Transcript
Tetuan Valley
Tetuan Valley, OCTOber 2012
Startup School 7: Fall2012
WEEK 3
“More human than human is our motto”
#startspain
STARTUP FINANCE 101 – Session 3
24/10/2012
Objective
Introduce students with tehcnological backgrounds to key financial concepts that are esential at the hour of starting a business
Result
•Comprehension of key financial indicators •Ability to parameterize the models given the face value of a startup and to make financial projections to investors
Duration
2 sessions, 4hr
Session 1 • Concepts • Principals • Equations • Investors; Objectives and restrictions, stages, “Venture Capital” and
Value Levers • Conclusions for the entpreneur
Session 2 • Business Plan • Price • Business Model • Other tools
disclaimer
Katelyn made these slides
LlUIS COBI AND NAST
are not responsible
for her
tastelessness
PLEASE MAKE all COMPLAINTS
addressed TO HER
24/10/2012 5
TIME VALUE OF MONEY Effect of compound interest
“A bird in the hand is worth two in the bush”
=
Effect of compound interest
“A bird in the hand is worth two in the bush”
Time value of money
24/10/2012 7
PRICE OF RISK Correlation of Risk & Return
“There´s no such thing as a free lunch”
Correlation of risk & return
“There´s no such thing as a free lunch”
Price of risk (Sharpe ratio)
24/10/2012 9
RISK =
COMPANY MARKET
24/10/2012 10
MARKET RISK
24/10/2012 11
COMPANY RISK
24/10/2012 12
DIVERSIFICATION Market vs. Company Risk
“Don´t put all your eggs in one basket”
Market vs. Company Risk
“Don´t put all your eggs in one basket”
Diversification
24/10/2012
BALANCE SHEET
STATEMENTS OF ANY COMPANY
24/10/2012
RELATIONSHIP BETWEEN ACCOUNTS
24/10/2012
RELATIONSHIP BETWEEN ACCOUNTS
10/24/2012
PROFIT AND LOSS
Earnings
COGS
Overhead Expenses
EBITDA
Depreciations and amortizations
Contribution Margin
EBIT
Financial result
EBT
Taxes
Net Result
+
-
-
-
-
10/24/2012
EARNINGS
How many things you sell
At what price
X
10/24/2012
PROFIT AND LOSS
Earnings
COGS
Overhead Expenses
EBITDA
Depreciations and amortizations
Contribution Margin
EBIT
Financial result
EBT
Taxes
Net Result
+
-
-
-
-
10/24/2012
COST OF GOODS SOLD
How many things you sell
How much it costs to make them
X
10/24/2012
PROFIT AND LOSS
Earnings
COGS
Overhead Expenses
EBITDA
Depreciations and amortizations
Contribution Margin
EBIT
Financial result
EBT
Taxes
Net Result
+
-
-
-
-
10/24/2012
OVERHEAD = FIXED COSTS
10/24/2012
Depreciations and amortizations
Earnings
COGS
Overhead Expenses
EBITDA
Depreciations and amortizations
Contribution Margin
EBIT
Financial result
EBT
Taxes
Net Result
+
-
-
-
-
We buy a machine in year 1 for 6k We buy a machine in year 1 for 6k
We buy a machine in year 1 for 6k
10.000
5.000
1.000 4.000
6.000
5.000
-2.000
0
-2.000
0 or credit
BAD
+
-
-
-
-
6k amortized over 3 years…
10.000
5.000
1.000 4.000
2.000
5.000
2.000
0
2.000
666
1334
+
-
-
-
- 10.000
5.000
1.000 4.000
2.000
5.000
2.000
0
2.000
666
1334
+
-
-
-
- 10.000
5.000
1.000 4.000
2.000
5.000
2.000
0
2.000
666
1334
+
-
-
-
-
10/24/2012
PROFIT AND LOSS
Earnings
COGS
Overhead Expenses
EBITDA
Depreciations and amortizations
Contribution Margin
EBIT
Financial result
EBT
Taxes
Net Result
+
-
-
-
-
10/24/2012 28
CASH FLOW STATEMENT
Collectibles
Payments (Direct / Overhead)
Operating Cash
-
Annual Cash Balance
Investments
Temporary financial earnings
Investment Cash
-
+
Capital Subscriptions
-
New Debt
Principal of debt
Dividends
Financial Cash
-
+
24/10/2012 29
Company with increasing profits
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But if the same company sells with a difference of payments above 5 months the company can go bankrupt
-100
0
100
200
300
400
500
600
700
Year 1 Year 2 Year 3 Year 4
Margen
Cobros
Pagos
Caja
Margin
Collections
Payments
Cash balance
24/10/2012 31
We want to be more top heavy
Price
Cost
Overhead Expenses
EBITDA
Contribution Margin
-
-
24/10/2012 32
But not too much
Price
Cost Overhead Expenses
EBITDA
Contribution Margin
-
-
24/10/2012 33
And Not bottom heavy
Price
Cost
Overhead Contribution Margin
-
-
EBITDA
24/10/2012
Active where is my money Passive where does it come from
Long-Term Outside Capital
Tangible Equity Long-Term Assets
Short-Term Assets
Short-Term Outside Capital
Working Capital
BALANCE SHEET
Investments Depreciations
Debt Treasury Inventory
Creditors Short-term bank VAT
Banks
Social Capital Net Results Earnings
24/10/2012
Price is what you pay. Value is what you get Warren Buffett
94 M EUR
VS
1 M Tshirt+ 1st liga
24/10/2012 36
Earnings Expenses EBITDA Amort. EBIT T in EBIT Variation WC
CAPEX FCF
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
NOPLAT Amort.
