You are the founder of a company called Sailwithme.com that is providing sailing rentals to individuals across Europe. You have built an MVP of the website and you have been able to onboard 200 boats that are available for rental on your marketplace. You have not rented any boat yet as you need to scale up your team and sort out the commercial insurance. Therefore, you are thinking of raising a small pre-seed round of funding.
At this point, you have been advised to consider a long-term funding strategy for your start- up. If things go well, you will need to raise more money in the next few years, so it makes sense to be prepared for that eventuality in advance. Based on the financial planning that you have just done, you think that you would need to raise between $21M and $25M within the next 5 years. In order to gather the required information, you will need to answer the questions below:
a) Start by writing a short introductory paragraph (5-6 lines) about your company. You should include information about the value proposition, the business model and your ambition to build a global business. You should include any other information that you consider is relevant to provide a general understanding of your start-up.
[5 marks]
b) Based on the information provided, make sensible assumptions about the typical round sizes that you are likely to go through in the next 5 years. Include a date for the potential timing of the rounds. Use the table below to define the funding rounds and remember to include the table in your 2-page report.
10
Round of funding
|
Amount raised in the round
|
Timing of the round
|
Pre-seed
|
$
|
April 2020
|
Seed
|
$
|
|
(Include more lines if your company might have raised more rounds of funding)
|
$
|
|
|
TOTAL raised: $
|
|
[8 marks]
c)Based on your table from question b), complete the next table below including the potential investors (i.e. accelerators, angels, venture capitalists, and other sources of capital) that ideally would be involved in each round of funding. Using real names of investors (e.g. Notion Capital or Kindred Capital) would be preferred. Briefly explain the rationale behind the sources of capital in each round, and the lead investor you have chosen for each round. Use the table below to summarise the information and remember to justify your choices. Once you have completed the table, include it in your 2-page report.
Round of funding
|
Amount raised in the round
|
Investors involved
(i.e. accelerators, angels, venture capitalist and others)
|
Lead investor?
|
Pre-seed
|
$
|
|
|
Seed
|
$
|
|
|
(Include more lines if your company might have raised more rounds of funding)
|
$
|
|
|
|
TOTAL raised: $
|
|
|
[10 marks]
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d)Calculate the pre-money valuation for each of the funding rounds you have set out in your answer to the questions above, assuming a 20% dilution for each of the rounds.
Explain the way you have calculated it.
[5 marks]
e)Deduce, or propose, a capitalisation table (‘cap table’) for the company today, after the final funding round defined in your table from question c). Explain the rationale behind the ownership distribution you have assigned to each of the stakeholders. Once you have completed the table remember to include the table in your 2-page report.
[10 marks]
Stakeholders
|
Ownership (%)
|
Founder 1
|
|
Founder n
|
|
Investor 1
|
|
Investor n
|
|
...
|
|
f)You have now created a plan of how you see the funding will take shape in the next 5 years. In the last paragraph of your report, you should imagine how you will convince the lead investor of the last funding round to invest in your business. Use the 5M framework to justify to them the reason why they should invest in Sailwithme.com. Summarise the main terms that this investor would get by investing in that round of funding (i.e. type of shares they would buy, any preferences they would have, etc).