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Entrepreneurship, Second Edition by Andrew Zacharakis, William Bygrave

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4.8. CASE: Adam Aircraft

As the sleek, six-seat Adam A500 performed a graceful arc overhead, Babson College MBA John Hamilton, Vice President of Marketing for Adam Aircraft Industries (AAI), had to smile. Earlier that morning he had read an article describing the difficulties and pitfalls associated with designing, building, and certifying new aircraft. In the last 30 years, there were countless examples of startup aircraft manufacturers that had tried and failed to deliver new products to the small and mid-sized aircraft markets. In fact, the only two startup companies that had recently succeeded had been builders of very basic, single-engine aircraft.

Like most MBAs, John had been taught to analyze companies based on all the standard metrics: the management team, product viability and appeal, market demand, capitalization, and financing potential. While AAI appeared to be a winner on all counts—including the progress it was making in the lengthy and complex certification process—the company did not have the many millions of dollars it would need to bring its products to market and reach positive cash flow.

Talking with some of his peers in venture capital, John had come to understand that private equity investors were a fickle bunch. The vast majority preferred to invest in biotechnology, telecommunications, and other industries with historically well-defined harvest potential. Following the market correction in 2000, the flow of venture capital had significantly diminished, ...

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