1!!! Normal No Spacing Heading 1 v av #6-Assignment (Qualitative Valuation) Due: September 26 @ 11:59 pm Total Points: 30 Submit: Canvas 26-Assignment (Qualitative Valuation) Part #1: (20 Points - 10 Points for each method) Using the Qualitative" Ason Startup Valuation Model AND the Scorecard f.e. Bill Payne) Model (see #6d- Lecture) compute the Pre-Money Valuation for Company U. Provide a brief written/typed synopsis of your supporting rationale/justification for each scored "subjective line item factor, which could be either an assigned "fixed dollar amount" in the Ason) within a defined range or a "relative subjective percentage tin the Scorecard) to normalize either below or above the regional norm set at 100%. Your rationale/justification for each subjective line item subjective factor is strictly dependent upon the information/content contained within the Case Study. Please utilize and "type in the required information in the provided "templates OR you can utilize the #6-Template (Qualitative Pre-Money Computations) for the Ason and Scorecard and then simply copy & paste" in the equivalent computations. Using each of these two Qualitative subjective methodologies, you must identify the suggested Pre-Money Valuation for Company U, rounded to the nearest ten thousands Part #2: (5 Points) Using the "Investor ROI Hurdle Valuation" methodology compute the Pre-Money Valuation (see #6b-lecture). Again utilized and insert the required information in the provided below "template". Part #3: (5 Points) Integrate/analyze the above Qualitative and quantitative results and recommend a single Pre-Money Valuation for Company U supported by a brief explanation/statement. Company U: Company U, a medical device company located in Oklahoma City, has just received Federal Drug Administration (FDA) approval for its new ankle ligament implant device. Since the company has just now received FDA approval i.e. the legal right to sell the product with the specified medical performance claims), the Company absolutely has no trailing revenues. Actually, first revenues will likely not be recognized for another six months given the need to build-up a finished goods inventory to serve the various sales distribution channels requirements. However with the FDA approval the vast majority of the governmental regulatory risk has been removed plus any future incremental governmental risk should be negligible. Now that the FDA has approved the device, a full scale sales initiative will be launched, provided the Company raises the necessary capital to fund this sales & marketing launch initiative and corresponding Inventory buildup. In order to fund this next incremental business progression, the Company needs to raise $2,000,000 in a Series A Preferred offering The Co-Founders believe this funding will have to be raised collectively from an Angel Group syndication comprised of 3-5 Angel Groups. The local Angel Group which has already previously invested $500,000 and has agreed to invest $750,000 as a follow on investment in this series A Preferred round and lead the Angel Group Syndication effort within the surrounding states. The local Angel Group believes the investment tarihetsar Crime Anaal internet For RO P MacBook Air IM Aa Bbc.codee AaabCedee AaBCCD po Av 3 21 a3 Normal No Spacing Heading 1 The Co-Founders believe this funding will have to be raised collectively from an Angel Group syndication comprised of 3 - 5 Angel Groups. The local Angel Group which has already previously invested $500,000 and has agreed to invest $750,000 as a follow on investment in this series A Preferred round and lead the Angel Group Syndication effort within the surrounding states. The local Angel Group believes the investment offering will be categorized as a "later stage" Seed round requiring an Angel investor targeted 10x Rol given the FDA approval and executed key external sales vendor contract. The current local Angel Group informed the part-time CFO the current recent local average Pre-Money Valuations in the medical device sector has been approximately $2,400,000. The targeted investor ROI is based upon the fact the Company is rapidly transitioning from the Developmental to the Introduction commercialization phase. In anticipation of the CFO joining the Company full time upon funding and the need to add a new Independent representative to the Board of Directors as a requirement for this funding round, the Company and exsting shareholders committed to creating a 10% "pre-money Stock Option Pool According to the Series A Preferred offering the "Use of Funds" indicate the capital investment will be used to buildup Finished Goods Inventory, lease warehouse space for storage/shipping logistics, develop an