Venture Capital Fair（二）.docVIP

Venture Capital Fair Situation Several teams entered the microcomputer business one year ago (4 quarters or decision periods). They have surveyed the market, conducted a market opportunity analysis, opened a factory, designed brands, opened sales offices, hired sales people, developed advertising campaigns, and engaged in test marketing for the past two quarters. They have been restrained from investing in research and development and taking out loans. Recently, the teams have been preparing a business plan and pro forma financial statements. They must have detailed plans for the next year (4 quarters) and tentative plans for the third year in business. The simulation is structured so that the teams will require venture capital to invest in RD, new sales offices, and plant capacity. They can ask for up to 5,000,000 in common stock. They will receive this money in Quarter 5. At this point in time, the teams are planning to present their business plan to you as a venture capitalist and request equity financing. (Even if they do not ask for money, you are on their board of directors and have the right to review the business plan.) The format we will use is a venture capital fair. Each team will make a 12-minute presentation. After you have seen all teams, you will decide which teams interest you. You will then make an appointment to review the business plan and negotiate your equity investment. You will be free to negotiate any deal you wish without consultation with the other investors. Background details you should know: The initial capitalization was 4,000,000 which was invested by the executive team in 1,000,000 increments over the 4 quarters of the first year. Forty thousand shares of common stock have been issued to the executive team in exchange for their 4,000,000 investment. The initial value of the common stock was 100 per share. The executive team currently owns 100% of the company. At the end of the first year of business, the executive team will pres