Fall 2012 week 3 Fin 101
- 1. Tetuan Valley Startup School 7: Fall2012 WEEK 3 “More human than human is our motto” Tetuan Valley, OCTOber 2012
- 2. #startspain
- 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” 24/10/2012 7
- 8. Price of risk (Sharpe ratio) Correlation of risk & return “There´s no such thing as a free lunch”
- 9. RISK = MARKET COMPANY 24/10/2012 9
- 10. MARKET RISK 24/10/2012 10
- 11. COMPANY RISK 24/10/2012 11
- 12. DIVERSIFICATION Market vs. Company Risk “Don´t put all your eggs in one basket” 24/10/2012 12
- 13. Diversification Market vs. Company Risk “Don´t put all your eggs in one basket”
- 14. STATEMENTS OF ANY COMPANY BALANCE SHEET 24/10/2012
- 15. RELATIONSHIP BETWEEN ACCOUNTS 24/10/2012
- 16. RELATIONSHIP BETWEEN ACCOUNTS 24/10/2012
- 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
- 22. OVERHEAD = FIXED COSTS 10/24/2012
- 23. Depreciations and amortizations Earnings - COGS Contribution Margin - Overhead Expenses EBITDA - Depreciations and amortizations EBIT + Financial result EBT - Taxes Net Result 10/24/2012
- 24. We buy a machine in year 1 for 6k
- 25. We buy a machine in year 1 for 6k 10.000 - 5.000 5.000 - 1.000 4.000 - 6.000 -2.000 +0 -2.000 - 0 or credit BAD
- 26. 6k amortized over 3 years… 10.000 10.000 10.000 - 5.000 - 5.000 - 5.000 5.000 5.000 5.000 - 1.000 - 1.000 - 1.000 4.000 4.000 4.000 - 2.000 - 2.000 - 2.000 2.000 2.000 2.000 +0 +0 +0 2.000 2.000 2.000 - 666 - 666 - 666 1334 1334 1334
- 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 10/24/2012 28
- 29. Company with increasing profits 24/10/2012 29
- 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 24/10/2012 30
- 31. We want to be more top heavy Price - Cost Contribution Margin - Overhead Expenses EBITDA 24/10/2012 31
- 32. But not too much Price - Cost Contribution Margin - Overhead Expenses EBITDA 24/10/2012 32
- 33. And Not bottom heavy Price - Cost Contribution Margin - Overhead EBITDA 24/10/2012 33
- 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 24/10/2012
- 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
- 38. Market Risk Premium = Market Risk - Risk Free Rate
- 39. CAPM r% = Rf +(MRP*β) Price of Risk EQUALS Market Risk Prem, Non Risky How much it Stuff that matters
- 40. β=Positive
- 41. β=Negative
- 42. WACC WACC= Ke * (%e) + Kd (%d)
- 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 24/10/2012 44
- 45. WHO IS WHO #StartSpain
- 46. WHO IS WHO #StartSpain
- 47. WHO IS WHO #StartSpain #StartSpain
- 48. WHO IS WHO #StartSpain #StartSpain
- 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
- 53. THE CHASM
- 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+ 24/10/2012
- 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
- 57. CONCLUSION 1 / (1-n) Source: http://www.paulgraham.com/equity.html 24/10/2012
- 58. ITS BETTER TO HAVE A SMALLER PIECE Source: http://www.paulgraham.com/equity.html 24/10/2012
- 59. OF A BIGGER PIE Source: http://www.paulgraham.com/equity.html 24/10/2012
- 60. CONCLUSION 8% Source: http://www.paulgraham.com/equity.html 24/10/2012
- 61. CONCLUSION 1 / (1-.08) Source: http://www.paulgraham.com/equity.html 24/10/2012
- 62. CONCLUSION 8.7% Source: http://www.paulgraham.com/equity.html 24/10/2012
- 63. CONCLUSION 1 / (1-n) Source: http://www.paulgraham.com/equity.html 24/10/2012