extensive full set of professional marketing collateral materials (website, brochures, etc.), expand the administrative & sales training functions, and launch an aggressive medical device distributor sales channel driven by an aggressive variable Distributor sales commission of 38% With the FDA approval and large capital infusion, the currently part-time CFO who will be joining the Company full-time immediately upon funding. This part-time CFO has developed the company's detailed Integrated Financial Model, and even plans to utilize the financial figures for future budgetary purposes. This pending CFO is a CPA with seven years of public accounting experience primarily in auditing, but has no direct entrepreneurial operating managerial experience. The current Financial Modeling projections forecast a fifth year (which coincides with the anticipated Exit timeframe) EBITDA of 56 million. After researching recent market comparable high growth medical device company acquisitions by large public medical device companies, Company D anticipates an 8X EBITDA multiple valuation at the time of an "Er sale. Originally the CEO, a highly successful serial entrepreneur owned 60% of the Company, and the CSO (Chief Science Officer), who invented the medical device, has 25 years of device related design and product development experience, and the VP Marketing, who has 5 years of medical device supervisor field sales experience with the third largest national medical device distributor, each owned 20%. The CEO owns a disproportionately larger Founder's equity position primarily due to personally making a $250,000 original cash investment into the company, which was facilitated by a previously successful entrepreneurial business "Exit". None of the remaining Co-founders have invested any cash for equity or guaranteed any financial obligation, but exclusively received equity for contributing important intangible technical/industry knowledge. To date, Company has only dosed one external capital offering. Approximately a year ago, the local Angel Group invested 5500,000 in Common Stock offering at a Pre-Money Valuation of S750,000. As a 26 JE HA P Nay AaBbcode Aa Bbc dee IEEE 21 HO AaBbCcDc AaBbc Heading 1 Head Normal No Spacing To local Angel Group invested $500,000 in Common Stock offering at a Pre-Money Valuation of $750,000. As a result the current equity ownership stands as follows: Common Shareholders: Initial Current CEO 50% 36% CSO 20% 12% VP Marketing 20% 12% Angel Group-Initial 0% 40% Footnote: A total of 1,000,000 Common Shares are currently outstanding. Prior to the external sales Distributor initiating any sales activity, the external outsourced manufacturer must Initiate commercial scale production runs, which always has some inherent product risks, and ship finished units to Company , in order to build up an upfront "buffer stock of Finished Goods Inventory. Per the existing contract with the regional medical sales Distributor, the Company must maintain a minimum of 75 days in Finished Goods Inventory. The external manufacturer during the last six months has only been testing alpha product manufacturing and currently has not finalized production capacity to manufacture commercial grade units. The external manufacturer, upon receipt of a Purchase Order from the Company which will be issued upon closing this funding will immediately begin ramping up production. The regional medical sales Distributor, which represents approximately 20 different smaller medical device companies, has a field sales force of 15 regionally dispersed across five states, and has established customer accounts with over 200 Hospitals, and business/account relations with over 1,000 Physicians/Surgeons. After completing numerous Physician/Surgeon focus groups, the medical device sales Distributor is extremely excited about the opportunity to represent and carry this new ankle implant device. All Sales Distribution related contracts have been fully negotiated and executed with both key external strategic business partners. Per the detailed Business Plan, which has now been extensively updated to support the current Series A Preferred offering and the companion five year integrated Financial Modeling, the company projects needing to raise one additional subsequent 56.0 million Series B Preferred financing in approximately eighteen months in order to expand beyond this initial regional sales initiative to a full scale national footprint. Again per the Business Plan, this incremental but final required equity capital most likely will be raised from a mid- size regional Venture Capital Fund at an estimated $8.0 to $12 million pre-money valuation, provided the Company achieves its targeted S400,000 in monthly