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1. The startup effort came about because Bill Foster had it in mind for over a year but just suddenly woke up early one morning in June 1979 when he went on a business trip to Europe and decided to set up his business.Also, Bill had worked with some other people (some of them had reported to him previously) who had successfully started their companies like the founders of Tandem and Apple.At first, he did not want to do it because he had a good job with very good pay and benefits. But when he thought that he did not want to wake up at 70 with regrets, he decided to go for it.2. As shown in the table below, Bill Foster’s efforts at opportunity creation when he just left Data General was very low. It got a bit better when he was on the West Coast, but he did very well in finding a niche market in the area of system reliability needs. When he left California to go to New England, he was much more organized for HR, financing, implementation and getting capital.3. Finance-ability of Stratus.When he first left Data GeneralAt this time, Stratus did not have good investment potential because Foster did not have a good plan and had not put together his team. Also, venture capital companies normally don’t do first round setups. When he was on the West CoastThere was more interest but he did not have his team together and venture capitalists would have preferred if he had teamed up with another entrepreneur with more experience. When he was on the East CoastHe had much greater chances. He had formed a team, he had learned more about the venture capital community (how much you can raise, how much control you have to let go). Also, the industry was being able to command a greater share at this time. He also found out that he could raise capital from high net worth individuals and using this option he could end up giving up less control. However this option was more complicated because of the tax implications for the wealthy individuals. 4. Major selling points of the product.These include:It has stackable options so users pay for what they can afford (both software and hardware options).There is no interruption to operations. The product has a different approach with 2 CPUs running at the same time so if one fails, the second CPU takes up with no interruption.There is no user intervention required.Maintenance is easier. This is an attractive option because repair costs are rising in the industry.The area it addresses is high risk and applies to a wide market (banking, airlines, hotels, medical) so it is a profitable venture.5. The things Bill Foster should have done differently were to explore financing options and staff requirements earlier (venture capital firms, private individuals and other operating corporations). He could have found out that three financing options were open to him much earlier. It would have been better if he had done this immediately after leaving Data General. He should also have been talking to the people who would make up his team much earlier (when he was on the West Coast).6. Important factors that Foster needs to consider in assessing financing alternatives include:What is the total investment he requires?Stratus requires $6.2 million equity financing; $2 in year 1, $2.2 in year 2 and $2 in year 3. A venture capital company is not likely to fund more than $2 at a go.How much control must he have?Venture Capital companies usually at least 51% control (Tandem gave up 71%, Prime Computers gave up 72%). With private individuals he may not need to give up more than 40 or 45 percent ownership. It is not clear what the situation is with other operating corporations.§  How much complexity can he take care of?If he uses private wealthy individuals, the process can be more complex. It will require a private-placement memorandum under SEC rule 242. 7. If he has five individuals investing $400,000 each, he can meet his needs and also keep majority control (55 to 60 percent) so this is the option I recommend. This is better than a venture capital company investing $2 million and keeping 70% or more.

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