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

[mysticmaus]

I have some questions about investing >


1 - Is it still possible to invest now?


2 - Is the minimum still 2000 ? ,and why?


3 - If profit is made , will that be shared once a year or once a month?

 

[EvilDragon]

1. Yes, no one has invested yet, the business plan has just been sent


2. About 2000 - 3000. It's the minimum because anything else wouldn't really make much profit for you, and there are fees to be paid when transferring money. Also, I need to prepare tax report here for every investor, so the more there are, the more work it is.


3. Once a year.

 

[mysticmaus]

Ah , okay!


Can you please sent me your investment plan too? , I'm interested in this ^_^

 

[Mr_Loon]

Hi ED, many thanks for your frequent updates and clarifications, I'm getting a lot clearer picture as to your proposed investment model now.


There are still a load of questions flying round my head but I'll hold back from asking them now as I've a suspicion that a careful reading of your plan will provide a little enlightenment.


If you're seeing the lawyer then a fundamental thing to sort out is the exact relationship between OP GmbH, OP Ltd, M Weston, Dave C & Fatih. I know that you're all men of honour and from my understanding there have been verbal contracts and informal written agreements for the business so far. Ask your lawyer what sort of agreements between these parties need to be in place.


A little tip for dealing with lawyers is to tell them exactly what you want and request a fixed price quotation for the satisfactory and timely delivery of the service required. This has worked wonders for me on the couple of occasions I've had to engage the services of a lawyer.


Viva La Pandora!

 

[EvilDragon]

Ah , okay!


Can you please sent me your investment plan too? , I'm interested in this ^_^

Will do

If you're seeing the lawyer then a fundamental thing to sort out is the exact relationship between OP GmbH, OP Ltd, M Weston, Dave C & Fatih. I know that you're all men of honour and from my understanding there have been verbal contracts and informal written agreements for the business so far. Ask your lawyer what sort of agreements between these parties need to be in place.

That's all being taken care of, no worries.

A little tip for dealing with lawyers is to tell them exactly what you want and request a fixed price quotation for the satisfactory and timely delivery of the service required. This has worked wonders for me on the couple of occasions I've had to engage the services of a lawyer.

Well, the lawyer is actually also a very good colleague of mine.


He was the one owning the TV station where started to work and our company does the PC stuff as well for his company.


So you can be sure he'll help me as good as he can

 

[WizardStan]

I'm still waiting for the business plan, by the way.

 

[EvilDragon]

I'm still waiting for the business plan, by the way.

You should have one now.

 

[neko]

It seems you're offering two different investment options.


Option 1:


I buy a 10% share for 160000 EUR.  There is a yearly dividend payment if OpenPandora GmbH earns a profit.  Sometime after 2012 you buy back my 10% share and pay me the 160000 EUR that I originally invested.


Option 2:


I buy a 10% share for 160000 EUR.  There may or may not be a dividend payment.  Sometime after 2012 you have the option of repurchasing the shares, but if the company earned money, then the value will be higher.  For example, if the company was valued at 2M EUR, then you would pay me 200000 EUR for my 10%.  However if the company loses money then I don't get my initial investment back.


My question is how do you determine the valuation in the second case.  Normally for this type of investment, the company would be valued based on an initial public offering or an acquisition by a third party, but you have no intention of doing either.

 

[ledow]

"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."


So, if someone invested 160,000 EUR now, then in a year they *MIGHT* make 40,000 EUR (which they would probably be able to make in savings-account interest in that time anyway with zero risk), and in two years *MIGHT* make 140,000 EUR (assuming everything goes to plan, all the new units sell, and you make over a MILLION in pure profit within two years, which is a big statement, to say the least from a company - and product - that is presumably yet to make any?). That sees a pretty poor return, really, especially seeing as that makes a lot of assumptions and, from an investment point of view, would qualify only as a perfect "fantasy" series of events - i.e. unlikely. That's barely a double-your-money return in 2.5 years, and most investors of that scale would tend to look for 5x or more on an investment of that size. You can easily get better than that by just putting that amount of money through a decent financial adviser - who will invest in standard bonds and even today come out ahead of that with a lot more certainty.


Once you include currency volatility (hello, Italy, thanks for degrading the Euro further, my Euro holidays just got cheaper again), local taxes on that profit, depreciation of money returned (e.g. interest rate rises in the mean time so it is a 1% more "worthless" than it was when you put it in etc.) it becomes very painful for a foreign investor and even a Euro investor would be hard-pushed to justify it except on purely charitable grounds.