sales within the eighteen months. The implant medical device unit sales price is $1,500 and the innovative medical device should save the medical insurance around $4,000 in reduced surgical operating room costs due to Implant time savings. Given the projected reduced patient recovery timeline and accelerated/simplified Surgeon insertion, the company forecasts revenue to grow at 85% per year as market share is taken from the five largest competitors which currently cumulatively generate apprandmately $450 million in revenues annually. Ferences Mailings Review View Tell me 21 AaBbccdee Aaabccode a po A AaBbCcDc AaBbc Hoedingt Normal No Spacing Hood Value ($) Part #1: John Ason Pre-Money Valuation Subjective Factors Score (1-5) Idea Prototype Management Revenue Relationships Total - Pre-Money Supporting Scoring Justification: Idea: Prototype: Management: Revenue: tates Focus 26 D A ER OD P MacBook Air 16-Assignment (Qualitative Valuations) erences Mailings Review View Tell me 21 ST A A. Aa Rbcode === 19 Abcode AaBbccbc BbceDd No Space Heading Hending NO Relationships: Rating 30% % Part #1: Scorecard Pre-Money Valuation Regional/Industry Average Pre-Money Valuation Subjective Factor Weighting Quality Management Size of Opportunity 25% Product or service 10% Sales Channel 10% Stage of Business 10% Size of Round 5% Need for More Funding 5% Quality of Business Plan S% Total Adjustment Scorecard Pre-Money Valuation Quality Management: Size of Opportunity: Product or service: Focus 2) ( 16-Assignment (Qualitative Valuations) ses Ab Mailings Review View Tell me EVE 2 a AaBbccdee Aa Bbcode AaBbccDc ABCDE Heating 1 Heading 2 Normal NO SPAL Product or service: Sales Channel: Stage of Business: Size of Round: Need for More Funding: Quality of Business Plan: Part #2: Investor ROI Breakeven (Venture Capital) Method $ Forecasted EBITDA EBITDA Multiple Exit Value Investor Capital Focus P #6-Assignment (Qualitative Valuations) Mailings Review View Tell me Po 21 ST Aa Bbce de AaRbCode AaBbccDc Aabb Eve E 1 Normal No Spacing Heading 1 Hen Part #2: Investor ROI Breakeven (Venture Capital) Method $ Forecasted EBITDA EBITDA Multiple Exit Value Investor Capital $ Investor ROI Investor Total Return $. % % Investor Equity Investor Capital Pre-Money Valuation $ Investor Capital $ Post Money Valuation $ Part #3: "The" Recommended Pre-Money Valuation $ Rationale: 1!!! Normal No Spacing Heading 1 v av #6-Assignment (Qualitative Valuation) Due: September 26 @ 11:59 pm Total Points: 30 Submit: Canvas 26-Assignment (Qualitative Valuation) Part #1: (20 Points - 10 Points for each method) Using the Qualitative" Ason Startup Valuation Model AND the Scorecard f.e. Bill Payne) Model (see #6d- Lecture) compute the Pre-Money Valuation for Company U. Provide a brief written/typed synopsis of your supporting rationale/justification for each scored "subjective line item factor, which could be either an assigned "fixed dollar amount" in the Ason) within a defined range or a "relative subjective percentage tin the Scorecard) to normalize either below or above the regional norm set at 100%. Your rationale/justification for each subjective line item subjective factor is strictly dependent upon the information/content contained within the Case Study. Please utilize and "type in the required information in the provided "templates OR you can utilize the #6-Template (Qualitative Pre-Money Computations) for the Ason and Scorecard and then simply copy & paste" in the equivalent computations. Using each of these two Qualitative subjective methodologies, you must identify the suggested Pre-Money Valuation for Company U, rounded to the nearest ten thousands Part #2: (5 Points) Using the "Investor ROI Hurdle Valuation" methodology compute the Pre-Money Valuation (see #6b-lecture). Again utilized and insert the required information in the provided below "template". Part #3: (5 Points) Integrate/analyze the above Qualitative and quantitative results and recommend a single Pre-Money Valuation for Company U supported by a brief explanation/statement. Company U: Company U, a medical device company located in Oklahoma City, has just received Federal Drug Administration (FDA) approval for its new ankle ligament implant device. Since the company has just now received FDA approval i.e. the legal right to sell the product with the specified medical performance claims), the Company absolutely has no trailing revenues. Actually, first revenues will likely not be recognized for another six months given the need to build-up a finished goods inventory to serve the various sales distribution channels requirements. However with the FDA approval the vast majority of the governmental regulatory risk has been removed plus any future