We are an existing company of 4 years, with 5% of market share in our chosen market. The market we have chosen is an infrastructure market. It is a recession proof market.
We have built the company from scratch, with our own money. We have no debt to outside early investors. We have a product which is certified by the federal government in Australia. We want to now move globally and expand into other synchronised markets here. Our product is unique in that the market we have chosen to enter is a hard to enter market due to compliance and community values being fundamental infrastructure components to success.
We are looking to raise capital because we want to develop our product to enable bigger market share of the current market, expand the product template to enable the other complimentary markets and then also move globally into USA, UK within a year from funds.
We have had 3 forecasts done by PriceWaterhouse Coopers which are conservative, medium and bullish. Conservative forecasting still shows a 1.5billion dollar forecast over 5 years. Bullish at 30% market growth shows 6.5 billion dollar forecast over 5 years.
We are engaged with a company who is putting together the IM and they have done an internal based valuation. I am concerned this valuation is a conflict of interest as the firm receives options to be exercised within 5 years, at the original investment price of first investors.
I am looking for an arms length valuation, and some advice on dilution. My first question is:
- Is it normal to keep a low valuation regardless of the forecast and existing proven revenue model, just because it is the first investor?
- If the investment is only $3million for the first round, and we are aware of the growth potential, (having done all due diligence on territories, competitors and capabilities, and still found we are the leader in the field globally, with no other company providing what we have developed) should that 2 or 3 million be worth 25-45% of the company?
- We are concerned the first round will only cover current territory and build, not expansion into the next territories, even though we have stated we want to make sure that money is available for year 2. The advisors are saying we will do a second round raising. But that would need to start immediately if we are to move into OS in year two.
I realise this is a lot, but it's a real live situation which I hope many others reading this will benefit from.
kind regards Ruby