Inception Brewing Company

Stu Minshew

Chaitrali Amrutkar

Jose Valenzuela

Mark Wahl

Saurabh Chakradeo

Executive Summary

• Craft Beer Industry• Three co-founders

– CEO, COO, & Brewmaster

• Good synergy of complementary experiences, but lack experience in the craft beer industry

• Only have $20,000, need $800,000

Executive Summary

• Goals of our project– Analyze the management team fit– Analysis of business model and operations– Market Analysis of the craft beer industry– Financial Requirement Analysis– Valuation– Recommendations about raising capital

Management Team

CEO• Currently CFO • Start Up experience:

– Company 1– Company 2

• Pursuing a MBA from Georgia Institute of Technology (GA Tech)

Aaron Killingbeck - COO

• Currently Hospital Director• Served in the United States Navy as a

construction project manager– Simultaneously managed 13 construction

projects with a budget in excess of $4M• Strong skills in operations management

and adhering to government regulations

Brewmaster• Currently a Project/Applications Engineer • Served in the United States Navy as a

Laboratory Technician and Radiological Controls Supervisor aboard two Nuclear Submarines

• Strong Skills in chemical reactions, water quality, and manufacturing

Strengths & Weaknesses• Strengths

– Startup Experience– Operations and Manufacturing Skills– Unique Brewing Process

• Weaknesses– Lack of Beer Industry Experience– Large Management Team

Market Analysis

• Craft Beer– 2011: Growth in volume by 13% and dollars

by 15%– Currently only 5.9% of beer industry and an

$8.7 billion industry.

• Tennessee– 2011: No Regional Breweries (5 in South

East)– 2011: Only 5 Breweries producing over 500

barrels (17 in NC)– Lenient serving and distribution laws

Business Modeland Operations

Current status

• Beer recipes have been developed

• Looking for a tasting room to lease in Tennessee

4 ways of selling beer

• Pints• Growlers• Six packs• Kegs

Growlers and six packs can be purchased to be consumed at another location

High profit

Day to day operations

• Headed by Brewmaster– 30 barrels of beer a day using a forklift– Maintain quality and meet high demand

• 2-3 new employees in Jan 2014 to help with operating tasting room

Future hiring

• Depending on financing, hire help for: accounting, sales, marketing

• Expansion options Six packs, kegs : through distributors Distributors: restaurants, super markets, bars

Financial Requirements

Financial Requirements• Crucial for financing, and planning• Company stages

– Pre-Startup: till Dec. 2013– First Operating year: 2014

• Needs– Equipment purchases and startup costs– Brewing ingredients, gross wages, payroll

expenses, supplies, repairs and maintenance, advertising, travels, accounting, legal advice, rent, utilities, insurance

Financial Requirements

Financial Requirements

• Cash necessary Pre-Startup: $590,270• Breakeven in third quarter of 2014• With an initial $800,000 investment, the

company can sustain until the breakeven point

Valuation• Present value of the

free cash flows• Parameters

g 3%

Rf 2.81%

Beta 0.77

r 8.2%

TV 2016 $7,296,811.75

1 2 3

2014 2015 2016

Net Income (millions) 435608 619811 938258

Less: Taxes 130682.4 185943.3 281477.4

EBIAT 304925.6 433867.7 656780.6

Less: Capital Expenditure 350,000 0 0

Less: Change NWC 10% 30492.56 43386.77 65678.06

Free CashFlow -75567 390480.9 591102.5

Discount Factor 0.924214 0.854172 0.789438

PV Cash Flow -69840.1 333538 466639

Terminal Value 7296811.749 9243042

Net Present Value 9973378.882

• NPV $9,973,378.88• Only one iteration

Valuation

Simulation using Venture.SIM

• Growth Rate: Normal distribution with mean 2% and standard deviation 0.5%

• Beta: Uniform distribution with minimum 0.4 and maximum 1

• Number of iterations: 1000

• Average NPV: $9.65 million

Raising capital

• Need $800,000• Target 3-5 angel investors• Raise $250,000 - $300,000 from three• Give up 30% stake

– “Bill Lane case”– Dividends based on percentage of ownership

from year 2– Option to expand regionally and nationally

Conclusion

• <Market Analysis>