incremental governmental risk should be negligible. Now that the FDA has approved the device, a full scale sales initiative will be launched, provided the Company raises the necessary capital to fund this sales & marketing launch initiative and corresponding Inventory buildup. In order to fund this next incremental business progression, the Company needs to raise $2,000,000 in a Series A Preferred offering The Co-Founders believe this funding will have to be raised collectively from an Angel Group syndication comprised of 3-5 Angel Groups. The local Angel Group which has already previously invested $500,000 and has agreed to invest $750,000 as a follow on investment in this series A Preferred round and lead the Angel Group Syndication effort within the surrounding states. The local Angel Group believes the investment tarihetsar Crime Anaal internet For RO P MacBook Air IM Aa Bbc.codee AaabCedee AaBCCD po Av 3 21 a3 Normal No Spacing Heading 1 The Co-Founders believe this funding will have to be raised collectively from an Angel Group syndication comprised of 3 - 5 Angel Groups. The local Angel Group which has already previously invested $500,000 and has agreed to invest $750,000 as a follow on investment in this series A Preferred round and lead the Angel Group Syndication effort within the surrounding states. The local Angel Group believes the investment offering will be categorized as a "later stage" Seed round requiring an Angel investor targeted 10x Rol given the FDA approval and executed key external sales vendor contract. The current local Angel Group informed the part-time CFO the current recent local average Pre-Money Valuations in the medical device sector has been approximately $2,400,000. The targeted investor ROI is based upon the fact the Company is rapidly transitioning from the Developmental to the Introduction commercialization phase. In anticipation of the CFO joining the Company full time upon funding and the need to add a new Independent representative to the Board of Directors as a requirement for this funding round, the Company and exsting shareholders committed to creating a 10% "pre-money Stock Option Pool According to the Series A Preferred offering the "Use of Funds" indicate the capital investment will be used to buildup Finished Goods Inventory, lease warehouse space for storage/shipping logistics, develop an extensive full set of professional marketing collateral materials (website, brochures, etc.), expand the administrative & sales training functions, and launch an aggressive medical device distributor sales channel driven by an aggressive variable Distributor sales commission of 38% With the FDA approval and large capital infusion, the currently part-time CFO who will be joining the Company full-time immediately upon funding. This part-time CFO has developed the company's detailed Integrated Financial Model, and even plans to utilize the financial figures for future budgetary purposes. This pending CFO is a CPA with seven years of public accounting experience primarily in auditing, but has no direct entrepreneurial operating managerial experience. The current Financial Modeling projections forecast a fifth year (which coincides with the anticipated Exit timeframe) EBITDA of 56 million. After researching recent market comparable high growth medical device company acquisitions by large public medical device companies, Company D anticipates an 8X EBITDA multiple valuation at the time of an "Er sale. Originally the CEO, a highly successful serial entrepreneur owned 60% of the Company, and the CSO (Chief Science Officer), who invented the medical device, has 25 years of device related design and product development experience, and the VP Marketing, who has 5 years of medical device supervisor field sales experience with the third largest national medical device distributor, each owned 20%. The CEO owns a disproportionately larger Founder's equity position primarily due to personally making a $250,000 original cash investment into the company, which was facilitated by a previously successful entrepreneurial business "Exit". None of the remaining Co-founders have invested any cash for equity or guaranteed any financial obligation, but exclusively received equity for contributing important intangible technical/industry knowledge. To date, Company has only dosed one external capital offering. Approximately a year ago, the local Angel Group invested 5500,000 in Common Stock offering at a Pre-Money Valuation of S750,000. As a 26 JE HA P Nay AaBbcode Aa Bbc dee IEEE 21 HO AaBbCcDc AaBbc Heading 1 Head Normal No Spacing To local Angel Group invested $500,000 in Common Stock offering at a Pre-Money Valuation of $750,000. As a result the current equity