Tetuan Valley Startup School V - Fall 2011 - Week 3

1. Tetuan alley
Startup School Fall 2011
This is the Land of Do-as-you-
please-and-take-what-you-want
Week
3
Tetuan Valley, October 2011

2. Sponsors Collaborators

3. Finance
for
Entrepreneurs
Objec3ve
Session
1
• Concepts
Introduce
students
with
tehcnological
• Principals
backgrounds
to
key
financial
concepts
• Equa;ons
that
are
esen;al
at
the
hour
of
star;ng
a
business
• Investors;
Objec;ves
and
restric;ons,
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
projec;ons
to
investors
• Business
Model
• Other
tools
Dura3on
2
sessions,
4hr
11/3/11

4. TIME
VALUE
OF
MONEY
Effect
of
compound
interest
=
“A
bird
in
the
hand
is
worth
two
in
the
bush”
11/3/11
4

5. DIVERSIFICATION
Market
vs.
Company
Risk
“Don´t
put
all
your
eggs
in
one
basket”
11/3/11
5

6. PRICE
OF
RISK
Correla;on
of
Risk
&
Return
“There´s
no
such
thing
as
a
free
lunch”
11/3/11
6

7. IN
GRAPHS
Effect
of
compound
Time
value
of
money
interest
“A
bird
in
the
hand
is
worth
two
in
the
bush”
Market
vs.
Company
Risk
Diversifica3on
“Don´t
put
all
your
eggs
in
one
basket”
Correla;on
of
risk
&
return
Price
of
risk
“There´s
no
such
thing
as
a
free
(Sharpe
ra3o)
lunch”
11/3/11

8. STATEMENTS
OF
ANY
COMPANY
BALANCE
SHEET
11/3/11

9. RELATIONSHIP
BETWEEN
ACCOUNTS
11/3/11

10. Company
with
increasing
profits
11/3/11
10

11. 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 Collec;ons
Cobros
200 Pagos
Payments
Caja
100 Cash
balance
0
-­‐100
Year
1 Year
2 Year
3 Year
4
11/3/11
11

12. PROFIT
AND
LOSS
Earnings
-­‐
COGS
Contribu3on
Margin
-­‐
Overhead
Expenses
EBITDA
-­‐
Deprecia;ons
and
amor;za;ons
EBIT
+
Financial
result
EBT
-­‐
Taxes
Net
Result
11/3/11

13. CASH
FLOW
STATEMENT
Collec;bles
-­‐
Payments
(Direct
/
Overhead)
Opera3ng
Cash
Capital
Subscrip;ons
+
New
Debt
-­‐
Principal
of
debt
-­‐
Dividends
Financial
Cash
-­‐
Investments
+
Temporary
financial
earnings
Investment
Cash
Annual
Cash
Balance
11/3/11
13

14. BALANCE
SHEET
Ac3ve
à
where
is
my
money
Passive
à
where
does
it
come
from
Long-­‐Term
Assets
Tangible
Equity
Social
Capital
Investments
Net
Results
Deprecia3ons
Earnings
Long-­‐Term
Outside
Capital
Banks
Short-­‐Term
Assets
Working
Capital
Debt
Treasury
Short-­‐Term
Inventory
Outside
Capital
Creditors
Short-­‐term
bank
VAT
11/3/11

15. 1
M
Tshirt+
94
M
EUR
1st
liga
VS
Price
is
what
you
pay.
Value
is
what
you
get
Warren
Buffea
11/3/11

16. FCF:
what
is
it?
l CAPM:
r%
=
α
+
βp
=
Rf
+(β*MRP)
l WACC=
Ke
*
(E
/
(D+E))
+
Kd
(D
/
(D+E))
l FCF
=
Net
income
+
deprecia;on
–
changes
in
working
capital
–
Capital
expenditures
Earnings
Expenses
EBITDA
Amort.
EBIT
T
in
EBIT
Amort.
NOPLAT
Varia3on
CAPEX
FCF
WC
11/3/11
16

17. WHO
IS
WHO
SICAVs
Family
offices
Insurance
&
Brokers
Pension
Funds
¿?
Endowments
Private
Banking
Hedge
Funds
Grants
and
Subsidies
Angel
Funds
CVC
Funds
of
Comercial
Funds
Banks
Investment
Banking
Sovereign
Funds
11/3/11

18. HOW
PLAYERS
INVEST
Friends
and
Venture
Funds
Origin
family
3
1
Family
Office
Capital
Involvement
Own
Money
Others
Money
Business
Angels
Industrialists
2
Financial
Purity
Source:
Perennius

19. INVESTMENT
STAGES
11/3/11

20. THE
CHASM

21. 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
Contribu;on
to
Industrial
Partners
Strategic
criteria
Slow
business
Source:
HighGrowth;
Elaboración
Okuri
Ventures

22. DESIRED
RETURN
Target
yearly
Holding
period
Investment
Entry/exit
return
(years)
death
rate
mul3plier
PE
25%+
3-­‐5
<20%
x3,5
VC
25%+
3-­‐5
>60%
x10+
BA
15%+
4-­‐7
>80%
x20+
11/3/11

23. ORIGIN
OF
MULTIPLIERS-­‐LEVERS
Shareholder
Return
PE
25
Investment
Mul3plier
20
15
VC
10
5
0
Source:
Cifras
orientaGvas
Sales Margin Debt Arbitration Total
11/3/11

24. CONCLUSION
1
/
(1-­‐n)
Source: http://www.paulgraham.com/equity.html
11/3/11