Financial Summary
Deal Structure
BlueIsland.com is seeking $2 million in equity capital. In return for this investment, the investor will receive 11 percent of the outstanding common shares of BlueIsland.com.
The capital raised in this first round of equity financing will be used as follows:
| First-round Financing | $2,000,000 |
| Development Cost | $1,000,000 |
| Marketing & Advertising | $500,000 |
| Salary Expense | $200,000 |
| Office space leasing and other expenses | $300,000 |
| Total | $2,000,000 |
BlueIsland.com also intends to raise additional funds through second and third rounds of equity financing as follows:
| Oct 2000 | |
| Second-round Financing | $4,000,000 |
| By end of 2nd quarter 2001 | |
| Third-round Financing | $4,250,000 |
The capital raised through these two rounds will be used to provide the working capital requirements. The largest part of these will be the advertising and marketing expenses. The initial investors will be given the first option to take part in these subsequent rounds of financing.
Investor Return
BlueIsland.com will provide its investors a return on investment of 70 percent. The following table illustrates the calculation of the investor's returns:
| Investment Opportunity | |
| Investment required | $2,000,000 |
| Equity Offered | 11% |
| Industry Revenue Multiple | 20 |
| Year 5 Revenue | $26,900,000 |
| Terminal Value in 5 years with the liquidity discount of 50% | $269,000,000 |
| Value of investment in Year 5 | $28,397,140 |
| Return on Investment | 70% |
Risk Analysis
Although BlueIsland.com represents a great investment opportunity, there are inherent risks in the development of this online product, including:
- Website traffic is lower than expected
- Small business online commerce is lower than anticipated
- Competition appears overnight
- Demand for advertising space outstrips available advertising space for sale
- Unmet product development schedule
- Unable to secure strategic partnerships for the terms articulated and must purchase ad space and marketing lists direct
Exit Strategy
There are two primary means of an exit strategy for BlueIsland.com's investors:
- Initial Public Offering. BlueIsland.com is forecasting an IPO approximately Q1 2003
- Merger or acquisition. BlueIsland.com views this as the most viable harvest strategy for both the founders and the investors if the right opportunity presents itself. BlueIsland.com is an attractive acquisition for an Internet advertising website like AdMaster.com, a competitor such as AllMedia.com, or a potential player who would like access to our dedicated customers. A comparable company recently sold for $198 million to an online advertising conglomerate
