tetuan valley startup school vi (session 4)
DESCRIPTION
Tetuan Valley is the first non-for-profit pre-accelerator program in Europe. Our goal is to promote local Entrepreneurship and regional development towards technology. Twice a year we host a 6 week startup school, with focus on training and working on the implementation of a business idea. We have a portfolio of more than 70 top-notch mentors, participating to give the students a unique and valuable experience. All graduates of the startup school get exclusive access to the Tetuan Valley Alumni Network. For further info please check tetuanvalley.comTRANSCRIPT
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Tetuan VAlley
Tetuan Valley, March 2012
Startup School Spring 2012
In the end, a Spartan's true
strength is the warrior next to
him. So give respect and honor to
him, and it will be returned
Week4 #StartSpain
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#startspain
Sponsors Collaborators
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STARTUP FINANCE 101 – Session 3
28/03/2012
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
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TIME VALUE OF MONEY Effect of compound interest
“A bird in the hand is worth two in the bush”
=
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DIVERSIFICATION Market vs. Company Risk
“Don´t put all your eggs in one basket”
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PRICE OF RISK Correlation of Risk & Return
“There´s no such thing as a free lunch”
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Time value of money
Diversification
Price of risk
(Sharpe ratio)
Effect of compound interest
“A bird in the hand is worth two in the bush”
Market vs. Company Risk
“Don´t put all your eggs in one basket”
Correlation of risk & return “There´s no such thing as a free lunch”
IN GRAPHS
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BALANCE SHEET
STATEMENTS OF ANY COMPANY
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RELATIONSHIP BETWEEN ACCOUNTS
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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
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PROFIT AND LOSS
Earnings
COGS
Overhead Expenses
EBITDA
Depreciations and amortizations
Contribution Margin
EBIT
Financial result
EBT
Taxes
Net Result
+
-
-
-
-
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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
-
+
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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
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Price is what you pay. Value is what you get Warren Buffett
94 M EUR
VS
1 M Tshirt+ 1st liga
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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.
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CAPM
r% = Rf +(MRP*β)
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CAPM
r% = Rf +(MRP*β)
Price of Risk
Non Risky
Stuff
EQUALS Market Risk
How much it that matters
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WACC
WACC= Ke * (%e) + Kd (%d)
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WACC
WACC= Ke * (%e) + Kd * (%d)
Money
Equity Costs
COSTS How much
You use
Debt Costs
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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.
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Brokers
Family offices SICAVs
CVC
Private Banking
Insurance & Pension Funds
Funds of Funds Investment
Banking
Angel Funds
Hedge Funds
Comercial Banks
Grants and Subsidies
Endowments
¿?
Sovereign Funds
WHO IS WHO
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Involvement
Financial Purity
Industrialists
Venture Capital
Friends and
family
Business Angels
Family Office
Own Money
Others Money
Funds Origin 3
2
1
Source: Perennius
HOW PLAYERS INVEST
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INVESTMENT STAGES
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THE CHASM
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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
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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
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0
5
10
15
20
25
Sales Margin Debt Arbitration Total
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Shareholder Return
Investment Multiplier
PE
VC
Source: Cifras orientativas
ORIGIN OF MULTIPLIERS-LEVERS
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1 / (1-n)
Source: http://www.paulgraham.com/equity.html
CONCLUSION