Course Project : New Venture Financing

COURSE OBJECTIVES

Upon successful completion of this course, the student will be able to:

1. Identify common sources for funding new ventures and the role of private equity

2. Examine the evaluation methods used by entrepreneurs to determine business worth 3. Critique the factors used by investors to value potential investments

4. Negotiate the terms for closing a new venture financing deal

PROJECT DESCRIPTION (OR BACKGROUND INFORMATION)

For this project you will compile a brief, hypothetical portfolio for a new venture and then share this via a presentation to potential investors.

First, you will select an appropriate venture (either of your own choosing or from potential ventures on sites such as Kickstarter or from shows such as Shark Tank) that you believe can achieve annual revenues in excess of $2 million within three years.

After identifying the venture, you will then create the following reports:

1. Overview of the company (vision, objectives, structure, and management)

2. Current financial situation (cash flow, current investment needs for growth)

3. Investor options (investment needed, preferred structure, preferred investors)

4. Valuation of the company in terms of the founder

5. Valuation of the company in terms of an investor

6. A "pitch" presentation briefly outlining the above as well as:

a. Explanation of how current finances, and those brought by the investor, will be used

b. Proposal for how to split equity between investor and founder as well as future investors

PROJECT INSTRUCTIONS

This project will assess your understanding of the financing strategies, valuations, and process for a new venture or startup. As outlined above you will be submitting several documents for this project.

Most of these documents will be shorter reports that will help you build your pitch to potential investors. Immediately below you will find a more detailed description of each submission and what should be included.

1. Overview of the Company

a. In one to two pages, provide an overview of the company. This should be enough for a potential investor to get a sense of the company's current development, its vision, objectives, structure, product or service, competitive niche, and current management successes. The financial situation is not provided in this document, but it should be detailed enough for someone to identify what stage the company is in when it comes to investment (angel, first round, ongoing, etc)

2. Current Financial Situation

a. In one to two pages, outline the following:

i. A rough picture of the company's current operating expenses and cash flow
ii. Current cash reserves

iii. Funding needed for next stage of expansion (one year)

3. Investor Options

a. In two to three pages, outline the following:

i. Recap of funding needed for next year of operation

ii. The preferred structure of the financing (type of financing, number of investors, ownership, etc) iii. Identify preferred investors (type and background; role in the company)

4. Valuation of the Company: Founder

a. In one to two pages, provide a breakdown of the valuation of the company from the perspective of the founder; imagine that this breakdown could be used by the founder to help pitch her company. Be sure to include assets, revenue, the value of the idea or other intellectual property, and the team constructed.

5. Valuation of the Company: Investor

a. Over one to two pages provide a breakdown of the valuation of the company from the perspective of the founder. Be sure to include the projected revenue and the founder's valuation of the idea.

6. Potential Investor Pitch

a. The pitch should be a 10 minute PowerPoint presentation designed with the goal of introducing the venture and securing financing. It should include brief summaries of the following (one to two slides per topic):
i. Overview of the company, current financial situation, valuation, current investment needs

b. The pitch should end with several slides outlining how ownership of the venture will be shared between the founder, the potential investor, and future investors.

c. The pitch should include presentation notes that amply convey the information on the slides

The project should be submitted in the following manner:

1. Items 1 - 5 above

a. Upload a Word document, Google Doc, or PDF of your work for items 1 - 5. They can be combined into one document if you wish as long as each section is clearly titled.

2. Item 6 (The Pitch)

a. The pitch should take the form of a PowerPoint or similar presentation format