Yes, Cash moves Entrepreneurial Ideas into Industry. After
significant Research and Development, inputs of time, effort and very valuable sweat
equity, a dynamic strategic plan has been structured. This highly confidential
strategic plan will allow, a dated Prospectus to Investors and a Business Plan
for Lenders, to be extracted and offered, hence, selling a percentage of the
idea to individual or group investors, who expect to earn a superior Return on Investment. Such
Equity Investors will calculate the risk of earning, as compared to losing
their money. The Lender, however, will demand some tradable fixed form of
tangible asset to hold as financial security.
The active and constantly updated strategic plan
would have cost the Entrepreneur, their family and friends, every little bit of
disposable cash savings. An idea can cost the entrepreneur relationships and
result in; being alone, quitting and failure or to continue and persevere to work
on another idea, to promote its possible success. One success out of hundreds
of ideas can easily bring the entrepreneur back in good standing with friends
and family. Such a winning idea will have to be promoted in front of cash
investors, for by now the entrepreneur is cash poor, but has armed with a very
valuable preliminary prospectus.
The offer or pitch must be placed in front of
selected investors, who can add value, more than just cash, to the idea. An
investor, with a prime location, machinery and equipment, or technical know-how,
in addition to the required cash, is in a better position to grow the idea. The
Idea, as great as it maybe, must compete with many other ideas for initial cash
contributions. Its greatest competitive advantage is if it is seen as an
improvement on a successful product. Innovation upon an existing product, which
already owns market share, is most likely to win numerous investors’ interest.
The Entrepreneur, though desperate for cash, must know
the idea’s projected breakeven points, and not allow investors to steal or
devalue the preceding work. Recognizing the need for cash to fuel operations
and sales but understanding that without the idea, cash would never generate
superior returns. So, it is the Idea Promoter that must value the work by offering
cash investor(s) a small percent of the organization, for their cash injection.
For example, a 10% share price at $100,000 would value the company at
$1,000,000. Whereas, the same $100,000 for 20% would value the said entity at
$500,000. While the projected earnings per share remains the same.
An Investment Banker or Underwriter, dealing with
large depositors, is in the best position to help a startup idea meet its targets
and measures. High value clients, seeking better than the bank deposit returns
from a portion of their portfolio, are soon converted to Angel Investors or
Venture Capitalist. Underwriter’s Fees and Loan Interest payments must be
incorporated into the projections, offset by increasing forecasted sales
revenue or by the needed equity investment. Such cash investment or loans would
serve the project best, if in hard currencies, as not to expose or experience negative
Foreign Exchange issues too early in the operation.
Rationale
T.A.J &
Associates Company Limited uses this occasion
to comment on topics that have been covered, both academically and by the
mainstream media, to add its opinion and point out investment opportunity, not
to invoke any social action.
