Business Plan sent to interested investors (2011 - 09 - 20)


EvilDragon

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Well, just some quick news to tell you that I finished the business plan this weekend and sent it out to interested investors.


Over 40 community members have sent me mails that they are interested in investing - guys, you rock!


I also sent a copy to notch - he was one of the first people to order a Pandora (and waited until he got it), so he might be a potential candidate as well.


I will let you know more details and informations about it soon, as well as the preordering that should start soon.


Right now, I'm just a bit tired and need to get up early tomorrow.


But I will keep you informed!
 
I'm really interested in the number of new preorders. Quite a lot has changed in the past few years, I fear a bit that interest might be waning.


It's an interesting read Michael. I'll have to check the calculations in detail, but first I need some sleep....
 
Okay, Business Plan received, I have my team of elite ol' multimillionaire friends working on the case .. be back at you soon enough, ED!
 
Plan received here too, thanks ED.


I've only had a quick look through it and couldn't find anything relating to confidentiality, does this mean you are happy for the contents of the plan to be discussed openly, for example on this forum?


I could not see an answer to this question : (originally asked here)


What would happen in the following scenario? :


ED has a company valued at €100.


He seeks an investor.


I invest €25.


We agree my investment will be for 5 years.


5 years later the company is valued at €500.


When I cash in my investment, what do I get back?


Who decides what the company is worth?


I also have a supplementary question using the above scenario :


If after 5 years Open Pandora Gmbh enters insolvency with debts of €100


Am I liable to cover some of these debts?


If yes then how much?


Please accept my apologies if this info is in the plan, as I said, I've only had a quick look so far.
 
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Plan received here too, thanks ED.


I've only had a quick look through it and couldn't find anything relating to confidentiality, does this mean you are happy for the contents of the plan to be discussed openly, for example on this forum?

Ah, no, you're right :)


Some are internal informations (company calculations, etc.) that should not be discussed openly, though I will be open enough to post the basic plan here, also some costs, but not in full detail :)

What would happen in the following scenario? :


ED has a company valued at €100.


He seeks an investor.


I invest €25.


We agree my investment will be for 5 years.


5 years later the company is valued at €500.


When I cash in my investment, what do I get back?

In our scenario, you would get back what you put in: 25 €.


However, as the value of a company grows with the profit it made, you'll get the share of profit each year.

Who decides what the company is worth?

That's being calculated based on the business plan and the profit that can be made.


My tax consultant did this for me.

If after 5 years Open Pandora Gmbh enters insolvency with debts of €100


Am I liable to cover some of these debts?


If yes then how much?

In this case, you would only lose your 25€.


Any profit you got from the years before that are yours and you can keep that.


So the maximum money you risk is your investment.


Also, in case of an insolvency, the investors are the first persons who get their money back from what's left in the company.
 
...


Some are internal informations (company calculations, etc.) that should not be discussed openly, though I will be open enough to post the basic plan here, also some costs, but not in full detail :)


...

Thanks ED for your clarification of the above questions, I'll wait until you post the basic plan before asking any detailed questions on the forum.


On a very general level my understanding of the proposed investment method is as follows :


The investment is in the form of a fixed term loan to Open Pandora GmbH.


The 'interest' (or return on investment) is a proportion of annual profits for Open Pandora GmbH.


Investors do not own any part of Open Pandora GMBH (based on your response above : 'In our scenario, you would get back what you put in: 25 €')


Does that sound right?


After my first read of the calculations, I'm wondering, have you considered the fact that a certain amount of profits need to be retained to repay investors their initial loans? (the amount of this will only be known when the durations of the loans are agreed)


On a general point, it might be worth clarifying your numbering conventions to potential investors, I'm pretty sure most people will understand it but you appear to write numbers differently in Germany than in the UK.


e.g. in the UK fifty thousand euros and seventy five cents would be written as follows : €50,000.75 in Germany (and perhaps the rest of the world as far as I know) it appears to be €50.000,75 (i.e. commas and full stops are the other way round)
 
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The investment is in the form of a fixed term loan to Open Pandora GmbH.


The 'interest' (or return on investment) is a proportion of annual profits for Open Pandora GmbH.


Investors do not own any part of Open Pandora GMBH (based on your response above : 'In our scenario, you would get back what you put in: 25 €')


Does that sound right?
Yes and no. You're making the assumption that the value of the company goes up, but there's a flaw in that: a company is worth what it is being sold for, no more, no less.


There are calculations that will find the "value" of a company, but those are only estimates of what a company would be worth if someone wanted to buy it, it isn't some magic value that automatically makes shares worth more. No matter what value some estimate says, a share is worth exactly as much as someone is willing to pay for it, no more and no less, and since the contract makes it non-transferable, the only person you can "sell" to is back to OpenPandora, and that price is defined.


However, suppose EvilDragon sells 25% of the company in shares, raising 300'000EUR, he estimates the company at 1.2 million EUR. Someone then comes along and buys the company for 5 million EUR. NOW the company has a real value, not just an estimate, because someone has decided that the company is worth more than it was before. 25% of that 5 million EUR (1.25 EUR) would be distributed to share holders because they owned 25% of the company.
 
What would happen in the following scenario? :


ED has a company valued at €100.


He seeks an investor.


I invest €25.


We agree my investment will be for 5 years.


5 years later the company is valued at €500.


When I cash in my investment, what do I get back?

In our scenario, you would get back what you put in: 25 €.