It seems pie-in-the-sky, still, especially for "amateur" investors - a 2000EUR investment will possibly get you 0.125%, which would be what? 500EUR back in year 1? 1750EUR (total) in Year 2? Yes, you could "double your money" by year 3, if everything goes to plan, but you could also lose it all (especially if, say, you're the only one to invest, or not enough people invest overall) - bankruptcy only works for investors if there are recoverable assets - a set of boards that needs hundreds-of-thousands of Euros of work to actually finish and sell is really nothing more than scrap metal, in that circumstance. Or possibly you could get something no more than standard savings interest in the first year and there not BE a second year. I hope the business plan details under what circumstances they can force you to take your investment back because if the next batch never sees the light of day, you'll make a pretty minuscule profit for such high risk, just by buoying them up to fulfil only their existing (currently unfulfilled) orders and then be sent on your way.


And everything from the lawyer to the tax consultant is done on a-nod-and-a-wink and "That's all being taken care of, no worries." I'm sure someone will be able to make guaranteed money and/or gainful employment from it, but I'm not sure the investors get such a good deal. If nothing else, if you *don't* make a profit (by, for example, ploughing all the profit back into the next batch's production, or marketing, or tooling, or employees to build them - because these investors have no say in what you do and it would be pretty easy to hide the profit into such things), you pay investors nothing - and maybe, possibly, might be - they will get their money back minus the interest they could have had on it.


There are high-risk ventures. There are pet projects that people might be willing to fund. But this just seems... well... weird. I'd be very interested to know who does actually invest. I'm not even sure it would be worth the effort/expense of having your own lawyer check over the contract just to check there are no pitfalls you're unaware of.

 

[Tam Toucan]

No disagreeing since I know sod all about, but...."160,000 EUR now, then in a year they *MIGHT* make 40,000 EUR (which they would probably be able to make in savings-account interest in that time anyway with zero risk" can you point me to where I can get 25% return a year with zero risk in the current climate?

 

[EvilDragon]

Exactly. 20 - 30% is a perfectly normal rate for such investments.


On a bank, you can currently get a max of 6% (in Germany) per year, so 25% is perfectly okay. If the Pandora sells better, the quote you can get is even higher.


If 10.000 Pandoras could probably make 700.000 EUR profit.


10% of that would be 70.000 EUR.


So, with 160.000 EUR, you would make 70.000 EUR, which would be 43,75%.


Are 10.000 sold units in a year realistic?


Yes, I think so. With units in stock, bigger production runs (which would lower the costs and therefore the sales price), 10.000 are certainly possible.


Is it likely? Who knows. It probably depends on the worldwide market. If we get another financial crisis, sales will go lower.


There's always the risk. Therefore, I've been very careful with number and rather mentioned the minimum number of units I think we will sell instead for exaggerated values.


It's the same with the stock market: You can make BIG money with it - but you can also lose it.


Any SAFE investments won't get you much interest.


Also, I've been very careful when planning everything. In worst case, if demand drops dead after the first 4000 are delivered, I could stop production and pay back the invested money as well as the profit made until then.


I calculated everything so that the risk for everyone who invests is as low as possible.

And everything from the lawyer to the tax consultant is done on a-nod-and-a-wink and "That's all being taken care of, no worries." I'm sure someone will be able to make guaranteed money and/or gainful employment from it, but I'm not sure the investors get such a good deal. If nothing else, if you *don't* make a profit (by, for example, ploughing all the profit back into the next batch's production, or marketing, or tooling, or employees to build them - because these investors have no say in what you do and it would be pretty easy to hide the profit into such things), you pay investors nothing - and maybe, possibly, might be - they will get their money back minus the interest they could have had on it.

Yes, and that's perfectly normal for investments in start-up companies.


The investor checks the business plan. It's up to him whether he sees potential in the product and wants to support and invest or not.


It's nothing new or weird we're doing here.


There are even a lot of "business angels"-organizations, a pool of investors looking for such high-risk projects to invest.

 

[WizardStan]

So, if someone invested 160,000 EUR now, then in a year they *MIGHT* make 40,000 EUR (which they would probably be able to make in savings-account interest in that time anyway with zero risk), and in two years *MIGHT* make 140,000 EUR (assuming everything goes to plan, all the new units sell, and you make over a MILLION in pure profit within two years, which is a big statement, to say the least from a company - and product - that is presumably yet to make any?).

I seriously want to know what bank you're with that gives 25% interest risk free. The highest safe investments I've ever held were 10%, and even those had some risk. I have hit on companies that will churn out 30-50% or more, but I've also gone through companies that suddenly drop 75% overnight. That's the nature of investing: it's gambling with a different deck of cards.


Anything that can produce 25% return per annum is going to be a high risk investment: if it's not high risk, than it is extremely undervalued.


ED's business plan is sound, the numbers all work, with a large enough investment you can make a lot of passive money, but it is extremely risky and there's a lot of reasons someone may not want to get involved. I don't think the Pandora can afford another delay, for example: if this German company can't get started fast enough, or if they have as much difficulty as CC did and we get trickles instead of thousands every month, then it is doubtful that OpenPandora will be able to recover a second time and you will lose your investment.

