This document provides an introduction to financial concepts for startups, including different stages of funding, pre-money and post-money valuations, and dilution of shares. It uses Uber as an example of a startup that has achieved a high valuation of over $50 billion despite not being profitable. The document outlines the agenda and provides examples to illustrate key points about how startup funding works and how valuations are determined through negotiation between founders and investors. Slides include interactive polling questions and links to additional explanatory videos on topics like convertible loans and bridge financing.

1. MICHAL GROMEK
PONTUS ENGSTRÖM
1320 ENTREPRENEURSHIP AND
OPPORTUNITY, 20TH OF JANUARY 2017
Picture:https://flic.kr/p/drV3LQ
BEGINNERS GUIDE
TO FINANCIAL VOODOO
FOR STARTUPS
ENTREPRENEURS
PERSPECTIVE

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HOW IS IT POSSIBLE THAT A TECH STARTUP IS WORTH
BILLIONS OF EURO AND SOME STILL DOESN'T MAKE ANY
MONEY? - EXAMPLE OF UBER.
ROAD MAP FOR OUR 45 MIN TODAY:
DIFFERENT STAGES OF FUNDING, PREMONEY
VALUATION, POST MONEY VALUATION, SERIES A, B, C,
BRIDGE FUNDING, DILUTION OF SHARES.

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ZOOM IN TO UBER VALUATION > 2015
51 bn USD
7.4 bn USD

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ZOOM IN TO UBER VALUATION > 2016
68 bn USD

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ZOOM IN TO UBER VALUATION > 2016
VALUATION NEARLY
EQUAL TO VW (!)

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GET A PIECE OF
PAPER READY
AND A PEN
OR THE ELECTRONIC VERSION OF IT :)

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WHICH ASSETS DOES IT REALLY OWN?
WHY DO YOU THINK THEIR VALUATION IS
SO HIGH?
HOW UBER MAKES MONEY?
TAKE ONE MINUTE TO WRITE DOWN:
HOW OLD IS THE TAXI BUSINESS?
HOW MANY INT. COMPANIES DID WE HAVE BEFORE
UBER?

8. WHAT ARE VALUATIONS ACTUALLY REALLY
NEEDED FOR?
TO INFORM INVESTORS WHO WOULD
LIKE TO ACQUIRE A STAKE IN A COMPANY
ABOUT ITS VALUE. ENTREPRENEUR IS
TRADING CASH FOR A % OF OWNERSHIP.
THEORY:
THE COMPANY IS WORTH WHATEVER
INVESTOR AND ENTREPRENEUR AGREES
THAT THE COMPANY IS WORTH.
PRAXIS FOR STARTUPS AND EQUITY INVESTMENTS

9. HOW TO UNDERSTAND THE
ENTREPRENEURS?
WE ARE RAISING 200K FOR 20% OF OUR
COMPANY.
WHAT YOU WILL HEAR:
IMPLIED POST MONEY VALUATION OF THIS
STARTUP IS 1M. PRE-MONEY VALUATION IS
800K.
WHAT YOU SHOULD UNDERSTAND:

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MARKET SIZE
FIELDS OF INVESTIGATION - PART 1
FOUNDERS AND TEAM
REVENUE PROJECTION 3Y / 5Y
INTELLECTUAL PROPERTY (IP) - PATTERNS, APPLICATION
PRODUCT, SERVICE AND TECHNOLOGY
TRACTION
FOR YOUR E-VALUATION PROJECT

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ALREADY INVESTED CAPITAL
FIELDS OF INVESTIGATION - PART 2
STAGE OF THE STARTUP - PRODUCT / SERVICE / TECH.
COMPETITIONS
NEED FOR ADDITIONAL INVESTMENTS
REPUTATION OF THE COMPANY
CLAIMS AGAINST THE COMPANY
FINANCIAL PERFORMANCE UNTIL TODAY
FOR YOUR E-VALUATION PROJECT

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PRE MONEY VALUATION
POST MONEY VALUATION
DILUTION OF SHARES
"YES, WE HAVE A VALUATION PROJECTION
THAT YOU CAN USE..."
DURING YOUR FIRST MEETING WITH THE STARTUP...
FOCUS ON:

13. 10 mSEK + 2mSEK = 12m SEK
PREMONEY
VALUATION
WIFI PIE AB EXAMPLE
INVESTMENT
AMOUNT
POSTMONEY
VALUATION
THE NEGOTATED
VALUED OF THE
COMPANY BEFORE
THE INVESTMENT
THE VALUE OF THE
STARTUP AFTER
THE INVESTMENT

14. FOUNDER MENTIONS TO YOU:
WIFI PIE AB EXAMPLE - DILUTION
"I WOULD LIKE TO RAISE MONEY BUT, DON'T WANT TO
DILUTE MY OWNERSHIP TO STRONGLY"
THIS IS WHAT IT USUALLY MEANS IN THE REALITY
PLEASE ESTIMATE THE HIGHEST VALUATION POSSIBLE
SO THAT NEW STAKEHOLDERSHIP WILL RESULT IN
SMALL SHARE DILUTION.

