Hi. I am planning to have someone come in as a business partner/ investor for a retail e-commerce sports apparel startup. The founder, myself, started this 2 years ago. It has grown significantly in Vietnam and still continuing to grow and has stablke revenue streams in Vietnam and i am looking to launch the US business. That's when I want to have someone come in to build this out and possibly build more operations overseas in other countries too. I am thinking to value the business without the Vietnamese operations using formula: my opportunity cost of developing the brand for 2 years + cost associated with getting the supplier + cost associated with design + LLC formation cost in the US + US trademark cost + my free capital to invest in US business. Is this reasonable? How do I go about on doing this
Happy to hear that you have stabilized the operations & revenue within 2 years of business launch and now you're focusing on growth opportunities at a wider scale.
To do that you're on-boarding a partner who will help you to scale business operations at US and also make investment to bear operational cost for initial days. You also don't want to include your existing operations/revenue from current Vietnam's entity, that's mean this partnership would be valid for US operations only? You will be the sole owner of Vietnam based firm?
If that's the case, I hope you have already carried out, the market research for US sports consumers, present competitors, estimated cost of customer acquisition, cost of service delivery as per US regulation and mediators, technology, operations, maintenance & financial transactions cost in US etc.
For better understanding, I've classified your formula as following:
f + p = total cost to acquire 'R' revenue within 'T' time-frame
Their is no standard ways for equity split, most of VC prefer Cash-flow estimation method whereas other methods used by early stage ventures. The choice is yours.
I agree with @Clay, your costs and the effort you put into developing the brand mean very little to the investor. Sure you have traction in your home country, but expanding to another country is in fact, a completely new business with all the risks that you had at the start the first time. You cannot draw parallels between the VN market and the US market. The only advantage is that you have figured out your means of production. That's it.
Your investor or foreign sales partner is going to look at what you have done to reduce their risk. What have you done to test the US market? Have you personally visited the US to establish relationships into which the US-based partner can step-in and take over? What does the competitive space in the US tell you about your likely addressable audience and obtainable market?
The more unanswered questions, the higher the risk, and the lower the value.
Kind of funny that Xiao Xiao also posted in this board asking the same thing on her side. I'm betting she is your "Someone" ;-)
Thank you very much for you guys answers, it was really helpful to me especially @anuj.
As you are looking to launch the business, would it be app or website ?
Seems reasonable, but remember: your costs don't matter to them.
In this sort of negotiation, I'd find out more about their needs. Tailor your "offer" to their needs (bearing in mind your needs). They might have a vision of this business that is far more valuable and be willing to pay far more. For example, what it leverages their exist business. Suddenly you're far more valuable to them.
There is so much more they can provide you beyond simple money. If you learn more about their needs and wants you may strike gold.
Lastly, it seems like Partner and Investor are to very different beasts.