 

[EvilDragon]

So, if someone invested 160,000 EUR now, then in a year they *MIGHT* make 40,000 EUR (which they would probably be able to make in savings-account interest in that time anyway with zero risk), and in two years *MIGHT* make 140,000 EUR (assuming everything goes to plan, all the new units sell, and you make over a MILLION in pure profit within two years, which is a big statement, to say the least from a company - and product - that is presumably yet to make any?).

I seriously want to know what bank you're with that gives 25% interest risk free. The highest safe investments I've ever held were 10%, and even those had some risk. I have hit on companies that will churn out 30-50% or more, but I've also gone through companies that suddenly drop 75% overnight. That's the nature of investing: it's gambling with a different deck of cards.


Anything that can produce 25% return per annum is going to be a high risk investment: if it's not high risk, than it is extremely undervalued.

Exactly. If any company is involved, you can either make lots of money, lose your money or at least get it back.


Regardless what company there is.


Even if you would buy Apple stocks - the stock could drop as well.


Just think about HP: One decision and your stocks lose a lot of value.

ED's business plan is sound, the numbers all work, with a large enough investment you can make a lot of passive money, but it is extremely risky and there's a lot of reasons someone may not want to get involved. I don't think the Pandora can afford another delay, for example: if this German company can't get started fast enough, or if they have as much difficulty as CC did and we get trickles instead of thousands every month, then it is doubtful that OpenPandora will be able to recover a second time and you will lose your investment.

True. I'm pretty sure it will still sell once we get production running in Germany.


This is also the reason I only take unpaid preorders. It gives new customers the chance of ordering it without any risk.


And once the production is done, I've got a big list of preorders, no need to look for more.


Sure, GC might be as slow as CC, but that's very unlikely.


I talked to some of their customers, have visited them and saw them work on PCBs. Their customers praised them, it all worked flawlessly.


Aditionally, the company is based in Germany. If they don't produce, it's way more easy to take legal action (in worst case) and get the full money back.


As you can check the money a company has in Germany, I know they could pay back the full investments.


So the risk is way lower than for a production outside of Germany.


The device IS still good, I don't think it's outdated. I compared emulators, and the Pandora runs most emulators as good as the iPhone 4, some even better.


The iPhone 3GS has the same CPU power as the Pandora, but any emulator or app runs way slower.


Why? Because it's phone for the mass market. The iPhone has some neat and well thought UI - however, that UI needs processing power and it is ALWAYS active, also when you play games.


That's fine, because it's mostly a phone.


The same issues is with most other smartphones as well.


While the hardware of the Pandora is a bit older, it doesn't really affect the usability.

 

[Darkknight512]

Don't forget about overclocking


That should push us into the Iphone 4 speed CPU wise.


Really at this point I don't see Cortex A9 bringing all kinds of new things you could do on your phone. The next step in emulation for me is PS2, but that will barely run on 3 Ghz C2D's. I think we have gone into the point where the average consumer does not NEED the A9, the capabilities don't change, just a slight increase in slickness, I feel the same about everything past lowly clocked C2D's, I just don't see people needing anything faster right now.


But I think we do need to get Youtube video going smoothly, that's part the Wifi problems we still seem to have, and the CPU not being able to keep up.. something we can take care of by using the DSP? I feel we don't need the ram it will suck up at this point, I've never gone past 180 MB of ram usage without a swap.

 

[ensoniq2k]

ED is right. I got a Palm Pre Plus here, overclocked to 1.1 GHz. I checked the pandora-wiki for information about the playability of some dosbox-games. I tried to run some games that where reported to run flawless on the pandora. They where far away from the speed reported in the wiki.


The Pre has also a TI OMAP with the same GPU and with 512 MB twice the RAM of the pandora and still runs way slower.

 

[Caine]

Add me to the list of people who is interested in knowing where you can get 25% without risk.

This is also the reason I only take unpaid preorders. It gives new customers the chance of ordering it without any risk.


And once the production is done, I've got a big list of preorders, no need to look for more.

So, do you have any indication of the current demand?

Sure, GC might be as slow as CC, but that's very unlikely.


I talked to some of their customers, have visited them and saw them work on PCBs. Their customers praised them, it all worked flawlessly.

Wasn't CC also highly recommended to you? How does the product of those satisfied customers compare to the Pandora in terms of complexity?

The device IS still good, I don't think it's outdated. I compared emulators, and the Pandora runs most emulators as good as the iPhone 4, some even better.

It's only outdated for the latest and greatest crowd. Otherwise it performs as required. The number of applications that are on the border of its capabilities are few. Most either run with ease or won't run even when you overclock beyond the safety thresholds (well, perhaps except N64 which seems to hover around the edge).