ownership stands as follows: Common Shareholders: Initial Current CEO 50% 36% CSO 20% 12% VP Marketing 20% 12% Angel Group-Initial 0% 40% Footnote: A total of 1,000,000 Common Shares are currently outstanding. Prior to the external sales Distributor initiating any sales activity, the external outsourced manufacturer must Initiate commercial scale production runs, which always has some inherent product risks, and ship finished units to Company , in order to build up an upfront "buffer stock of Finished Goods Inventory. Per the existing contract with the regional medical sales Distributor, the Company must maintain a minimum of 75 days in Finished Goods Inventory. The external manufacturer during the last six months has only been testing alpha product manufacturing and currently has not finalized production capacity to manufacture commercial grade units. The external manufacturer, upon receipt of a Purchase Order from the Company which will be issued upon closing this funding will immediately begin ramping up production. The regional medical sales Distributor, which represents approximately 20 different smaller medical device companies, has a field sales force of 15 regionally dispersed across five states, and has established customer accounts with over 200 Hospitals, and business/account relations with over 1,000 Physicians/Surgeons. After completing numerous Physician/Surgeon focus groups, the medical device sales Distributor is extremely excited about the opportunity to represent and carry this new ankle implant device. All Sales Distribution related contracts have been fully negotiated and executed with both key external strategic business partners. Per the detailed Business Plan, which has now been extensively updated to support the current Series A Preferred offering and the companion five year integrated Financial Modeling, the company projects needing to raise one additional subsequent 56.0 million Series B Preferred financing in approximately eighteen months in order to expand beyond this initial regional sales initiative to a full scale national footprint. Again per the Business Plan, this incremental but final required equity capital most likely will be raised from a mid- size regional Venture Capital Fund at an estimated $8.0 to $12 million pre-money valuation, provided the Company achieves its targeted S400,000 in monthly sales within the eighteen months. The implant medical device unit sales price is $1,500 and the innovative medical device should save the medical insurance around $4,000 in reduced surgical operating room costs due to Implant time savings. Given the projected reduced patient recovery timeline and accelerated/simplified Surgeon insertion, the company forecasts revenue to grow at 85% per year as market share is taken from the five largest competitors which currently cumulatively generate apprandmately $450 million in revenues annually. Ferences Mailings Review View Tell me 21 AaBbccdee Aaabccode a po A AaBbCcDc AaBbc Hoedingt Normal No Spacing Hood Value ($) Part #1: John Ason Pre-Money Valuation Subjective Factors Score (1-5) Idea Prototype Management Revenue Relationships Total - Pre-Money Supporting Scoring Justification: Idea: Prototype: Management: Revenue: tates Focus 26 D A ER OD P MacBook Air 16-Assignment (Qualitative Valuations) erences Mailings Review View Tell me 21 ST A A. Aa Rbcode === 19 Abcode AaBbccbc BbceDd No Space Heading Hending NO Relationships: Rating 30% % Part #1: Scorecard Pre-Money Valuation Regional/Industry Average Pre-Money Valuation Subjective Factor Weighting Quality Management Size of Opportunity 25% Product or service 10% Sales Channel 10% Stage of Business 10% Size of Round 5% Need for More Funding 5% Quality of Business Plan S% Total Adjustment Scorecard Pre-Money Valuation Quality Management: Size of Opportunity: Product or service: Focus 2) ( 16-Assignment (Qualitative Valuations) ses Ab Mailings Review View Tell me EVE 2 a AaBbccdee Aa Bbcode AaBbccDc ABCDE Heating 1 Heading 2 Normal NO SPAL Product or service: Sales Channel: Stage of Business: Size of Round: Need for More Funding: Quality of Business Plan: Part #2: Investor ROI Breakeven (Venture Capital) Method $ Forecasted EBITDA EBITDA Multiple Exit Value Investor Capital Focus P #6-Assignment (Qualitative Valuations) Mailings Review View Tell me Po 21 ST Aa Bbce de AaRbCode AaBbccDc Aabb Eve E 1 Normal No Spacing Heading 1 Hen Part #2: Investor ROI Breakeven (Venture Capital) Method $ Forecasted EBITDA EBITDA Multiple Exit Value Investor Capital $ Investor ROI Investor Total Return $. % % Investor Equity Investor Capital Pre-Money Valuation $ Investor Capital $ Post Money Valuation $ Part #3: "The" Recommended Pre-Money Valuation $ Rationale