| Topic Name: |
Business Plans Advice Needed |
| Message Name: |
Suggestions |
| Date Posted: |
06/06/2001 |
| In Reply To: |
I would appreciate any recommendations (e.g., articles, texts, busines plans, etc.)regarding the following:
I am working on the business plan for an innovative beverage company with rapid revenue growth. The Company has received $1,ooo,ooo in financing last summer, but now needs additional financing. I believe the Company needs to prepare a detailed budget estimating the amount of money it requires to enable it to get to a sales level where vc's or private equity funds would be interested in investing, but I have no idea what percentage interests should be given to the new investors or how the company should be valued. Part of the complexity arises because on a discounted cash flow basis you can get a wildly different valuation than on a comparable transactions analysis (i.e., valuations based on sales multiples of small beverage companies acquired). In my mind, the discounted cash flow model is not particularly helpful since in the event a large beverage company acquired this small business, the large company's cost structure and marketing/distribution capabilities would be radically better.
Much appreciated. |
| Message: |
Hi, I think that my past experience may be relevant. To be honest, I am not an expert in the food/beverage/restaurant industries and can't address specific concerns but here goes.
When some of our portfolios companies have been in the same position w/ a question of an accurate valuation, the solution has sometimes been to have an independent, top-tier investment bank value it. This may be especially pertinent, given the 2 metrics that you have suggested. In your situation, there may additional advantages in using that same bank later on for raising further capital such as a private placement or ipo or to advise on an m&a deal. As to structuring the deal, you will have to discuss that with your investors (and take appropriate anti-dilution measures etc. among other things, just like last time.) Be wary; in this environment it is a buyer's market, your valuation will be lower and VCs know you're desperate for capital. Why not go back to your seed investors to see if they will follow on? Any capital may be not bad. Good luck!
IC
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