 

[WizardStan]

Also regarding the "most investors of that scale would tend to look for 5x or more on an investment of that size" remark: there are two types of large investors, those that want to make huge returns, 2x or more per year as you suggest, and those that want passive income. No single investment will turn out 100% of your original investment on a regular basis: that is so far beyond unreasonable it isn't even funny and shouldn't even have been brought into consideration. The large investment firms that make that kind of money do so in a very active way, buying and selling through a lot of stocks in days or weeks (or sometimes hours), gathering just a few percent at a time. It's very risky and takes a lot of work to pick the right investments, but it pays off well when you do it.


The other side of the coin is passive investment, buy it once and money just comes rolling in without any management. This can be preferred even by large investment firms because it provides a more stable (or at least predictable) income: even if all the heavy day trading they do amounts to nothing, they can still count on having enough from their passive investments to pay their employees.


The real reason you won't see these big investment companies is not because it is "only 25%" but because it is only 300'000 EUR. I talked to a trader a few weeks ago, lost a million dollars on a bad trade*, took him almost a month to recover it. Not him, obviously, the bank he works for. The amount of money he has control over, 300'000EUR would be like bending over to pick up a penny.


* the reason I had to talk to him was because he tried to blame my group for the loss, saying we weren't supplying information fast enough. There was 6 milliseconds between the update on the exchange and when it was delivered to his system, it was literally impossible to go any faster without violating the laws of physics, and even if it was instant it wouldn't have helped. The problem was inefficiencies in his trading algorithm which sometimes took too long to trigger.

 

[EvilDragon]

Add me to the list of people who is interested in knowing where you can get 25% without risk.

Me too In case the project fails, this would be an easy way to pay all you guys back


But... heh. Nope. I will just prevent a failure. Hah!

This is also the reason I only take unpaid preorders. It gives new customers the chance of ordering it without any risk.


And once the production is done, I've got a big list of preorders, no need to look for more.

So, do you have any indication of the current demand?

As preordering will start within the next days, I've got no fixed information here.


But I got about 200 eMails within the last 1 month for people asking about where to buy it.


And that's without having delivered Pandoras lately and without any press reviews, etc.


My guess is that the actual demand is higher. Most people probably don't care about sending an eMail (they might just register for the newsletter) and as soon as there are more press reviews, more people will check out the website as well.


As soon as everything is set up, I will push the Pandora as good as possible.


Well, we'll see how the demand increases with preorders soon.

Sure, GC might be as slow as CC, but that's very unlikely.


I talked to some of their customers, have visited them and saw them work on PCBs. Their customers praised them, it all worked flawlessly.

Wasn't CC also highly recommended to you? How does the product of those satisfied customers compare to the Pandora in terms of complexity?

It was suggested by TI to use them, as they produce a similar product (like the BeagleBoard).


TI only had some prototypes produced there (AFAIK), and CC probably gives TI prototypes extra priority.


After we wrote what happened on the blog, one other company did contact us. They also wanted to work with CC, but the test run had a 100% failure rate...


They switched to a different company and things work fine now.


We've not been in contact with other customers.


Also, GC calls me up every now and then to ask the status, they contacted me on weekends if they have some news, whereas CC wasn't even able to answer us the question about the current status.


The communication is already WAY better.


I've seen some PCBs from their customers. One is a professional HDSDI video processor from a local company here, which has a similar part density on the PCB as the Pandora has and it's also 8layers, so pretty similar in terms of production.


The failure rate without extensive testing (they were in a hurry, as the previous production company in UK had problems producing the boards... yeah, that scenario reminds me of something) was 3%, so pretty good.

It's only outdated for the latest and greatest crowd. Otherwise it performs as required. The number of applications that are on the border of its capabilities are few. Most either run with ease or won't run even when you overclock beyond the safety thresholds (well, perhaps except N64 which seems to hover around the edge).

True words. And the possibilities are still huge.

 

[Exophase]

My question is how do you determine the valuation in the second case. Normally for this type of investment, the company would be valued based on an initial public offering or an acquisition by a third party, but you have no intention of doing either.

I figured it was strictly the amount of money the company has.

 

[EvilDragon]

My question is how do you determine the valuation in the second case. Normally for this type of investment, the company would be valued based on an initial public offering or an acquisition by a third party, but you have no intention of doing either.

I figured it was strictly the amount of money the company has.

Okay, had an appointment with my lawyer and tax consultant again.


The value of the company is determined officially by a certified public accountant, who will make a market analysis to find out the potential value, etc.


This does cost at least 20.000 EUR, so it doesn't make much sense here.


So the mentioned Option 1 is probably the one to go for, though the lawyer will check out if anything else makes sense as well (he's pretty good with those things, as he invested quite in a few projects himself as well).