New Venture Financials and Business Valuation One Asset Management Limited

New Venture Financials and Business ValuationOne Asset Management

Limited

New Venture Financials and Business Valuation

To share knowledge and experience of the venture capital industry in term o

f new venture capital financials and bus iness valuation by venture capitalists’ p

oint of view in order to give fundament al knowledge for further study or practi

cal use in the real business operation.

Objective

ResearchGrant

Business Expansion

Market Expansion

Product Launch

Product Development

IdeaConception

AngelVenture Cap

VentureCapital

IPO

Business Cycle and Financing Need

DebtFinancing

Sources of Funds for Enterprises

Debt Financing

- 1. Short Term Loan : Working Capital- CCCCCC CCCCCCCC/ , / ,- Packing Credit- CCCCCCCCC

- 2. :Long Term Loan Fix Asset- -CC CCCCCC(310)- - Lease Financing (3 5 years)


Sources of Funds for Enterprises 3. Debenture : Working Capital / Fix ACCCC

- CCCCCCC CCCCCCCCC- CCCCCCCCC CCCCCCCCC- CCCCCCCCCCC CCCCCCCCC

Equity Financing1. Preferred Stock2. Common Stock


Institutions Supplying for financingDebt Financing

1. CCCCCCC CCCCCCC CCCC’ 11. The Government Saving Bank

12. Small and Medium Enterprises DevCCCCCCCC Bank of Thailand (SMEs Bank)

13. Bank for Agriculture and Agricultur al Cooperatives

2. Commercial Bank


Institutions Supplying for financing3. Other Financial Institutions

3.1 Finance Company3.2 Leasing Company3.3 Factoring Company


Institutions Supplying for financingEquity Financing1. Government’s Venture Capital Fund 1.1 SMEs Venture Capital Fund : ONE ASSET MANAGEMENT LIMITED

1.2 The Office of Small and Mediu m Enterprises

Promotion 1.3 National Innovation Agency2. Venture Capital Company 2.1 Venture Capital Management SecuritiesCo. 2.2 General Venture Capital Company


Financial Aspect of Business Plan

Financial Plan should provide the following information for investors/ lenders:

Sources of FundsUses of FundsProjected financial position of the firm (Income Statement, Balance Sheet, Cash flow statement)

The Plan should also include how the funds/loans can be repaidThe Plan should be at least 3-5 years


Venture Capital as a New So urce of Fund

Venture Capital is one of the equity financing sources of funds in order to invest in good potential businesses. Venture Capital will invest in enterprises in term of preferred stock or common stock as a partner of the enterprises and hold the investment for a specific period of time.


What VC are looking for? Historical financial data

Good and undated financial statementC CCCCCCCCCC CCCC CCCCCCC CCCCCCCCCC :

Revenue recognition (whether there are conditions on sales)

R & D C CCCCCCC CCCCCC CCCC CCCC:

Often forgotten costs : financing cosC


What VC are looking f or? (Cont’d) Cash Flow

Collection Period Monthly Cash Flow for the fir

CC CCCCCCCCCC CCCC CCCC CCCCCCCCCC


How Does Venture Capital D etermine Business Value ?

Qualitative Business Valuation•Analysis of Management• Reviewing Personnel and Compensation• Analysis of Marketing and Sales - Market Segment - Market Trend - Market Share • Investigating Product• SWOT Analysis


How Does Venture Capital Determine Business Value ? SWOT ANALYSIS

S CCCCCCCC W CCCCCCCCC

O CCCCCCCCCCCC T CCCCCC


Quantitative Business Valuation• Analysis of The Financial Statements and Projections

- Profit and Loss Statement- Balance Sheet Statement- Cash Flow Statement- Source and Use of Fund- Ratio Analysis

New Venture Financials and Business Valuation How Does Venture Capital Determine Business Value ?

Methods of Quantitative Business Valuation

- Book Value - P/E Ratio- Discount Cash Flow

- Price to Book Value

New Venture Financials and Business Valuation How Does Venture Capital Determine Business Value ?

Financing Issues for Software BusinessHigh investment in human capital in initial stageDebt financing difficult due to lack of collateralDifficulty in valuation of IP for venture capital financingUnderstanding of the business by venture capitalist


Preparation for Getting FinancingCommon problems faced:

Efficiency in operationBusiness knowledgeWeak financial backgroundFinancial Statement not addressed properlyUnderestimation of support costsLack of legal expertise, especially contract lawsHigh valuation commanded


Preparation for Getting FinancingNo risk assessment (unfinished contract, cost overrun, copyright protection, etc.)

Overestimation of revenuesAccounting issues, especially cost allocationHuman resource issues not addressed properlyOverseas opportunity to go beyond domestic valuation


Documents

New Venture Financials and Business Valuation One Asset Management Limited