CAPM
r% = Rf +(MRP*β)
Price of Risk
Non Risky
Stuff
EQUALS
How much it that matters
Market Risk Prem,
Market Risk Premium
= Market Risk - Risk Free Rate
CAPM
r% = Rf +(MRP*β)
Price of Risk
Non Risky
Stuff
EQUALS
How much it that matters
Market Risk Prem,
β=Positive
β=Negative
WACC
WACC= Ke * (%e) + Kd (%d)
WACC
WACC= Ke * (%e) + Kd * (%d)
Money
Equity Costs
COSTS How much
You use
Debt Costs
24/10/2012 44
Earnings Expenses EBITDA Amort. EBIT T in EBIT Variation WC
CAPEX FCF
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
NOPLAT Amort.
#StartSpain
WHO IS WHO
#StartSpain
WHO IS WHO
#StartSpain
Industriales
Source: Perennius
#StartSpain
WHO IS WHO
#StartSpain
Industriales
Source: Perennius
#StartSpain
WHO IS WHO
#StartSpain
Involucración
Industriales
Capital Riesgo
Friends and family
Business Angels
Family Office 1
Source: Perennius
#StartSpain
HOW PLAYERS INVEST
#StartSpain
Involucración
Pureza financiera
Industriales
Capital Riesgo
Friends and family
Business Angels
Family Office
2
1
Source: Perennius
#StartSpain
HOW PLAYERS INVEST
#StartSpain
Involucración
Pureza financiera
Industriales
Capital Riesgo
Friends and family
Business Angels
Family Office
Dinero propio
Dinero de terceros
Origen de los fondos 3
2
1
Source: Perennius
#StartSpain
HOW PLAYERS INVEST
24/10/2012
INVESTMENT STAGES
THE CHASM
Why they Invest What they Measure Decision Time
Family, Friends and Fools
Confidence Personal
Commitment Fast
Subsidies and Public Assistence
Policy alignments
Compliance merits
Slow
Business Angels Personal affinity Profitability Fast
Venture Capitalists Investment
criteria Profitability Slow
Industrial Partners Strategic criteria Contribution to
business Slow
Source: HighGrowth; Elaboración Okuri Ventures
INVESTMENT CRITERIA
24/10/2012
Target yearly return
Holding period (years)
Investment death rate
Entry/exit multiplier
25%+ 3-5 <20% x3,5
25%+ 3-5 >60% x10+
PE
VC
15%+ 4-7 >80% x20+ BA
DESIRED RETURN
0
5
10
15
20
25
Sales Margin Debt Arbitration Total
24/10/2012
Shareholder Return
Investment Multiplier
PE
VC
Source: Cifras orientativas
ORIGIN OF MULTIPLIERS-LEVERS
24/10/2012
1 / (1-n)
Source: http://www.paulgraham.com/equity.html
CONCLUSION
24/10/2012
Source: http://www.paulgraham.com/equity.html
ITS BETTER TO HAVE A SMALLER PIECE
24/10/2012
Source: http://www.paulgraham.com/equity.html
OF A BIGGER PIE
24/10/2012
8%
Source: http://www.paulgraham.com/equity.html
CONCLUSION
24/10/2012
1 / (1-.08)
Source: http://www.paulgraham.com/equity.html
CONCLUSION
24/10/2012
8.7%
Source: http://www.paulgraham.com/equity.html
CONCLUSION
24/10/2012
1 / (1-n)
Source: http://www.paulgraham.com/equity.html
CONCLUSION
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