Capital Formation Plan

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Develop a high-level funding schedule using an Excel spreadsheet for your new venture business concept that can be used to discuss cash requirements for the first year of operations with prospective investors. The spreadsheet should be prepared on a monthly basis and should include the following specific details:

Headcount plan – include all personnel need to carry out the critical operations of the business for the upcoming year.

Personnel Count
CEO
Lead Developer
COO
Sales Executive

Admin Assistant

 

General & administrative expenses, including office rent and related costs, utilities, communication expenses, insurance, filing fees, etc.

General Expenses
Office Lease 12,000.00
Insurance 2,500.00
Communication Expenses 10,000.00
Legal/ Patent Fees 10,000.00
Tier 1 Data Center Lease 120,000.00

 

Estimate the cost of how you plan to market the company/product.

Marketing Expenses
SEO 20,000.00
Social Media Marketing 80,000.00
Tradeshows 25,000.00
PR Firm(s) 10,000.00

Develop your revenue model, including key assumptions and variables such as unit sales, sales growth, number of customers by the end of the year, product pricing, etc., Make the model flexible enough to enable you to change key variables and run “what if” analyses.

Notes:

  • Show realistic growth in unit sells.
  • Show no Ad revenue for the first 8 months.
  • Show now product revenue for the first 1 month due to free upgrade period.
Products Sell Price
HD Live Streaming (Per month) $149
HD Live Streaming (Pay-per-day) $15
Display Player $5
Personal Domain $1
Ad Free Service $5
Quic Store Products $30
Global Ticker Ad Unit $15,000
Small Ad Unit $2,500
Large Ad Unit $5,000
Major Traffic Channel Small Ad Units $5,000
Major Traffic Channel Large Ad Units $15,000

 

Customers Year 1
Monthly Active Users 613,180
Daily Active Users 367,908
Mobile Monthly Active Users 245,272
Total Users 981,088

 

If the cost of delivering your product or service is significant, forecast the cost of goods sold based upon estimate costs and the product assumptions used in item 4 above.

Note:

  • Product delivery cost is minimal due to its software form.
  • Use standard online software delivery cost assumptions to create this section.

 

After preparing the initial funding plan, critically review the plan and assumptions (including having advisors and other management team members review the plan for reasonableness). Adjust the month-to-month results to “normalize” the cash balance (and ensure it never runs below $0), adjusting discretionary expenses if necessary.

 Upon completion of the financial model, answer the following questions:

  • How much funding do you need to operate during the first 12 months of operations? Please include your numeric answer and an explanation of several sentences.
  • Does the amount of cash needed in item 1 above fall within the “reasonableness range” for an early stage company (i.e., up to $5 million)? Please include your numeric answer and an explanation of several sentences.
  • What is your monthly cash burn rate – both gross and net burn (gross burn is the average of total expenses each month; net burn is gross burn offset by the average monthly cash generated from revenues). Please include your numeric answer and an explanation of several sentences.
  • How long will you be able to operate at the end of the 12 months forecast before you need additional funding? Please include your numeric answer and an explanation of several sentences.

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