EMA Invest. NOTATION DE PROJETS

For several months now, RCP & Partners have been working with the EMA Foundation to create a universal method of evaluating projects, of which, a prototype will be introduced and tested in the course of the EMA Invest 2001 fair. The purpose of such a rating method will not be to dictate to the prospective investor that he or she should consider a particular graded project. Instead, it will be used to assess how well the project was prepared, and the number of elements the initiator has gathered together to help the prospective investor make an educated decision. The grade will allow the initiator to evaluate his or her contribution, and the wealth that he or she has actually generated before investment. It will also indicate how he or she may increase the project’s value by improving its preparation, reducing the potential risks, and widening the scope of its target group of prospective investors.
In accordance with his or her criteria and the risks he or she has deemed tolerable, the proposed universal rating method would also allow the investor to select with greater speed and accuracy, the projects that he or she wishes to examine.

Lacking tangible proofs, project initiators are most often unable to answer this question, and are thus unable to evaluate or negotiate the value of their project.
Around the world, from simple innovators with new ideas to governmental agencies in charge of promoting foreign investment, the promoter is often faced with the same question – "What is the value of your project?"
They often base the value of their project on the uniqueness of the offer or on the estimated return that it promises to yield.
Hence, their evaluation becomes muddled with their enthusiasm or convictions. Naturally, these are not compatible with the investors’ pragmatism.
It is this misunderstanding that compromises the success of most projects.
It represents a loss of boundless wealth, particularly when one is aware that economies are suffering more from a lack of feasible projects than from a lack of capital.
In fact, from a financial perspective, the value of a project resides solely in its ability to receive investment and make it profitable.
It is not determined by the commonly vulnerable initial idea. Instead, it is the hard work, personal initiative, and daring risk-taking of the initiator that will demonstrate the project’s feasibility and profitability.
By attending to the most creative, exploratory, and unpredictable elements of the company, the project initiator can sell investment minimal-risk opportunities to the investor.
The more the project initiator lowers the investors’ potential risks, the more he or she will increase the value of the project.

The preparation process may be divided into 5 stages, at each of which, the project increases in value.

PHASE 1 – THE CONCEPT
Identify an unfulfilled need or a new commercial opportunity, define the product or service that will fill this need or take advantage of this opportunity.
In general, this phase is the responsibility of the project initiator himself/herself. If that person lacks the expertise or necessary financial resources to assume responsibility for the remaining phases, he or she must share his or her plan with partners, as needed, in exchange for benefits or capital. At this stage, the project is still without value, except if it is already protected under copyright law, carries a brand, or is on a website of which the name would constitute an obvious competitive advantage. In such instances, the project must be evaluated in the same manner as cash, kind, or securities.

PHASE 2 – DEVELOPMENT
Evaluate the market, create the product, test the adequacy of the product, establish a marketing strategy.
The project initiator must possess or harness the needed marketing, technical, industrial, and geographical forces. Polling and market research institutions may also address quantitative or qualitative issues, as may legal council.
This stage successfully completed, the project may only be sold to an operator or to the particular entities that are adequately skilled to evaluate its feasibility and oversee its implementation. In this case, the project initiator must contribute between two and three percent of the total investment.

PHASE 3 – FEASIBILITY
Determine how the project will be run, and the amount of investment needed. Draw up a business plan, and outline possible risks.
The project initiator must collaborate with a private company or trust company accountant. The project then becomes accessible to all competent investors within that given industry. At this stage, the project is developed by three to five percent.

PHASE 4 – APTITUDE
Establish the skills that will be needed, unite management forces, evaluate the availability of additional skilled workers.
The assured provision of competent management and available labor is a key element in the preparation of a project.
If the initiator is unable to fulfill the above requirements, he or she must collaborate with a strategic partner who can do so.
With these elements in place, the pool of potential investors grows larger in areas of finance such as investment capital, risk capital, and private or institutional investors. The project is completed and may develop by eight to ten percent of investment.

PHASE 5 – MARKETING
Create the marketing and financial plans, proceed to rating the project, target potential investors and have them compete amongst themselves.
The portfolio may be put-together by specialists in marketing and financial engineering, and presented using various methods of communication. It is at this crucial stage that the project is rated. This last phase may increase the project initiator's provision and may be negotiated between ten and fifteen percent of the total investment.

NB. Any eventual contributions in cash, kind, loans, or securities were not taken into account when projecting the above figures.