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Business Plan Preparation Funding Offering, Valuation & Executive Summary
Frank Moyes Leeds College of Business University of Colorado Boulder, Colorado Funding, Offering, Valuation & Executive Summary
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Tonight Hive Live case Offering & Valuation Executive Summary
Source & Use of Funds In the Fire – Operations & Development Plans Hand-in Operations Plan Development Plan Management Plan 5 yr income statement Funding, Offering, Valuation & Executive Summary
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Next Week Publish Your Plan Investor presentations
Next Week Publish Your Plan Investor presentations Team Meetings to review Financial Plan (4 slides) Funding Plan, Offering & Valuation, Sources & Uses, Risks (4 slides) Hand-in Financial Plan + Assumptions (print out all pages of the Financial Model) Funding Plan Funding, Offering, Valuation & Executive Summary
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End of Semester Schedule
Practice Presentations Workshop April 22 (optional) 12 teams @ 45 minutes 2 sessions beginning at 8:00am April 26 Cut Round for grade Presentations 30 min sessions Hand in 2 copies of Plan Financial model – all worksheets 2 copies of slide presentation Presentations in Rooms 125 & 124 15 minute presentation 15 minute Q & A Select 4 teams for finals Funding, Offering, Valuation & Executive Summary
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End of Semester Schedule (continued)
April 28 four finalists submit 6 copies to Entrepreneurship Center before 12:00 noon May 3 Undergraduate Business Plan Competition Reception at 5:30 Competition in Room 224 at 6:00 Invite friends and family Attendance required to do FCQ’s & peer evaluations Funding, Offering, Valuation & Executive Summary
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Salary Information Salary info http://www.salary.com
Salary Information Salary info Funding, Offering, Valuation & Executive Summary
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Funding Requirement Look at Cash Flow from Is this enough?
Funding Requirement Look at Cash Flow from Operating Activities + Funding Activities Is this enough? Look at monthly Cash Flow How decide if realistic? Discontinuities What's wrong seasonality growth contingency procuction inefficiencies stat-up costs Sensitivity? Funding, Offering, Valuation & Executive Summary
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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 Funding, Offering, Valuation & Executive Summary
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Offering Equity Nontraditional Debt Grants Amount of investment
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 Funding, Offering, Valuation & Executive Summary
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Advantages & Disadvantages
Advantages & Disadvantages Equity Debt Mezzanine Grants Non-traditional Equity Benefit: permanent capital no later impact on cash flow offer a piece of company: dilution Shareholders want a return can be difficult to manage Lots of strings: board seats, Preferred stock (get money first), right 1st refusal Exit strategy Debt Benefit: don't give up share of company But, convertible debt at option of lender Bank debt: want to see assets and history of profits and cash flow Personal guarantee Must be paid back: impacts cash flow Interest expense Mezzanine Sits on balance sheet between debt and equity Debt, but doesn't have to be repaid right away Equity, warrants Strong cash flow history Grants: Neither debt or equity Strings Getting grants becomes the objective Non-traditional: Joint ventures, strategic partnerships, Customer and supplier: special terms or equity Know more about your business than you want Could comprise exit Funding, Offering, Valuation & Executive Summary
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Sources of Funding Bootstrapping F, F (and F) Angels Venture Capital
Sources of Funding Bootstrapping F, F (and F) Angels Venture Capital Guido Funding, Offering, Valuation & Executive Summary
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Valuation Why do valuations?
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 Funding, Offering, Valuation & Executive Summary
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Methods for Determining Valuation
Methods for Determining Valuation Tangible book value Discounted cash flow Price/Earnings 10 x Net Income 6 x EBITDA Venture Capital method Funding, Offering, Valuation & Executive Summary
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Venture Capital Method - Key Assumptions
Venture Capital Method - Key Assumptions Net Profit Valuation Multiple Investor ROI Funding, Offering, Valuation & Executive Summary
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Required Rates of Return
Required Rates of Return 5 yr. Increase ROI Seed %+ Start-Up % Early Stage % Second Stage % Exit % 19x 10x 8x 5x 3x Seed: proof of concept Start-up: set-up production and initial sales Early stage: full scale operations and market development Second stage: expansion Exit: harvest CCG Seed prototype show to customeres investors: #250K + #50K business plan got oreder for 6 systems Start-up site in Cambridge 2,000sq ft ordered materials and parts 5 people Sales Director cashed check Early 2 sites same business park 5,000 sq ft distributor Europe CFO High margins 60%+ lose control Second stage new location 20,000 sq ft 45 people to 75 Marketing Director bank loans offices in Paris and Frankfurt US market Exit partner Carlton for US #12 million Funding, Offering, Valuation & Executive Summary
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Executive Summary Opportunity/Need Product/Service Target market
Executive Summary Opportunity/Need Product/Service Target market Competitive advantage Process Management Financials See Jim Linfield’s slides Funding, Offering, Valuation & Executive Summary
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Executive Summary Opportunity = Size, trends
Executive Summary Opportunity = Size, trends Compelling Need = Problem being solved, Target market = Describe, why purchase Product/Service = Features & benefits Competitive Advan = Unique, sustainable Process = Produce & deliver Management = Experience Financial = Revenue, when profitable Funds required, exit Funding, Offering, Valuation & Executive Summary
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