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VC Secrets: Venture Valuation and Keeping Your Share

From: Venture Planning Associates Inc. <Expert-zine@VenturePlan.com>
Date: Sat, 1 Nov 2003 00:41:30 -0500
Message-ID: <316300-22003116154130437@mail3.autocontactor.com>
To: site-comments@w3.org

Dear ,

As promised, here is your new issue of the Expert-Zine.

       The Art of Negotiation
       VENTURE VALUATION and KEEPING YOUR SHARE 
      
              By William F. (Bill) McCready, Founder/CEO 
              Venture Planning Associates, Inc. 
              www.VenturePlan.com

VENTURE VALUATIONS

When it comes to finding an investor for your venture why
should 'FAIR SHARE' be an issue? 

Problems arise when entrepreneurs, experts in their field,
find themselves in unfamiliar territory, and easily
intimidated by the financial 'expert' controlling the funding,
and the financial future of the deal.

Some deals fail to get off the ground because the investor
wants an UNFAIR RETURN. Others never see the light of day
because the entrepreneur is unwilling to part with an
appropriate share in EXCHANGE for INVESTMENT CAPITAL. 

A SUCCESSFUL NEGOTIATION dictates that both parties walk away
from the table as winners. How do you protect your interests
and ensure that the deal you strike is fair for all concerned?

The best way is to do your homework. Know as much or more about
the true VALUE of YOUR DEAL as your PROSPECTIVE INVESTOR.
By preparing a solid BUSINESS PLAN that addresses everything
an investor wants to know, you become an expert in his field.
In the process, you will learn for yourself the fair asking
price, as well as the best and worst case scenarios.

At this stage, you are selling a FINANCIAL PACKAGE, not your
product or service. It must be competitive in the marketplace
in the areas of risk, return, liquidity and technical issues.

Here are the basics:

DEVELOP COMPREHENSIVE FINANCIAL DATA

  - Determine the funds required and their use, by back
    fitting the CASH FLOW REQUIREMENTS of your business plan. 

  - Decide on an EXIT STRATEGY for the investor and yourself.

     - Keep and Hold
     - Acquisition
     - Initial Public Offering (IPO). 

       Each requires different CASH MANAGEMENT STRATEGIES.
       Include a comprehensive pre and post investment
       VALUATION ANALYSIS for your business plan and
       exit strategy. 

  - Develop a TERM SHEET or DEAL STRUCTURE based on the
    prospective investors’ required rates of return for the
    stage of your business. 

*** ======== Valuation and Deal Structure ======== ***

   Venture Planning Associates, Inc. offers a series of
   VALUATION and DEAL STRUCTURING reports to help you
   through the funding process:

  - BUSINESS VALUATION CHECKLIST, Spreadsheet and Questionnaire 
    http://www.ventureplan.com/orderpops/valuerpt.html

  - SAMPLE VALUATION 
    http://www.ventureplan.com/orderpops/valuation.html

  - 10 Ways to STRUCTURE YOUR DEAL and ATTRACT INVESTORS
    http://www.ventureplan.com/orderpops/dealrpt.html

*** ============================================== ***

BUSINESS VALUATION STUDY

One of the most frequently used methods to evaluate risk and
reward scenarios is the FIRST CHICAGO METHOD, which requires
developing THREE FINANCIAL PLANS and assigning probabilities
to the outcome of the plan. 

  1. Your plan is successful and goes public or gets acquired. 
  2. Your business is moderately successful (15% after taxes). 
  3. The business fails, and is liquidated. 

Assign a realistic probability to each scenario, and calculate
a COMPOSITE VALUE. Then calculate the AMOUNT of STOCK to be
offered based for a required rate of return (e.g. 40%). 
Back-calculate how much of the business to sell.

INVESTMENT PLAN

This is the document outlining in further detail the timetable
of required equity and debt financing, and the payback, or
liquidation, of the investor's position under various scenarios. 

This is where the 'DEAL' is structured to MAKE YOUR BUSINESS
ATTRACTIVE to INVESTORS.

By being prepared, not only will you know what is fair, you
will have the confidence to stand up to those who would gladly 
demand, and get, more than you should give them in order to be successful. 

An important aspect of all fund raising is to consider the
effects of DILUTION and RATES of RETURN for MULTIPLE ROUNDS
of FUNDING.

*** ========= PowerPoint Biz Plan Offer ========== ***

Venture Planning provides work sheets and templates to analyze the effects of
these multiple rounds in their complete Business Plan Packages. 
Being prepared to answer these questions in advance will greatly enhance your
standing as financially aware and also help you keep your fair share of your
business.
Venture Planning Associates, Inc., Tel. 858.457.3434 / efax 425-955-7531
mailto:capital@ventureplan.com

*** ================================================ ***
 
Watch for the next issue of the Expert-zine!

*** ================================================ ***

This FREE newsletter is distributed by subscription only. 
Please feel free to pass this issue, in its entirety on
to friends and associates.

*** ================================================ ***

http://www.expert-zine.com / http://www.ventureplan.com
Teri McCready, Publisher  
Tel. (858) 457.3434 / email: marketing@ventureplan.com
5370 Toscana Way                 San Diego, CA 92122 USA

Copyright 2000-2002, Venture Planning Associates, Inc.
ISSN: 1529-1316

*** ========= PowerPoint Biz Plan Offer ========== ***

    You are receiving this message because you subscribed
    to this e-zine either from one of the following web
    pages or from the site of one of our affiliates.

     http://www.expert-zine.com
     http://www.venturemap.com/
     http://www.ventureplan.com/
     http://www.ventureplan.com/venture.seminar.html
     http://www.ventureplan.com/capital1.html
     http://www.ventureplan.com/vcpreview.html
     http://www.ventureexperts.com

*** ============================================== ***

   * Many sites tell you WHERE to get funding.
     ... We show you HOW to get it!* 
         Bill McCready, CEO/Founder
         Venture Planning Associates, Inc. 
         For more information visit http://www.VenturePlan.com.

*** ================================================ ***

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Received on Saturday, 1 November 2003 00:38:35 GMT

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