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Capitalization Process and Model
The purpose of this 6-page memorandum is to help officers, directors, and other managers interested parties to comprehend a novel capital structure model that has had a modicum of success in the market and explore its possible relevance to various corporate situations. It is a must read for any company considering raising capital and creating value for investors.
Daily news articles report that it is becoming increasingly difficult for early stage companies to raise capital. Capital market conditions indicate that this status may continue. Overcoming this condition may require that early stage companies execute a new approach by designing their business plan so it can succeed through raising small rounds of capital in planned follow-on offerings.
This memorandum introduces concepts for a planned evolution and capitalization process that can be used by some development-stage companies. It presents an overview of Pipeline Data, a company that has executed this capitalization process and model. To the extent Pipeline’s market cap value holds or increases, this is a model and process that other development-stage companies can follow to achieve capitalization in a context that anticipates increasing the market cap value of the company for each new round of investors.
The Process
- The process described herein assumes that a development-stage company can be transformed into a viable business through its team’s ongoing effort to master capitalization as their first strategic objective and capability.
- This process envisions harmonizing a continuous capital-raising effort that begins by funding the company with a small initial round of founders capital, to raising a small private round to raising a larger interim round (PP, 504, Reg.S or bridge loan) to preparing, filing and funding a small SB-2 offering and making the company a publicly traded entity by listing it on NASDAQ’s tier three market, the OTC Bulletin Board.
- This process assumes that the company’s business plan can be designed to focus its team’s effort on first developing its capital structure and capitalization capability and then expending resources to develop technology and/or scale up business operations when available capital and executable opportunity can be transformed into adding value to the company.
- This process assumes that a company’s business plan, its offering documents and long-term development plan shall be created in accordance with a model that is designed to capitalize and develop an early-stage company by activating capital market practices first and company operations second, and only after a sustaining capital structure has been developed and funded and the team has mastered capitalization and instilled it as a core foundation on which the company’s business model can be developed.
- This process assumes that the objective is to conceive business and technology development plans and offering documents in a context that articulates that the vision for the project is developing an early-stage company that will create value each time one of its milestones is achieved. Identifying and achieving value-added milestones and continuing to sell the vision of how those achieved milestones are creating value is a fundamental requirement to make this model work.
- This process assumes that the mission is to apply capital market practices to develop a valuable early-stage company. It encompasses...
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