This presentation was part of a joint webinar of lexr.ch and tresio.ch. When, and what type of funding do you really need? Keeping cash in your company: the essence of planning Your planning and reporting on autopilot Startup Financing: The startup lifecycle Term Sheet negotiations: Cash or King?

1. 11 I 2020
Startup funding & liquidity
planning
Best practices in Switzerland
and hands-on advice

2. Agenda
• When, and what type of funding do you really need?
• Keeping cash in your company: the essence of planning
• Your planning and reporting on autopilot
• Startup Financing: The startup lifecycle
• Term Sheet negotiations: Cash or King?
• Q&A
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3. Your hosts today
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Michele Vitali
Head of VC & Startup Financing @LEXR
Tobias Angehrn
CEO & Co-Founder @TRESIO

4. A cash flow view on
funding your company
Funding a company is possible in three main ways:
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funding through own
business activities
Getting funding through a
business loan
Getting funding through
an equity injection
• Highest independancy
• Best suitable for business models
in which cash flow can be
generated quickly
• Growth process can take a bit
longer, especially in the beginning
• Risk, that a better funded
competitor will be faster
• You keep the ownership over your
business
• Can get very expensive over time
• Only suitable for cash flow positive
companies, beware of the total
cost (interest + installments)
• Be careful with personal liabilities
as a founder! Very often required
• Your balance sheet is
strengthened
• Best suited for cash-intenste
business models that require
investments up-front for
development etc
• You give away control
• Be careful with the terms

5. Funding your company
through cash flow generated
Not feasable in typical «startup»
cases, as there are high investments
but no revenues in the beginning.
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Screenshot: TRESIO

6. Funding your company
through a business loan
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Interest and repayments can be a
cash flow killer, they are due,
regardless if you generate cash.
Screenshot: TRESIO

7. Funding your company
through equity
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Equity funding gives you the
cash upfront, 100% of it can be
used to develop the business.
Screenshot: TRESIO

8. Eight ways to keep the cash in
your company
• Focus on spend control from day 1 – also after a funding round!
• Rainy day reserves are always a good idea
• Agree on up-front payments with your customers
• Stay on top of your invoices, and implement a collections-process early on
• Pay your bills as late as possible
• Profit ≠ Cash Flow!
• Get help managing your money early on
• Smart tools like TRESIO can save you hours of planning
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9. Revenue ≠ Profit ≠ Cashflow!
80’000 CHF of net profits will please your investors, but
doesn’t say anything about the status of your bank account!
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CASH
machinery
debtors
stock
creditors
loan
equity

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Planning your cash flow:
absolutely essential for survival!
9 / 10 bankruptcies
directly result from
liquidity issues.
60% of companies
have a profitable business
at their liquidation.
1) 2)
1) Source: Seco
2) Source: Finpacific

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planning your cash flow:
absolutely essential for survival!
The risk of running out of cash is
often the highest when you feel
that everything is under control!
👉 Planning your cash flow and liquidity means being prepared!

12. Automate your planning and
reporting with smart tech!
• Be constistant with your KPI’s.
• Find systems and tools to automate
your reporting processes early on.
• Clean, professional looking reports will
make you look great in front of investors
and bankers.
• Automations save time, improve
efficiency, reduce errors and give you an
edge over your competitors.
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Automate your planning and
reporting with TRESIO
Free Demo Account: www.tresio.ch
• Integrates with your accounting system
• You are consistent, thanks to automations
and rule-based projections
• Easily collaborate with your team and
report to your investors

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Startup financing
Startup Lifecycle The Term Sheet

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1. Pre-founder stage: Finding the right partners
2. Incorporation, first financing by family & friends
3. Seed, Series A and following
4. The exit
You must spend money to make money
- Platus -
Startup lifecycle

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Cash or King
Money Control
The Term Sheet

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#1 Valuation and Investment
#2 Liquidation Preference
#3 Anti-Dilution Protection
Money

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#1 Money – Valuation and
Investment Amount

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• Preference (1x, 2x)
• Participation
#2 Money – Liquidation Preference
• Liquidation preference
(1x, 2x) with
participation
• Double-dipping
Investor friendly Founder friendly
• 1x liquidation
preference without
participation

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Start Series A Exit
Founders
VC
100%
0%
66.6%
33.3%
VC invests CHF 500k
@CHF 1m pre-
money
33.3%
66.6%
Sale of company for
CHF1m (with 1x liq.
pref. + participating)
#2 Money – Liquidation Preference
CHF 1m
CHF 1.5m
Exit
66.6%
33.3%
Sale of company
for CHF1m
(without liq. pref.)

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Protects an investor in case of a ‘down round’:
• Valuation of following financing round is lower
• ‘Free shares’ to protect from dilution
• Protection usually to the detriment of the founders
#3 Money – Anti-dilution

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• Weighted Average Issue Price
is determined
• Broad-based weighted
average
• Narrow based weighted
average
• Full ratchet
#3 Money – Anti-dilution

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Start Series A Down-round
Founders
VC 1
100%
0%
66.6%
33.3%
VC1 invests CHF
500k @CHF 1m pre-
money
33.3%
33.3%
VC2 invests CHF
250k @CHF 500k
pre-money
VC 2 0% 0% 33.3%
Down-round
44.4%
22.2%
Without dilution
protection
33.3%
#3 Money – Anti-dilution

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Control
#1 Founders Vesting
#2 Transfer Restrictions
#3 Purchase Option

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• Success of a startup depends to a large
extent on the founders:
• Founders have to ‘earn’ shares over time
• Incentive to stay with the company /
penalty if they leave
• Two main concepts:
• Cliff
• Vesting period
#1 Control – Founders Vesting

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• Right of first refusal - no shareholder can simply sell the shares to a third party without
offering the shares to the existing shareholders first
• Tag-along right - protects the minority shareholders: If a shareholder sells shares
surpassing a certain percentage threshold, e.g., 50% of all shares, the other shareholders
have the right to request that the buyer also buys their shares for the same terms and
conditions.
• Drag-along right - protects the majority shareholders: the right to oblige the other
shareholders to also sell their shares to the buyer so that the buyer can actually acquire
control of 100% of the shares in the company.
#2 Control – Transfer Restrictions

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• Protects the shareholder structure
• Penalize unwanted behaviour - criminal
acts, ‘bad leaver’
• Prevent the transfer to third parties – in
case of death, divorce
#3 Control – Purchase Option

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LEXR Term Sheet Guide

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contact@lexr.ch
+41 79 639 13 06
michele.vitali@lexr.ch
www.lexr.ch
info@tresio.ch
+41 79 212 61 92
tobias@tresio.ch
www.tresio.ch