Our Business

Business Incubating, a new business idea in China

Business incubation is a business support process that accelerates the successful development of early stage companies by providing entrepreneurs with resources and services.  In North America alone, incubation programs assisted more than 27,000 companies that provided employment for more than 100,000 workers and generated annual revenues of $17 billion 2005.

 

Successful completion of a business incubation program increases the likelihood that a start-up company will stay in business for the long term: older studies found 87% of incubator graduates stayed in business, in contrast to 44% of all firms (the latest available data).

 

It is our fundamental approach to combine the best businesses with intelligent long-term investments in publicly listed companies with the ultimate listing venues in the United States that will benefit our client companies and create enduring wealth for investors.

 

The Incubating Period

SinoCubate will invest directly in stages, in Chinese companies (“Incubating Companies’) to be listed in the United States or elsewhere when the incubating company has reached a mature stage (the incubating period) and will qualify as a stand-alone publicly listed company, typically 1-2 years after the initial investment.

 

During the incubating period, SinoCubate will provide capital, management support and advice, and prepare the incubating company to become a publicly listed company.

 

In consideration for the incubating service and investments, the entrepreneur will give up a certain percentage, typically 10-15% of the ownership in the Incubating Company to SinoCubate, thereby maintaining a substantial controlling ownership of the company.

 

When the Incubating Company has reached a certain level of maturity, it is anticipated that SinoCubate assists the Incubating Company to go public through an IPO or reverse merger in the United States or elsewhere, depending on various factors, such as but not limited to industry, valuation, liquidity, and access to additional working capital as needed. It is anticipated that SinoCubate will gain a profit through the higher valuation of its equity stake in the Incubating Company, since publicly listed securities are traditionally valued at a premium compared with privately non-listed equal companies.

 

Investment Procedure

Below are the main points we typically conduct before an investment is being made: 

 

  • Qualification. During initial interviews and meetings with the management of the potential portfolio company, SinoCubate conducts a preliminary assessment of the target company to ensure it meets the general guidelines.

 

  • Evaluation and Expectations. Through research, further interviews and analysis of the business, including the historical and projected financial information, industry, competition and valuation to ascertain that the management’s expectations are in conformity and to assess both parties interest to pursue the transaction.

 

  • Approval. SinoCubate’s Investment Committee reviews the pre-audit and estimated valuation, and when appropriate, approves the investment subject to completion of satisfactory due diligence.

 

  • Term Sheet.   SinoCubate prepares a term sheet with the portfolio company to include amount, terms, due diligence process and estimated time line for the transaction.

 

  • Pre-audit.  If the potential portfolio company is not already audited by a PCAOB auditor pursuant to US GAAP, SinoCubate conducts – on the company’s expense - a pre-audit and on-site inspection to ensure the company’s financial statements are in conformity with US GAAP, and that its legal structure, contracts and permits etc are suitable and in good standing.

 

  • Co-investors.  From time to time, SinoCubate anticipates to co-invest with other investors, such as government funds, or professional investors.

 

  • Completion of Going Public Process and Incubating.  Following the closing of SinoCubate’s initial investment, we will provide managerial assistance and prepare the company on all the facets of the going public process, and invest additional capital as needed.  The company will learn to act as a publicly listed company in the US, including stringent reporting requirements and corporate governance and understand the value and importance of a western style CFO.  SinoCubate will establish an independent board and provide an acting CFO, as needed and assist the company in hiring a long-term qualified CFO, as applicable.

 



Investment Criteria

  • Growth rate 30%
  • $30,000,000 in revenue
  • $5,000,000 net profit
  • $4,000,000 in equity (tangible assets)
  • Cash flow positive
  • Little or no debt
  • Seasoned Management (with proven track record)