Funding assessment

Funding assessment


Individual case study 75%


The assignment


Your task is to produce a consultancy report for both Midas Touch Technologies
(MMT) and Victoria Capital Investment Ltd (VCI). MMT is considering whether to
approach the venture capital firm for funding and VCI is considering whether to
invest in MMT. Your report will inform their decisions.
Using the information provide in the pages below, your report should:


Part A – For MMT


Make suggestions about the type of funding that would be most suitable by:
Identifying the advantages and disadvantages of approaching the venture
capital firm for the full amount of equity funding.
(20 marks)
Identifying an alternative funding strategy for MTT, including a discussion
of the advantages and disadvantages.
(20 marks)


Part B – For VCI


Make recommendations whether they should invest in the business by
Evaluating the market potential of MMT (20 marks)
Assessing the financial status and funding demand of MMT (20 marks)
Your recommendations may be based on the information provided, but should also
be backed up by evidence taken from academic literature, industry reports, articles,
reputable websites etc. Please ensure that you reference your evidence using
Harvard style referencing (use Cite Them Right online to check referencing is
accurate – available via the Library).


Additional marks


Referencing – 10 marks
English, spelling and grammar – 5 marks
Presentation and layout – 5 marks

Word limit


The report should be 3000 words (-10%) in length.
Referencing
Please include references to academic theories discussed during the course. The
references in the body of text will be included in the word count, but the references
section at the end of the document will not.


The Case


Victoria Capital Investment Ltd (VCI) is a London-based venture capitalist firm,
typically investing in early stage technology businesses.
Midas Touch Technology Ltd (MTT) produces high-end smart watches using
premium materials and third party software. MTT intend to approach VCI for an
investment of £10 million. To date, MTT have developed the product fully. The
product has pending worldwide patents and the manufacturing is outsourced to a
company in Hong Kong.


MTT is owned by Yixing Han (28) and David Green (39) who met when they
worked at a multinational technology organisation. Working together in international
accounts management, they identified the growing market for wearable technology.
They remained with their employer for the first three months, but left to devote their
full attention to MTT after generating a lot of early interest in their first product. The
team are currently geographically dispersed, with Yixing based in London and
David in Cardiff, Wales.


MTT’s owners have invested £50K, secured a £400K long-term loan from the bank
and raised £300K using crowd funding.
In 2015, MTT achieved revenue of £936K in the first year of trading through sales
of their flagship product, although the company posted a £674K loss. In 2016, MTT
plan to develop a new product, bring manufacturing in house and launch global
marketing campaigns. The proposed £10 million investment will be allocated as
follows:


£4.5M manufacturing plant and tooling costs
£3M sales and marketing campaign
£2.5M new product development
Market research suggests that global smart watch sales will be £1,740 million in
2015; the industry is expected to grow rapidly to £9,830 million in 2019.


MTT produced a 6 year income statement, and a 6 year cash flow statement seen
below (Table 1) and (Table 2), note that the 2015 are the actual year end results.
They have assumed that they will receive the £10 million investment in January
2016.


Table 1: Midas Touch Technology Ltd 6 year income statement (£K)

Year 2015 2016 2017 2018 2019 2020
Sales Revenue 936 2,898 7,728 15,456 32,472 62,400
Direct Material Cost
Direct Labour
Production Overheads
Depreciation
634
221
197
0
1,725
593
538
0
2,705
1,352
1,030
500
5,152
2,640
1,996
500
10,148
5,412
4,059
500
18,720
10,140
7,540
500
Total Cost Of Sales 1,051 2,857 5,588 10,289 20,119 36,900
Gross Margin (115) 41 2,140 5,167 12,354 25,500
Sales and Admin Costs
Research and Development Costs
Other Operating Costs
44
440
35
3,000
2,500
45
1,800
800
200
2,000
900
420
3,000
3,400
740
6,000
4,800
1,150
Operating Profit (634) (5,504) (660) 1,847 5,214 13,550
Finance Cost
Corporation Tax
40 40 40 40
361
40
1,035
40
2,702
Profit After Tax (674) (5,544) (700) 1,446 4,139 10,808


Table 2: Midas Touch Technology Ltd 6 year cashflow statement (£K)

Year 2015 2016 2017 2018 2019 2020
Operating Activities
Net Profit (PAT)
Adjustments for:
Depreciation
Working capital
(674)
0
(23)
(5,544)
0
(700)
500
1,446
500
4,139
500
10,808
500
Net cash from operating activit ies (697) (5,544) (200) 1,946 4,639 11,308
Investing Activities
Purchase of PPE (Tooling)
0 (4,500)
Net cash from investing activiti es 0 (4,500) 0 0 0 0
Financing Activities
Bank Loan
Owner Investment
Crowd Funding Investment
Venture Capital Investment
400
50
300
10,000
Net cash from financing activiti es 750 10,000 0 0 0 0

 

Last Updated on February 10, 2019 by EssayPro