Objective: The objective of this individual assignment is to develop a capitalization table for an early- stage venture through multiple rounds of financing to illustrate the impacts of outside investment on ownership percentages and the value of each owner in the company For individual assignments, students are expected to turn in work that is their own. Consultation among students for both individual and team assignments is encouraged; however, deliverables including individual write ups and spreadsheets should be developed independently by each student Assignment: Create a capitalization table that shows: 1) the number of shares (units) owned by each party, 2) the equity ownership (percentage ownership), and 3) value (in dollars) for each owner at the end of each of 6 stages of venture finance. In the case where ownership is vested over a period of time calculate ownership based on a fully diluted value (i.e. assume that all the shares vest immediately) Stage 1: Company Formation. Fresh with their knowledge from completing their Innovation and Commercialization class in UWM's College of Engineering and Applied Science, two student entrepreneurs decide to launch a company. The company will produce a software tool to help manage social media profiles, "Profile Filter." This innovative tool will be marketed to new college students who want to give their parents the usion of knowing what's happening while their children are away at college. The customized "Parent Profile" will automatically translate postings to parent-friendly versions. The picture of a raucous house party featuring their precious offspring willing beer will be automatically transformed in the same participants doing volunteer work at a neighborhood children's center. The program will employ advanced facial recognition software and highly realistic virtual reality environments. Recognizing their complementary strengths, the two entrepreneurs found a company (using an LLC structure commonly employed by startups that anticipate fund-raising). Founder 1 contributes $7000 in cash for operating capital and Founder 2 also has a value of $3000. The divide 100 contributes a computer and software that they agre shares (or units in the case of an LLC) between the two founders Stage 2: Angel Investment. The entrepreneurs know the importance of discovery to entrepreneurs a structured approach, so they create a business model canvas to develop their plan. For the next three months, the entrepreneurs test the market, refine their proposed product offering and create a development plan for their minimum viable product that they will used to enter the market. They do extensive research on the UWM campus although it is hard to find beer swilling freshmen among UWM's studious undergraduate population -they manage to reach their potential customers and test their assumptions regarding the value of the business, the key product features and the minimum viable product. One of the founders knows a little about software development, so they cobble together a prototype of the code t has limited facial recognition features a the virtual reality simulations are a little crude, but the product is good enough to demonstrate During their hypothesis testing phase, the entrepreneurs reach out to whole network of business leaders and investors who are anxious to help new ventures grow in Milwaukee. One person who