15. CLICK HERE FOR MORE SOPHISTICATED
VIDEO EXAMPLES OF SHARE DILUTION
DILUTION IS THE REDUCTION OF OWNERSHIP PERCENTAGES
IN A BUSINESS AS AN EFFECT OF THE ISSUANCE OF NEW SHARE.
SHARE DILUTION
DEFINITION:
EXAMPLE:
A COMPANY IS OWNED BY ONE FOUNDER 100%. IT RECEIVES AN INVESTMENT OF
10%. WHAT IS THE DILUTION OF SHARES?
POST MONEY
DILUTION:
< FOUNDER
INVESTOR >

16. WE ARE RAISING 500K ON A
PREVALUATION OF 1M
WIFI PIE AB EXAMPLE
HOW BIG IS POST-
MONEY VALUATION?
MENTI.COM
CODE: 607616

17. CLICK HERE FOR A VIDEO EXPLANATION
ABOUT STARTUP FUNDING
WE ARE NOW IN OUR C-SERIES SHARE ISSUE PROCESS AND CONSIDER 20M
INVESTMENT.
STAGES OF INVESTMENTS
WHAT DOES THE FOUNDER SAY TO YOU:
WHAT DOES THIS MEAN
THE COMPANY HAS AN SUCCESSFUL PROOF OF
CONCEPT, TEAM, EXPERIENCE IN RISING
FUNDING, SIGNIFICANT INVESTMENT AND
POTENTIAL SOME INT. EXPANSION

18. CLICK HERE FOR VIDEO EXPLANATION
ABOUT PRESEED FUNDING
FRIENDS, FAMILLY (AND "FOOLS"), BUSINESS ANGELS, PUBLIC FUNDING LIKE ALMI,
REWARDS BASED CROWDFUNDING, STING
PRE - SEED FUNDING - I HAVE AN IDEA
WHO IS PROVIDING PRE-SEED FUNDING?
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
EARLIEST STAGE, DESIGN OF THE PRODUCT, PROVISION OF MARKET FIT, CREATION
OF THE COMPANY.

19. CLICK HERE FOR VIDEO EXPLANATION
ABOUT SEED FUNDING
BUSINESS ANGELS, EQUITY CROWDFUNDING, REWARD CROWDFUNDING,
PUBLIC FUNDING
SEED FUNDING - I HAVE A COMPANY
WHO IS PROVING SEED FUNDING?
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
SIZE AROUND 230K EURO UP TO 2M EURO IN ORDER TO BRING THE PRODUCT TO
MARKET, SIGN FIRST BIG CONTRACTS, ADVERTISE TO THE PUBLIC

20. CLICK HERE FOR VIDEO EXPLANATION
ABOUT SERIES A FUNDING
BUSINESS ANGEL, EQUITY CROWDFUNDING, VENTURE CAPITAL (LATELY VC ARE
LESS LIKELY TO PROVIDE SERIES A FUNDING)
SERIES A - OPTIMISE PRODUCT & USER BASE
WHO IS PROVIDING SERIES A FUNDING
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
SCALING THE PRODUCT, EXPLORING THE TRUE MARKET FIT, INTRODUCTION OF
NEW FEATURES. IN THE PAST THE MEDIAN HAS BEEN AROUND 7M EURO. IT WENT
UP SIGNIFICANT IN RECENT YEARS TO 6.5 M-14M EURO
> INTERESTING CASE: AGGREGATE MEDIA - EQUITY FOR ADVERTISEMENT SPACE.

21. EXAMPLE OF AN VENTURE THAT RAISED SERIES B
VENTURE CAPITAL, (THAT SPECIALISE IN LATER STAGE FUNDING) INSTITUTIONAL
INVESTORS, HEDGE FUNDS FUND REPRESENTATIVES
SERIES B - "B" IS FOR BUILD
WHO IS PROVIDING SERIES B FUNDING?
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
THE STARTUP HAS A WORKING BUSINESS MODEL AND WOULD LIKE TO EXPEND ITS
REACH. IT RECEIVES SIGNIFICANT TRACTION AND HAS A TRACK OF RECORD. THE
COMPANY RAISES FUNDING FOR NEW TEAM MEMBERS, FURTHER EXPANSION.
SIZE: USUALLY 7M+ EURO

