Accouting Related

Juan and Ross have successfully started their server business. They have developed their product and
have shown customers that it works. They have also successfully marketed their business and products
resulting in sales of 29 servers. This means that they have successfully been able to eliminate two of the
three major risks associated with any start-up business: technology risk (Does the product work?), and
marketing risk (Can the product be sold?). The remaining risk is that of scale, can the sales be grown.
Juan and Ross are aware that most Angel and Venture Capital investors are willing to take this risk. They
initially decide to go out and access Angel funding. The problem is that they have no idea as to what
their company is worth, how much money they can raise, and what percentage of the company will the
investor(s) own?
Since Juan and Ross are based in San Diego they agree that they will use the standard value for
companies in San Diego as their base value.
Juan and Ross have no idea as to how to rate their management talents. They are very familiar with the
market, their competition, how to position their product versus their competition, the technology of
their product, etc. The feedback they have received to date regarding their presentations has been very
positive.
The size of the opportunity is very large with the market for servers expected to reach $45 billion in
2028.
The technology that Juan and Ross have developed is unique and solves many of the problems data
center providers encounter including heat, weight, and power.
Juan and Ross do not know of any direct competition for their product although several large companies
sell servers.
The two entrepreneurs believe that they know how to position and sell their products and have had
some success to date. They now believe it is time to ramp up their sales and marketing efforts.
Given the size of the market, they will certainly need additional investment if they are to achieve their
goals.
Assignment
1) Value Ross and Juan’s company.
2) How much money should they look to raise?
3) What percentage of the overall ownership will the investors own?