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Tetuan Valley Startup School 6 Week 4

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					   Tetuan VAlley
Startup School Spring 2012


                            Week4
                           #StartSpain



           In the end, a Sp art an's true
      st      th
         reng is the warrior next t     o
     him. So give respect and honor t   o
            him, and it will be returned

           Tetuan Valley, March 2012
                  #startspain

Sponsors   Collaborators
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




                                                                                                        28/03/2012
TIME VALUE OF MONEY
         Effect of compound interest
“A bird in the hand is worth two in the bush”



28/03/2012
             =                              4
             DIVERSIFICATION
           Market vs. Company Risk
     “Don´t put all your eggs in one basket”



28/03/2012                                     5
             PRICE OF RISK
          Correlation of Risk & Return
     “There´s no such thing as a free lunch”



28/03/2012                                     6
                      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
 Diversification
                                  “Don´t put all your eggs in one
                                  basket”



                                  Correlation of risk & return
 Price of risk                    “There´s no such thing as a free
 (Sharpe ratio)                   lunch”



28/03/2012
             STATEMENTS OF ANY COMPANY

                                BALANCE SHEET




28/03/2012
             RELATIONSHIP BETWEEN
                   ACCOUNTS




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             Company with increasing profits




28/03/2012                                     10
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




  28/03/2012                                                           11
                                  PROFIT AND LOSS

         Earnings
     -   COGS
         Contribution Margin
     -   Overhead Expenses
         EBITDA
     -   Depreciations and amortizations
         EBIT
    + Financial result
         EBT
    -    Taxes
         Net Result




3/28/2012
                               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


3/28/2012                                            13
                             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
 28/03/2012
                            1 M Tshirt+
94 M EUR                      1st liga


                   VS
 Price is what you pay. Value is what you get
                Warren Buffett


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                                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
28/03/2012                                                                                16
       CAPM

r% =   Rf +(MRP*β)
                CAPM

       r% =     Rf +(MRP*β)

Price of Risk
  EQUALS
                Market Risk
        Non Risky      How much it
          Stuff        that matters
          WACC

WACC= Ke * (%e) + Kd (%d)
            WACC

  WACC= Ke * (%e) + Kd * (%d)

Money
COSTS
             How much
              You use
   Equity Costs    Debt Costs
                                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
28/03/2012                                                                                21
                           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
28/03/2012
              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
             INVESTMENT STAGES




28/03/2012
THE CHASM
                      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
                       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+


28/03/2012
                  ORIGIN OF MULTIPLIERS-LEVERS
                                              Shareholder Return



               PE
                              25
   Investment
   Multiplier                 20

                              15

              VC              10

                               5

                               0
Source: Cifras orientativas        Sales   Margin       Debt       Arbitration   Total

28/03/2012
                                                CONCLUSION




                          1 / (1-n)
Source: http://www.paulgraham.com/equity.html


   28/03/2012

				
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