Response 1:

How did Ulukaya raise capital for his start-up business?

To begin with, Ulukaya borrowed money to buy the factory, financed the growth through further bank loans an reinvested profits. Eventually, the success of Chobani spoke for itself. The growth projection matched the historical performance and a multitude of banks offered large capital funding and a credit line for expansion.

What were the advantages of Ulukaya's "self-financing approach"?

The one huge advantage can be summed up in a word, control. Ulukaya was able to control the business and make decisions fitting his aspirations and is free from having to consider the aspirations of partners. Had he funded differently, he would have lost some of that control. There is a simplification to the business when you don't have to add partners or shareholders. According to Jeff Cornwall, "managing partners can be as much of a challenge as managing the actual business."

Another advantage, all of the profits and wealth go to the founder. There is no dilution effect. With more partners he would have to grow the business larger to meet his personal goals for income and wealth plus those of the other partners. And if and when he decides to exit his venture, the process is greatly simplified, no competing interests to negotiate.

What were the disadvantages of this approach?

Limited resources, meaning the size and capacity of the business is defined by your ability to generate capital. Also, the burden of risk sits at the feet of Ulukaya. His entire net worth is wrapped up in Chobani and should the business fail, then Ulukaya goes under as well. Finally, the founder may not possess all the skills needed to scale and grow the business appropriately. Had Ulukaya embraced investors, there is a possibility that the business could have grown beyond what it is today.

Now that Chobani's business has grown to "2 million cases of yogurt a week", do you think it would benefit Ulukaya to partner with outside investors? Why or why not?

Considering the size of the total market, I don't think it would be beneficial. Ulukaya has already captured 50% of the greek yogurt market according to the chart in the article and 20% of the total yogurt market. At his growth rate, he will have no problems furthering his standing in the market and funding his continued growth.

Response 2:

Forget about financing for a bit. I must say that I'm amazed that Ulukaya was able to get Chobani product shipping only two years after visiting the plant for the first time. It looks like one reason he could do this is that he first used the existing plant to make American yogurt and as a "contract manufacturer" to larger firms. This is a great "bird in hand" approach in my opinion. (Bettencourt, 2011). Generating revenue with the existing product can help generate cash flow which is vital to a business.

Ulukaya makes it very clear that he raised capital through small business administration bank loans, which most likely means he personally guaranteed it, and he put up some of his own money, 10%. Ulukaya also reinvested profits, rather than take the money out of the business.

A key thing that Ulukaya did to make sure he had profits early is to price the product correctly strategically, marketed the product strategically, and manufactured it strategically by buying used equipment. These three things helped him generate profit.

The advantages to him doing raising capital without outside investors is that he can run the company the way he wanted to. Yes, he still had the bank as a stakeholder, but that is a far cry from venture capitalists or other investors that want to "run" the business their way.

A big disadvantage of the self-financing approach is that Ulukaya runs the risk of not having outside expertise with respects to strategy and growth. However, he clearly proves in his article that he doesn't need it, there is simply no value to him in it. However, the future might see that change. Another disadvantage, but seemingly not an issue is availability of cash. Investors have plenty of that, but he doesn't need it. Especially if the competition has failed in meeting the quality of his product.

Could Chobani benefit from outside investors? I'm sure it could. At some point to grow Ulukaya will need to expand the product line. However, Ulukaya is running the company the way he wants to. Maybe he wants to be a "lifestyle" entrepreneur and the life he's leading is good enough. Maybe he doesn't need vast amount of wealth. His last statement is about legacy, and to him it seems having a good, healthy, and authentic product might be all he wants. So yes, the company could benefit, but that doesn't mean it needs to.