22. EXAMPLE OF AN VENTURE THAT RAISED SERIES C
200M USD
VENTURE CAPITAL, INSTITUTIONAL INVESTORS, HEDGE FUNDS
FUND REPRESENTATIVES
SERIES C (D, E, F... )
HOW IS PROVIDING SEED FUNDING
WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE
ACCELERATION BEYOND SERIES B, ACQUISITION OF COMPETITORS
OR PARTNERS, INTERNATIONALISATION. INVESTOR INJECT MONEY INTO
SUCCESSFUL BUSINESSES WITH THE
GOAL TO AT LEAST RECEIVE THE DOUBLE AMOUNT BACK.
KEYWORDS:
COMPETETIVE ADVANTAGE, MERGER
AND SYNERGISTIC PARTNERSHIP

23. WATCH A VIDEO ON MEZANINE FUNDING
IS A TERM WHEN A COMPANY DECIDES TO "GO PUBLIC" AND TO OFFER
THEIR SHARE ON A STOCK EXCHANGE- CLICK HERE FOR A VIDEO
EXPLANATION.
POSSIBLE SCENARIOS FOR YOUR STARTUP
PROJECT (BUT LESS LIKELY:))
IPO - INITIAL PUBLIC OFFERING
MEZANINE FUNDING
FUNDER IS OBTAINING A LOAN WITHOUT A COLLATERAL (AN
MOVABLE OR NONE MOVABLE ASSET THAT BACKS UP THE LOAN.
IN CASE OF A DEFAULT THE LENDER CONVERTS HIS DEBT INTO
SHARES. - CLICK HERE FOR A VIDEO EXPLANATION.
USUALLY USED WITH A TRACK RECORD AND REPUTATION USED
OFTEN TO PERFORM AN IPO. TYPICAL INTREST IS SOMEWHERE
BETWEEN 10% AND 22%

24. COMPREHENSIVE VIDEO EXPLENATIONAL
OF CONVIRTABLE LOAN
A COMPANY ISSUES A LOAN TO LENDERS AND AT A SPECIFIC DATE THE
INVESTORS CAN DECIDE IF THEY WOULD LIKE TO RECEIVE THEIR DEBT
REPAID OR CONVERT IT TO OWNERSHIP IN THE COMPANY.
LENDERS USUALLY RECEIVES A DISCOUNT RATE TO CONVERT INTO
VALUATION AT A LATER STAGE.
POSSIBLE SCENARIOS FOR YOUR STARTUP
PROJECT (BUT LESS LIKELY:))
COVERTABLE LOANS: (DEBT)
BRIDGE FINANCING (FORM OF CONVERTABLE DEBT)
IS A LOAN THAT CONVERTS TO EQUITY
THE INVESTOR CAN DECIDE ON THE TRIGGER POINT IF THE
LOAN WITH THE DISCOUNT SHOULD BE CONVERTED
ACCORDING TO AN OLD POST MONEY VALUE OR A NEW
PREMONEY VALUATION FOR NEXT ROUND.
WATCH A VIDEO ON BRIDGE FINANCING

25. FOCUS WHILE WORKING ON
YOUR PROJECT
WHERE IS
THE STARTUP REALLY
WHERE THE
VALUATION IS
WHERE
YOU ARE
EXPECTED TO BE

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WHAT MIGHT EXPLAIN UBER VALUATION
THE COMPANY OPERATES IN A GLOBAL
MARKET, IS A MARKET LEADER WITH A
SCALABLE BUSINESS MODEL,
GROWTH TRACK RECORD,
CAN ADAPT TO CHANGES,
HAS FEW EMPLOYEES,
DISRUPTS THE MARKET
HAS A POTENTIAL TO GENERATE SIGNIFICANT
REVENUE VERY QUICKLY IN A SHORT FUTURE
TAKING A 15-25% FROM EACH RIDE.

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NEXT STEPS
JOHN SJOLUND LECTURE ON -
FOUNDER GOES VALUATION
DIVISION OF GROUPS OF THREE +/-
PLEASE WATCH THE VIDEO, THAT YOU CAN ACCESS
AS HYPERLINKS IN THIS PRESENTATION BEFORE
YOUR FIRST MEETING WITH YOUR PARTNER STARTUP
PONTUS'S LECTURE ON DIFFERENT VALUATION
METHODS FOR DIFFERENT STARTUP NEEDS

28. 1320 ENTREPRENEURSHIP AND
OPPORTUNITY, 20TH OF JANUARY 2017
Picture:https://flic.kr/p/drV3LQ
SLIDES ARE ONLINE ON:
SLIDESHARE.COM/
MICHALGROMEK
CC LICENSE FOR DISTRIBUTION

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BREAK
UNTIL 10:15