Why is the media so glamorous?
Answer: It's the people.
In a feature titled 'The angel's Inbox' in the June issue of AsianInvestor, we write about businessmen who are seeking venture-capital financing. The amounts they're seeking are probably too small for an institutional investor, but just right for a high-net-worth individual (say a banker or hedge fund manager) who is looking to seed a business and take a direct stake.
Here is one of the case studies.
Background
Media professional Chris Thorp and financier Peter Williamson established their business, Pixelbox, in early 2007. Based in Hong Kong, it is a post-production studio that produces visual effects, computer-generated imagery, 3-D animation, award-winning editing and colour grading for TV commercials, film and television.
Pixelbox serves advertising agencies and production houses both for the mainland China market and regional Asia. The firm employs 27 people in Hong Kong and plans to open in Shanghai this year. The initial capital was provided by a combination of shareholder-loans and bank financing, secured on property owned by founding shareholders.
Financially, the firm is at the start of its third year of operations and shifting above cash break-even, with a revenue run rate of around HK$15 million a year. A recent injection of bank funding will be used to hire marketing staff to service the mainland market and deepen project-management expertise, with the intention that the new hires (which have been secured) effectively expand capacity and generate exponentially higher revenues.
The company is seeing strong interest from mainland agencies and production companies on the back of a growing reputation for quality standards and creativity.
Additionally, Pixelbox has begun servicing the Indian sub-continent. The company enjoys first-mover advantage with its international clients operating throughout the region. Infrastructure costs have already been sunk, so operating leverage is high.
Both principals own 50% of the business. Day to day, Chris Thorp runs operations and receives a market salary from the business. Peter Williamson's day job is with another firm working as an equity analyst.
The proposal
They wish to raise up to $3 million from a growth-capital investor to assist in debt refinancing (HK$14 million) to reduce principal and interest burden and to provide working capital to pursue regional/international growth opportunities.
In return, they are offering a 25% equity interest in the business, and are willing to discuss other security terms.
Take a look at the June edition of AsianInvestor if you want to read the views of our panel of Angels, all of whom are well-known local investors experienced at reviewing business plans.
Better still, write in and tell us what you think. Would you invest in this deal or do you see flaws in it? Venture capital is true alternative investment, but it is risky. "At the end of the day, it's the wee man that gets put through the mangle", as one of our Scottish ancestors probably said.
Perhaps you have a venture for which you are seeking investors. If so, tell us and we may write a case study of your project for an edition later in the year.
