LLP203 – Funding Coursework
Your task is to produce a consultancy report for Midas Touch Technologies (MMT). They are considering whether to approach a venture capital firm for funding and have asked you to produce a report that will inform their decision. Using the information provided in the pages below, your report should:
Identify the advantages and disadvantages of approaching the venture capital firm for the full amount of equity funding. (25 marks)
Using ALL information given (financial and non- financial) explain the risks the venture capital firm has to consider when appraising the investment. Explain whether you would recommend investing in MTT and why. (25 marks)
Identify an alternative funding strategy for MTT, including a discussion of the advantages and disadvantages. Make recommendations about how MTT could improve their chances of successfully obtaining this type of funding. (30 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).
Referencing – 10 marks
English, spelling and grammar – 5 marks
Presentation and layout – 5 marks
The report should be 3000 words in length. Students will be allowed to exceed this by 10% but additional words will not be marked.
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.
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.
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