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1 Funding Plan & Management Plan Business Plan Preparation Funding Plan & Management Plan Frank Moyes Leeds School of Business University of Colorado Boulder, Colorado
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2 Funding Plan & Management Plan Tonight In the Fire Operations Plan Development Plan Funding Plan Management Plan Team Meetings Hand-in: Operations Plan Development Plan Preliminary 5 year Income Statement Customer acquisition costs
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3 Funding Plan & Management Plan Two Weeks Publishing your plan Investor presentations Hand-in Management Plan Financial Plan (4 slides) Income Statement Balance Sheet Cash Flow Assumptions
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4 Funding Plan & Management Plan Funding Plan Determine requirements Prepare Sources & Uses Offering Valuation
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5 Funding Plan & Management Plan Funding Requirement Look at Cash Flow from Operating Activities + Funding Activities Is this enough? Look at monthly Cash Flow Operating Activities + Funding Activities
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6 Funding Plan & Management Plan Sources & Uses For each round of equity or debt, how will the money be spent? Common uses Marketing campaign to launch a new product Set up Call Center Development expenses of a new product or process Prototype Capital expenditure for equipment or systems Working capital
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Hecho en Casa Sources & Uses Statement FinancingAmountOwnershi p Uses of Funds Round A (June 2005) $315,00041.0%Salaries $221,800 Inventories $ 60,100 Working Capital $ 16,400 Capex $ 15,000 Other $ 1,700 Round B (Oct. 2006) $310,00015.5%Salaries $197,100 Inventories $ 79,200 Capex $ 30,000 Other $ 3,700 Round C (Q3 2007)$170,0004.0%Salaries $122,000 Inventories $ 41,700 Capex $ 6,300
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8 Funding Plan & Management Plan Offering Equity Amount of investment Form of investment Preferred or common Warrants Share of equity Exit strategy Nontraditional Joint ventures Customers & Suppliers Debt Amount of loan Interest rate Repayment schedule Collateral Warrants or conversion rights Grants
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9 Funding Plan & Management Plan Advantages & Disadvantages Equity Debt Grants Non-traditional
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10 Funding Plan & Management Plan Sources of Funding Bootstrapping F, F (and F) Angels Venture Capital Guido
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11 Funding Plan & Management Plan Valuation Why do valuations? Dilution: division of ownership between Investors and Founder Think $ value, not % ownership Art - not a science Objective: reach agreement on approach
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12 Funding Plan & Management Plan Methods for Determining Valuation Tangible book value Discounted cash flow Price/Earnings 10 x Net Income 6 x EBITDA Venture Capital method
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13 Funding Plan & Management Plan Venture Capital Method - Key Assumptions Net Profit Valuation Multiple Investor ROI
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14 Funding Plan & Management Plan Required Rates of Return Seed 80%+ Start-Up 60% Early Stage 50% Second Stage 40% Exit 25% ROI 5 yr. Increase 19x 10x 8x 5x 3x
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15 Funding Plan & Management Plan Management Plan
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16 Funding Plan & Management Plan Company Organization I Describe how your company will be organized Prepare an organization chart Will you have a board of directors? Will you have a board of directors? Will you have a board of advisors?
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17 Funding Plan & Management Plan Company Organization II What is the ownership structure of your company? What percent of the company do each of the founders own? Do you plan to have a stock option plan? Incentive plan?
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18 Funding Plan & Management Plan Management Team Describe the founders and principal managers who will run your firm. Write a short paragraph on each of the key managers? (Include resumes in the Appendix) What will be their duties and responsibilities? What unique skills do they bring to the venture? How will they be compensated? Is there a significant “hole” in the team? How do you propose to fill it?
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