Steps to Growth Capital New Tech Case Story

New Tech Case Story — Step 3

The Challenge: Are They Worth an Investor's Time?

Grant Argent (New Tech's financial advisor) stresses that the management team must be able to convince investors that New Tech is a fast-growing business with excellent profit potential. He informs Stuart Chip (New Tech's president) and Elizabeth Pratt (New Tech's accountant) that this evidence has to be documented in a convincing manner in an investment proposal. To do this, they must gather critical information that investors will need to examine before making their decision to invest in New Tech.

Potential investors, not to mention Stuart and his team, will need reliable information to:

• see what the company's growth opportunities are and how it will exploit them;
  
• put a value on the company's growth opportunity and expected return;
  
• determine the risk element and expected return on investment the investors want to earn; and
  
• arrive at some parameters for the share of equity the company will offer.

Elizabeth can do some of the groundwork on her own, but she asks Grant for some help with the technical analyses that will be required.

Key Tasks

The New Tech management team will have to take on a variety of tasks:

• assess the external environment, including economic and industry-specific trends, and an analysis of their competitors;
• examine their own procedures and processes, and develop plans to optimize them to achieve the growth targeted;
• determine what they feel is the value of the company now, at the beginning of the investment period, based on their financial forecasts;
• decide on how the investor would be able to take his or her money out and calculate a projected value for the end of the investment period; and
• determine what rates of return an investor might expect given their proposal and forecasts.

Read how New Tech conducted a situation analysis to understand their competitive advantages.

Read how New Tech calculated the key financial information: projected values and rates of return.

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