Angel investment, I suppose, educate a thicko
Discussion
This is a real ‘opportunity’ I glanced at that a friend had been emailed. It happens to be for a new bottled rum business. As a complete novice, but with a bit of a brain, can anyone explain how a brand new business with what looks like a projected income of about £150k over 2 years with about £1million of funding required over that period, become a business notionally valued (by themselves) at £50million? I’m not investing, I’d just like to understand 
Is it just random, made up numbers? Or is this how pitching to investors works?
First round (now, ish, 2021)
Sell 1000 bottles at £35
Need 90k for marketing, social media, production and packaging costs and so on
Sales through a 3rd party website only
Second round (first half 2022)
Sell 4000 bottles at £35
Need 950k for marketing, social media, production and packaging costs and so on
Sales through a 3rd party website only
Third round (Summer 2022)
Get put on Seedrs with a company valuation of £50million.
The return is invest in round 1 and get 10x back when put onto Seedrs.
Is it just random, made up numbers? Or is this how pitching to investors works?
First round (now, ish, 2021)
Sell 1000 bottles at £35
Need 90k for marketing, social media, production and packaging costs and so on
Sales through a 3rd party website only
Second round (first half 2022)
Sell 4000 bottles at £35
Need 950k for marketing, social media, production and packaging costs and so on
Sales through a 3rd party website only
Third round (Summer 2022)
Get put on Seedrs with a company valuation of £50million.
The return is invest in round 1 and get 10x back when put onto Seedrs.
Mr Pointy said:
4000 x £35 is £140k: so they want to spend £950k in order to bring in £140k. I'm no financial genius but I don't see how that adds up. Why would a company that's sold 4000 botlles of anything be worth £50m?
I suspect their hope is they become a hip and funky brand, and someone will pay for the brand rather than the actual business. Building a brand in this space is going to take a tonne of money.
I don’t quite understand how they’ll shift 1000 bottles with an investment of £90k, but the next 4000 will cost them £950k?
It all depends on who is behind the business, what their pedigree is and who else is investing. For instance, if it’s an ex-director of Diageo and he’s got a PE house behind him, then it’s at least worth looking at the proposal.
If it’s a nobody chancing their arm and trying to recruit as many small time investors as possible. Then maybe not.
I don’t quite understand how they’ll shift 1000 bottles with an investment of £90k, but the next 4000 will cost them £950k?
It all depends on who is behind the business, what their pedigree is and who else is investing. For instance, if it’s an ex-director of Diageo and he’s got a PE house behind him, then it’s at least worth looking at the proposal.
If it’s a nobody chancing their arm and trying to recruit as many small time investors as possible. Then maybe not.
bigandclever said:
I’m glad I’m not the only one raising an eyebrow. I get that Seedrs is a crowdfunding site for new business investment, but I’m still struggling to get my head around the pitch… it just seems like a daft leap in valuation.
It feels like numbers thrown at the page with no strategy. In the original document is there an explanation of why the 2nd round has higher costs than the 1st? Something like going for a less niche client base?Otherwise it feels like someone has just written a document with steadily increasing numbers until it finishes with the £50 million valuation needed to make the 1000% ROI figure.
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