1)

Artemis images has a complex business model. Artemis Images business

model was to scan and digitally archive images for companies and regular people and sell the stock images to other companies and consumers. In doing so, they will get the rights to sell the photos on their websites, taking 85% of the revenues, while the original owners of the photos receive 15% of the revenues. However, Artemis Images do not attain ownership of the material, simply rights to distribute and sell. The advantage of this is that it is a niche business model as at that time, if companies wanted to digitally archive their collection of photos, they would need to pay a company a large sum of money to do so, and many companies were not in financial positions to incur such large costs. However Artemis Images would archive for any company regardless of their size because of their revenue sharing model. This would allow them to reach out to a larger consumer base. Another advantage of this business model is that it allows them to tap into the existing customers of the larger companies. For example, fans of Indianapolis Motor Speedway Corporate (IMSC) who spend $500,000 a year on the photos of racing cars and events would have to go through Artemis Images to get photos from IMSCs archive. This would also apply for many companies including big names such as National Geographic if the manage to secure a contract with them. In addition, they would be promoted by their partner companies, and be co-branded with their client-partners, which would mean that they would save on advertising and promotion costs Yet another advantage of this model is that it saves a lot of costs and time for Artemis and the client-partner companies. The digitization of the archives and systematically tagging photos would make it much faster to locate the photo that is demanded. Before this, companies such as IMSC would have taken 2 weeks to locate one photo that would only sell for about $60-$100, which does not justify the costs. The search system would make it much more efficient to locate photos. Also, because Artemis would be scanning thousands of photos a day instead of scanning on demand, the cost per photo would only be about $2 instead of what other photo archiving companies such as Corbis and Getty incur which is about $40 per image. Thus, being more cost efficient than their competitors would make them much more able to compete with them in the long run.

Their Business model also extends to them being Application Service Providers (ASP) which would mean that they would provide the archiving software to companies who want to archive their photos themselves and have control of their own photo sales and archive system. The advantage of this is that they would be able to tap into the market where some companies do not want to give Artemis Images rights to distribute and sell their photos and keep 85% of the revenues. Furthermore, they would also have a greater chance of receiving financing from investors as investors were losing faith in B2B and B2C business models at that time but were still willing to invest in ASPs. Moreover, an additional source of revenue from their business model would come from web syndication. As customers who are fans of car racing may go on Artemis Images web page to purchase some images from IMSCs NASCAR, they may also be interested in other racing related merchandise, and Artemis may link other websites that sell these merchandise or sell merchandise of related companies on their website. The 3rd party related companies would pay Artemis a fee for the affiliation. The advantage of this is that since they will be generating traffic into their website, they can capitalize on the existing traffic by redirecting the traffic to buy related merchandise and earn money while doing so. Hence, they would be able to earn additional revenue on top of their main revenue model. However, there are some disadvantages of the business model. One prominent disadvantage is that Artemis Images do not have any tangible assets. This is because they do not own any of the photos, and the photos that they have are in digital format. This can also be seen on their balance sheet, as the only assets they have are cash and cash equivalents. This would make it more difficult for them or their investors to value their company. Another disadvantage is that the business model may not appeal to many companies. Many companies may not want to share their photos online or sell their photos, and may just want to archive them. Others may not want to share a large percentage of 85% of the revenues with Artemis. Although part of Artemis Images model is to sell the archiving software for those companies that do not want to share the revenues with Artemis, their main business model where we

expect majority of their revenues to flow in from come from the selling of the archived images, and the ASP model is mainly a front to get investors. Furthermore, they have very strong and established competitors such as Corbis, which is owned by Bill Gates, and getty-images.com. Although these companies are not directly competing with Artemis Images, they have been in the industry for a long time and it is safe to assume they have strong financial backing. If Artemis Images model does manage to prove successful, there are no significant barriers to entry that may stop the larger competitors from adopting Artemis Images model as well. In my opinion, their biggest disadvantage and pitfall in the model stems from the fact that the model is too broad and unfocused. They intended to do too many things, such as archiving for both regular customers and client-partners, provide ASP services and web syndication. This could make them seem like they are trying to do everything but not specialized or focused in any particular thing. The task would also prove to be too big for the small founding team to handle. I would think that they should have focused on one aspect of the business first as a start-up, and expand to serve larger markets as they grew. 2) Artemis Images founding team has various strengths and weaknesses.

