3. STARTUP FINANCE 101 – Session 3
Objective Session 1
• Concepts
Introduce students with tehcnological • Principals
backgrounds to key financial concepts • Equations
that are esential at the hour of starting a
business • Investors; Objectives and restrictions, stages, “Venture Capital” and
Value Levers
• Conclusions for the entpreneur
Result
•Comprehension of key financial
indicators Session 2
•Ability to parameterize the models • Business Plan
given the face value of a startup and to • Price
make financial projections to investors • Business Model
• Other tools
Duration
2 sessions, 4hr
24/10/2012
4. disclaimer
Katelyn made these slides
LlUIS COBI AND NAST
are not responsible
for her
tastelessness
PLEASE MAKE all COMPLAINTS
addressed TO HER
5. TIME VALUE OF MONEY
Effect of compound interest
“A bird in the hand is worth two in the bush”
24/10/2012
= 5
6. Time value of money
Effect of compound interest
“A bird in the hand is worth two in the bush”
7. PRICE OF RISK
Correlation of Risk & Return
“There´s no such thing as a free lunch”
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8. Price of risk (Sharpe ratio)
Correlation of risk & return
“There´s no such thing as a free lunch”
17. PROFIT AND LOSS
Earnings
- COGS
Contribution Margin
- Overhead Expenses
EBITDA
- Depreciations and amortizations
EBIT
+ Financial result
EBT
- Taxes
Net Result
10/24/2012
18. EARNINGS
How many things you sell
X
At what price
10/24/2012
19. PROFIT AND LOSS
Earnings
- COGS
Contribution Margin
- Overhead Expenses
EBITDA
- Depreciations and amortizations
EBIT
+ Financial result
EBT
- Taxes
Net Result
10/24/2012
20. COST OF GOODS SOLD
How many things you sell
X
How much it costs to make them
10/24/2012
21. PROFIT AND LOSS
Earnings
- COGS
Contribution Margin
- Overhead Expenses
EBITDA
- Depreciations and amortizations
EBIT
+ Financial result
EBT
- Taxes
Net Result
10/24/2012
27. PROFIT AND LOSS
Earnings
- COGS
Contribution Margin
- Overhead Expenses
EBITDA
- Depreciations and amortizations
EBIT
+ Financial result
EBT
- Taxes
Net Result
10/24/2012
28. CASH FLOW STATEMENT
Collectibles
- Payments (Direct / Overhead)
Operating Cash
Capital Subscriptions
+ New Debt
- Principal of debt
- Dividends
Financial Cash
- Investments
+ Temporary financial earnings
Investment Cash
Annual Cash Balance
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30. But if the same company sells with a difference of payments above 5 months
the company can go bankrupt
700
600
500
400 Margin
Margen
300 Collections
Cobros
200 Pagos
Payments
Caja
Cash balance
100
0
-100
Year 1 Year 2 Year 3 Year 4
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31. We want to be more top heavy
Price
- Cost
Contribution Margin
- Overhead Expenses
EBITDA
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32. But not too much
Price
- Cost
Contribution Margin
- Overhead Expenses
EBITDA
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33. And Not bottom heavy
Price
- Cost
Contribution Margin
- Overhead
EBITDA
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34. BALANCE SHEET
Active where is my money Passive where does it come from
Long-Term Assets Tangible Equity
Social Capital
Investments
Net Results
Depreciations
Earnings
Long-Term Outside
Capital
Banks
Short-Term Assets Working Capital
Debt
Treasury Short-Term Outside
Inventory Capital
Creditors
Short-term bank
VAT
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35. 1 M Tshirt+
94 M EUR 1st liga
VS
Price is what you pay. Value is what you get
Warren Buffett
24/10/2012
36. FCF: what is it?
CAPM: r% = α + βp = Rf +(β*MRP)
WACC= Ke * (E / (D+E)) + Kd (D / (D+E))
FCF = Net income + depreciation – changes in working capital
– Capital expenditures
Earnings Expenses EBITDA Amort. EBIT T in EBIT Amort. NOPLAT Variation CAPEX FCF
WC
24/10/2012 36
37. CAPM
r% = Rf +(MRP*β)
Price of Risk
EQUALS Market Risk Prem,
Non Risky How much it
Stuff that matters
43. WACC
WACC= Ke * (%e) + Kd * (%d)
Money
COSTS
How much
You use
Equity Costs Debt Costs
44. FCF: what is it?
CAPM: r% = α + βp = Rf +(β*MRP)
WACC= Ke * (E / (D+E)) + Kd (D / (D+E))
FCF = Net income + depreciation – changes in working capital
– Capital expenditures
Earnings Expenses EBITDA Amort. EBIT T in EBIT Amort. NOPLAT Variation CAPEX FCF
WC
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49. HOW PLAYERS INVEST
Friends
and Capital
family Family Office Riesgo
1
nvolucración
Business Angels
Industriales
Source: Perennius
#StartSpain
#StartSpain
50. HOW PLAYERS INVEST
Friends
and Capital
family Family Office Riesgo
1
nvolucración
Business Angels
Industriales
2 Pureza financiera Source: Perennius
#StartSpain
#StartSpain
51. HOW PLAYERS INVEST
Friends
and Capital Origen de los fondos
family 3
1 Family Office Riesgo
nvolucración Dinero propio
Dinero de terceros
Business Angels
Industriales
2 Pureza financiera Source: Perennius
#StartSpain
#StartSpain
54. INVESTMENT CRITERIA
Why they Invest What they Measure Decision Time
Family, Friends and Personal
Confidence Fast
Fools Commitment
Subsidies and Policy Compliance
Slow
Public Assistence alignments merits
Business Angels Personal affinity Profitability Fast
Investment
Venture Capitalists Profitability Slow
criteria
Contribution to
Industrial Partners Strategic criteria Slow
business
Source: HighGrowth; Elaboración Okuri Ventures
55. DESIRED RETURN
Target yearly Holding period Investment Entry/exit
return (years) death rate multiplier
PE 25%+ 3-5 <20% x3,5
VC 25%+ 3-5 >60% x10+
BA 15%+ 4-7 >80% x20+
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56. ORIGIN OF MULTIPLIERS-LEVERS
Shareholder Return
PE
25
Investment
Multiplier 20
15
VC 10
5
0
Source: Cifras orientativas Sales Margin Debt Arbitration Total
24/10/2012
