Deline in Style

[Wine in Style Follow-up]

If I were Eberhardt, I would decline the offer from the new investors. 

From the very beginning of his California wine export business, Eberhardt has struck me as an incredibly thoughtful businessman. Even in the selection process, the granularity of his decision making — “23 industries…market growth rates, competitors, market structure, and other notes pertinent to the strategic outlook of each industry” — was incredible. In addition, he seems to be a man of great moral and ethical character, as seen by Eberhardt not taking a salary until 2005, when the company began to make money.  

And so, accepting his funding simply because WineInStyle is facing another cash crunch seems to be wrong decision. The team and business have already surpassed so many hurdles — from sourcing California wineries, dealing with cross-border legal difficulties, and obtaining licensing in a grey area. Moreover, Eberhardt, even as a foreigner, was able to thoughtfully identify and capitalize on the key purchasing patterns of Japanese consumers. This level of grit gives me hope that the team can find another solution.

In addition, it appears likely that similar cash crunches will continue to appear in the upcoming years. Ever since Khoo has taken over, there have been financial challenges in 2006 and 2007. Given this cash crunch history, the likelihood of future financial troubles seems high — which means that accepting the funding now could still lead to the need for even more future funding. The case also highlights “Khoo’s success in sales,” and yet, “the growth in headcount greatly increased the overhead at WineInStyle’s headquarters.” These two comments in tandem surface the potential for greater operational efficiency. 

As difficult as it might be, I would advise Eberhardt to focus on two other, possible alternatives. (1) More efficient operations by cutting expenses or (2) Finding alternate investors who have trustworthy public records, so that Eberhardt can continue to see his vision for WineInStyle through.