One strength of the team is that it is a diversified team with members of different skills and expertise. Chris was the VP of National Accounts for ATG for 3 years and had experience in the industry, George was a project manager for Hibbert Group, and had experience in e-commerce and web-enabled fulfillment, Frank was at that time a senior VP at Petersons.com which was ranked one of the top 100 websites, and is also an expert at content management technology and strategy, and lastly, Greg was a senior sales executive to one of the largest commercial printers in the world. All these skills were very relevant to the business they were going into and they seemed like a promising team. Furthermore, they also had large networks and valuable contacts as they had links to National Geographic, CMG World Wide, BBC, and more. This network could have served to provide the company with leads to secure deals and investments. The leader of the team, Chris, was a strong leader who was

committed and experienced and had a good vision. She also had high self-efficacy as she had a lot of confidence in herself and in the success of the business. However, unfortunately the team had many weaknesses as well. The biggest weakness of the team in my opinion is that they did not define roles for each member. Although they thought it was a strength, it is actually necessary to delegate roles according to the strengths of each member. In addition, they naively thought that everyone in the team would contribute evenly, thus initially splitting the interest of the business evenly with 25% to each founding member. However, in the long run, it was apparent that the only one with skin in the game was Chris, while the rest did not commit as much to the business, with George only being able to contribute $5000 to the business, and Frank and Greg did not quit their jobs to work on the business full-time nor did they contribute any capital to the start-up. The article stated that members like Greg understood the business idea but did not understand the work involved in actually running a business. The lack of commitment in itself was also a big weakness of the team. They were also unable to stick together through tough times in the business, and George left the business stating that the stress he had been experiencing due to the business was affecting his health, relationships and lifestyle. This shows that the team is not strong as they are unable to pull together during the most important periods in the business, which are setbacks. Moreover, they were all inexperienced in starting up a business, as none of them had prior experience in launching a business or working for a startup. 3) Artemis struggled to raise funds due to many different factors. The

environmental factor that played a part in making it difficult for them to raise funds was the dotcom bubble bursting in 2000. Investors were skeptical of Internet businesses at that time and it was difficult to convince investors that they were not just another Internet business. Another factor was that a big investment was needed, but the return on investment (ROI) was low, and they were expected to incur over 4 million dollars in losses initially and take 2 years before they break even. Investors usually look for quick returns, or if its long term returns, it has to be relatively stable and not so risky. Therefore, their offer was unattractive to investors. Furthermore,

although their projections for 2003 were very positive with almost 20 million in profits to be made in that year, it may have appeared too good to be true and unrealistic, which may not have gained investors interests. Despite them putting up a front that their business model was an ASP, their main business was still in fact B2B and B2C centric. Therefore, it would still be hard for them to raise funds with that front as their business model as an ASP may not have been strong enough to gain the confidence of investors. The front of presenting the business as an ASP instead of for what it really is also leads to information asymmetry, where the investor does not have complete knowledge of the business. This may lead him to not know the full potential of the business, or lead to distrust if he feels that they are not being completely honest with him. Furthermore, many investors they met wanted to shape the business and wanted a say in running the business. However, Chris and her team were not willing to give up power in running the business and were looking for investors that would leave them to their original plan, and this proved to be difficult. In addition, the team had many weaknesses, as described in the previous question, and one of the most important aspects to a start-up that investors look at is the founding team. However because the founding team had many weaknesses, and most of the team were not committed and did not have skin in the game, it was likely that investors would be wary to invest in them. 4) There are many factors that a professional business appraiser will look at

when valuing a company. This includes looking at the companies employees, finances, management team, assets, future projections, other comparable companies1. Furthermore, the appraiser will also look at the companys intangible assets, which can be in the forms of their customer lists, intellectual property (which in this case could be its archiving software), contracts with clients, and perhaps the photos already stocked on their website. However, as we are only taught the basics of valuation, I will not be able to bring in the value of their intangible assets, and I will be using the Venture Capital Method to value Artemis Images. Using this method, we need to determine the http://www.entrepreneurship.org/en/resource-center/basics-of-companyvaluation.aspx
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appropriate price earnings ratio, by either taking Artemis Images current PE ratio (price/earnings ratio), or similar companies (competitors) PE ratio. Following which, we would need to calculate the terminal value by multiplying net income and P/E and discount the present value using an appropriate discount rate. If we use Artemis Images current PE ratio in 2001, which is defined as the market value per share divided by the earnings per share (EPS), we will get a negative value as the company was still in their start-up phases and made losses in their first year. Furthermore, if we take their competitors (Getty Images) 2 PE ratio in 2001, it is also a negative figure, and projected on their financial statement as 0.0 in 2001. This could have been attributed to the dot-com bubble bursting in 2000. If we use either one of these PE ratios, which are both negative, to calculate its market value, we will derive a negative market value for Artemis Images in 2001, and we will not need to look into the financials any further. Therefore, if we base the valuation of the company solely on the financial data in 2001, and ignore the fact that they are still running today, we would value Artemis at zero, or not being worth anything at that time. To further support my analysis, Artemis Images had very little tangible assets in 2001, and mainly in the form of cash and cash equivalents, and also probably had negative goodwill after the website crashing upon launch, and the shopping basket failing. There were many negative emails sent to Chris and people were unhappy with the website. This further illustrates that prospects looked slim for the company. However, this valuation as mentioned earlier is a simple one, and a complex valuation, which takes into account the state of the economy and industry at that time, and the intangible assets that Artemis images had, may have been able to positively value the company.

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