Forums: Discussions for entrepreneurs and small business.

Please go to theenergyindependent.com to read a news article by Mr. Maslow about an engine I have invented titled "An Engine for Our Time?".  I would like feedback as to your feelings about offering equity in the LLC to manufacture the engine and a truck for it to power.  Investors would receive one share of stock in the LLC and also a five year dealership for a one time price of $300.00.  5,000 shares to be offered.  Should you not wish to reply in this forum please consider sending an e-mail to nathangdad@yahoo.com

               Thanks,

                Darwin Nunley

 

Darwin,

From what I read in the article, you have a very intriguing invention - certainly one that is "timely".

As to your acquiring capital approach, I would consider the following:

1. I would separate the dealership and the equity. If you want to sell dealerships - sell those separate from the securities.
2. I personally think that $300 per unit is high for a start-up.
3. Be clear about your business model and how your investors will reap the rewards (liquidity event ).

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

Thanks for the input.

What do you think would be a good price point for the equity?

What do you think would entice people to sell equity?

1. Generally speaking, for a non-revenue startup, I`d think in terms of <$1.00 per unit

2. I`m not clear as to what you are asking in your second question.

-------------------------

Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

While I agree with Robert that selling equity positions in your company separately from any dealership licenses is the way to go, you shouldn’t set your share price at random.

Even if your company is just a start-up with no material assets that would mandate a traditional valuation, you can still do a rather simple Discounted Cash Flow Valuation (DCF) that will compute the company value solely based on its revenue/profit potential.

Also, please keep in mind that in order to solicit investments from anybody in the United States, you will need to comply with state Blue Sky Laws and federal securities regulations to steer clear of any trouble. Having said that, you can’t just approach anybody with your investment proposal without registering your securities or claiming an exemption from registration. In any event, you will need to provide potential investors with detailed information on a wide cross section of material aspects of your business to enable an educated decision on their end and satisfy statutory requirements.

It really sounds like your invention has a lot of potential. Wouldn’t it be a shame to get shortchanged or even get in trouble simple because you didn’t set this up properly?

Corporate finance certainly is no playing ground for the inexperienced as this can have far reaching implications. A well-defined capital market strategy that reflects value creation and appropriate risk taking in compliance with relevant securities laws and regulations is therefore a fundamental consideration and the first stepping stone to successfully approach investors.



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Jackson Steiner
http://www.JacksonSteiner.com

Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.
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