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Introduction Understanding financial projections, raising capital, and navigating venture capital deals are crucial skills for entrepreneurs in the innovative and fast - paced startup ecosystem.

Introduction
Understanding financial projections, raising capital, and navigating venture capital deals are
crucial skills for entrepreneurs in the innovative and fast-paced startup ecosystem. Financial
projections not only guide the strategic direction of a startup but also serve as a critical tool in
communicating the venture's potential to investors. Raising capital is a pivotal moment in a
startup's journey, requiring a deep understanding of valuation, equity, and investment terms.
Mastery of these areas is essential for securing the right partnership with investors while ensuring
the long-term growth and sustainability of the business.
Part 1(50): Financial Projections for a Tech-Enabled Home Fitness
Company
Business Scenario:
You are tasked with developing a detailed financial plan for a tech-enabled home fitness
company that combines smart exercise equipment with a subscription-based online
platform offering live and on-demand workout classes.
Assignment Requirements:
Five-Year Financial Forecast: Create detailed monthly projections for the first year and
annual projections for the subsequent four years, focusing on Profit & Loss statement.
Assumptions and Rationale: Clearly articulate the assumptions made regarding market
size, sales volumes, pricing strategies, and operating costs. Provide a rationale for these
assumptions based on market research or industry benchmarks.
Financial Details: Include estimations for equipment unit sales, subscription user growth,
pricing strategies, cost of goods sold (COGS), and detailed operating expenses.
Submission:
An Excel file with comprehensive financial models.
A written report (maximum FOUR pages) detailing your assumptions, methodology, and a
summary of the financial outlook.
Part 2(50) : Simplified Venture Capital Deal Structuring
Objective: Using the financial projections from Part 1, simulate a Series A venture capital funding
round, focusing on pre-money valuation, option pool sizing, and deal structuring.
Instructions:
1. Pre-Money Valuation:
Utilize the projected year-five EBIT (ignore depreciation and amortization) and
apply an industry-standard multiple to estimate the company's pre-money
valuation. 2. Option Pool Sizing:
Determine the percentage of the company to be allocated for future employee
stock options. Choose a percentage that reflects your companys needs to recruit
and incentivize key employees. Calculate its impact on the total share structure if
your company currently has 1 million shares outstanding.
3. Deal Structuring:
Outline the amount of capital to be raised, calculate the post-money valuation, and
determine the new investors equity percentage, factoring in the option pool's
dilutive effect.
Submission:
A detailed report (maximum THREE pages) explaining your valuation methodology, option
pool sizing, and the structured deal, including investment amount and resulting equity
distribution.
**Bonus (10): Alternative Funding Sources**
At this stage, beyond venture capital, explore other funding sources that could be suitable for the
startup, considering the business model and financial projections.
Identify Alternative Sources: List potential funding sources other than venture capital.
Justification: Provide a solid rationale for each selected funding source, linking your choices to the
specific circumstances of the business scenario and the assumptions made in the previous
sections.
Strategic Fit: Explain how these funding options align with the companys short-term and long-term
goals, based on your financial projections and potential needs for next rounds of financing.
Submission:
A concise written explanation (1-2 pages) as part of your main report, detailing the alternative
funding sources and your rationale for choosing them.
Submission Guidelines:
The assignment should be clear, well-justified, and demonstrate a thorough understanding
of startup finance fundamentals and venture capital deals.
Submit the complete assignment through the designated Dropbox on D2L before the
deadline. Ensure all parts are cohesively integrated and presented in a professional format.
Please combine all documents into a single PDF (except Excel file).
This is a group assignment.
No Late submissions will be accepted. Notes:
- Do NOT make holistic assumptions about final numbers. E.g.,I assume our first-year
salary would be X. Instead, try to come up with a systematic prediction.
- Feel free to add/delete subcategories in the excel template. Depending on your
assumptions, you might move some items from COGS to Operating Expenses or reverse.
Please note that the excel sheet is only a template to start with and you may need to
delete/add fields based on your needs.
- APA citation is required.

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