Entreprenial Finance - Develop a Strategy to Raise Funds

ENTREPRENIAL FINANCE:

Group 5: Anurag Ganguly 17P072, Jasleen Kaur 17P083, Nishant Malik 17P093, Mridul Todi        17P147

LUCIA

1. Develop a strategy to raise funds. What terms would you propose to Kumar? How can

Kumar make a sales pitch?

We have targeted a 50:50 approach in raising capital through equity and pre-sales.

The aim should be to raise $55000 through equity, out of which 10% will be charged by crowd funding platform, hence leaving behind 50,000 for Kumar. The rest 50,000 is to be raised through pre-sales, the break-up of which is as follows:

[pic 1]

Note the amount to be collected via reward funding is predicted for 53,000 which would ideally be raised upto 50,000 considering some margin for error in meeting estimates.

1. What returns Kumar believes the investors should get? Were investors better off in less riskier investments such as government bonds?

The investors should get moderate returns on their investment as this will be a motivating factor for them to invest in his project; very few investors in India are interested to promote Art & Culture, hence investor’s attractiveness is an important parameter that needs to be considered. However, it is not possible to raise equity by ascertaining a fixed rate of return to the investors, however a proposed plan needs to be put in place, which can be spread by a word of mouth and attract investments. Below is an estimated return that Kumar should ideally ay their equity investors.

[pic 2]

An important point to note is that a return of 16-17% CAGR is very attractive and would encourage in attracting investments.

A bond instrument would ideally give 4% p.a. return whereas a fixed deposit 6%p.a. At the end, it’s a risk reward game, with more reward on undertaking more risk by the investors; a balanced equity fund could ideally give similar amount of return with similar risk, hence the above return should be targeted, which would make both the parties (equity investors and Kumar) happy.

1. What returns Kumar believes he should realise personally?

Kumar should not ideally be expecting any return per se beforehand, however given the above expected return to equity, he would break even at $180,000 (100,000 for cost of making, 50,000 for equity amount, and 30,000 for return). So, anything above this figure of sales would ben his profit. A conservative approach expects the movie to earn $200,000 whereas an aggressive estimate would be $400,000. Therefore considering conservative approach, Kumar would ideally realise $20,000 and in a moderate scenario (sales of $280,000), a return of $100,000.

1. Will the audience be happy for watching movie unlimited time?

Generally it is difficult in current times that audience would like to watch a movie for unlimited number of times, however a lot depends on the type of movie created and how it has been marketed; a good movie with lot of buzz like Bahubali would definitely attract repeat viewers; and a cult classic like 3 idiots or Andaz Apna Apna can be possibly the ones which would be watched over the longer course. However the aim should be to create the buzz and earn revenue in the period of next 2-3 months of movie release, which is ideally the revenue generating life of a movie. Circulating and promoting Link campaigns would aid in this by creating a buzz by viewers themselves on the social media platform.

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