However, as the value of a company grows with the profit it made, you'll get the share of profit each year.
That should be made clear in whatever contracts are involved. My dad is part owner in a bar and they've been having a dispute with another silent partner who is wanting out as to what the terms of the separation are. Having just one dispute like that can easily wipe out the cash from several investors in a heart beat. Just appraising a business can cost several grand.


Personally, I'm not investing, but that's largely a function of not having cash that's not tied up in a retirement account for investment purposes. And, I think you'll understand why I'm not going to be tapping that money.
 
@WizardStan :


Not sure you've grasped the nature of the investment, from my understanding it is not in the form of buying shares, you can see that from ED's answer above of 'In our scenario, you would get back what you put in: 25 €.'
 
Not sure you've grasped the nature of the investment, from my understanding it is not in the form of buying shares, you can see that from ED's answer above of 'In our scenario, you would get back what you put in: 25 €.'
Yes, those exist. It's called "callable": you buy a share, but the company maintains the right to buy back the shares at some rate under certain conditions. You're still buying a share of the company, that's why, in the case that ED does sell the company in whole, you would get a portion of that sale.


If it were just a loan, it would be a bond, in which case you would own none of the company and would get only what was owed to you.


There's also other differences between a bond and callable share in the event of bankruptcy.
 
On a general point, it might be worth clarifying your numbering conventions to potential investors, I'm pretty sure most people will understand it but you appear to write numbers differently in Germany than in the UK.


e.g. in the UK fifty thousand euros and seventy five cents would be written as follows : €50,000.75 in Germany (and perhaps the rest of the world as far as I know) it appears to be €50.000,75 (i.e. commas and full stops are the other way round)


Your way is also how we do it in the US. But of course, we don't call it a "full stop", we call it a "decimal point". :p
 
The updated business plan data is much appreciated, thanks ED. I guess I'm still a bit on hold for the terms of the actual investment; I think it's pretty clear how the shares themselves are valued but I don't yet know under what conditions we can take back our shares (or when ED's company buys them). I presume they're not transferable like WizardStan originally said.
 
After my first read of the calculations, I'm wondering, have you considered the fact that a certain amount of profits need to be retained to repay investors their initial loans? (the amount of this will only be known when the durations of the loans are agreed)

Of course. If you check the business plan, you can see that after we've done the first 4000 units (which will also mean that all paid preorders are delivered), the full money is back so that any investor could pull his investment back out. This will probably be the earliest time I will put into the contracts.


We couldn't continue the production then, but there would be no debts left and if the demand is there, the product is established in the market and just some money is needed for 2 months, you can get a loan from the bank.


However, it wouldn't make sense for an investor to pull the money back after the first 4000 are finished - he wouldn't get a high profit.


Thanks to the paid preorders we need to deliver, profit after the first 4000 isn't much.


After them, the profit is a lot higher, as they will all be sold to new customers.


So basically, the earliest time to pull the investment back out would be end of 2012.

@WizardStan :


Not sure you've grasped the nature of the investment, from my understanding it is not in the form of buying shares, you can see that from ED's answer above of 'In our scenario, you would get back what you put in: 25 €.'

True. That's one possibility of investment:


The company is valued at a certain time (right now, it's 1,6Mio EUR).


If an investor puts in 10% (160.000 EUR), he will ALWAYS get 10% of the profit share.


His invested money doesn't change. Even in five years it will be 160.000 EUR, but he would get 10% profit, even if the new companies' value would be 20.000.000 EUR at that time.


The value of the company rises with the profit, so the investor would get A LOT of money, actually.


If the company makes a loss, the investor doesn't have to pay anything and the invested money he puts into the company wouldn't change as well. It would still be 160.000 EUR.


This is ONE possibility of a contract.


There is another one: Profit and loss sharing.


In this case, the money he invested will grow and shrink based on the profit and the loss the company makes.


If anyone is interested in that, I can offer that as well.


This is something that needs to be discussed individually with every investor and the contract needs to be setup.

The updated business plan data is much appreciated, thanks ED. I guess I'm still a bit on hold for the terms of the actual investment; I think it's pretty clear how the shares themselves are valued but I don't yet know under what conditions we can take back our shares (or when ED's company buys them). I presume they're not transferable like WizardStan originally said.

As said, this depends on the contract.


I guess most people probably just want profit sharing and get there investment back at some time, so this was the main thing I was concentrating on.


However, this is not fixed for everyone, if you want a different form of investment, we can discuss about that as well :)
 
Oh okay, I didn't realize multiple contracts will be offered. But a standard offering will be proposed, right? Hum, I'm starting to feel like I should have a lawyer >_>
 
Oh okay, I didn't realize multiple contracts will be offered. But a standard offering will be proposed, right? Hum, I'm starting to feel like I should have a lawyer >_>

Yeah, I'll also have a meeting with my lawyer and tax consultant tomorrow.


This is all very new for me as well, and I'm learning more and more each day.


It's especially complicated as almost every country handles these thing differently :D


Well, I already mentioned my standard offering:


* You invest money into the company. Based on the amount of money invested, you own xx% of the company (160.000 EUR is 10%, 16000 EUR is 1%).


* You will get a share of the profit made, based on the %age you own. If the company does 400.000 EUR profit in 2012 and you invested 10%, you'll get 40.000 EUR. If it does 1.000.000 EUR profit in 2013, you'll get 100.000 EUR. If it makes a loss, you won't get any money. Your investment won't change though, it will always be 160.000 EUR.


* From a fixed date on (probably end of 2012), you can get your invested money paid back. You won't get any profit share after that anymore, that should be clear.
 
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