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Cleantech Open
2013 Webinar Series
Tuesday, August 6, 2013
2 Cleantech Open Confidential Information – All Rights Reserved
Welcome to the National Webinar Series
• With the Cleantec...
3 Cleantech Open Confidential Information – All Rights Reserved
Global Partner
4 Cleantech Open Confidential Information – All Rights Reserved
National Sponsors
5 Cleantech Open Confidential Information – All Rights Reserved
Thank You To All Our Sponsors!
6 Cleantech Open Confidential Information – All Rights Reserved
The Summer Program – July – September 2013
Date Time
(PDT)...
7 Cleantech Open Confidential Information – All Rights Reserved
Session 1: Financial Analysis & Planning
1:30pm – 2:30pm, ...
Cleantech Open
Financial Analysis and Planning
By
Niraj Kohli - University of Phoenix
Tim Hoffman – Watts Capital / Cleant...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Copyright © 2013 University of phoenix. All rights reserved. Repr...
This webinar is a 60-minute meeting
presented as part of the Cleantech Open,
which focuses specifically on finances and
fu...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Agenda
o Value Creation in context of Finances and Funding throug...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Financial Analysis & Planning Worksheet and Judging Criteria
Work...
Cleantech Open Webinar No 5
by University of Phoenix
Understanding Value Creation in context of
Business Model through fin...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
How to Get Business Model Right?
Stay Focused on Value Creation, ...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
(VP)
VALUE
PROPOSITIONS
(CH)
CHANNELS
(CR)
CUSTOMER
RELATIONSHIPS...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What are the key financial metrics?
Cash
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What types of financial information are key to a start-up busines...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What types of financial information are key to a start-up busines...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What types of financial information are key to a start-up busines...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What are the costs of relationships?
Customer
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What are the costs of relationships?
Supplier
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What are the costs of relationships?
Developer
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What are the key financial metrics?
Inventory
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What are the key financial metrics?
Cycle Time
This metric measur...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What types of financial information are key to a start-up busines...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
What types of financial information are key to a start-up busines...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Are there any questions?
Cleantech Open Webinar No 5
by University of Phoenix
Developing financial models for
early stage enterprises
Cleantech Open
Webinar 5 – Financial Analysis & Planning
(VP)
VALUE
PROPOSITIONS
(CH)
CHANNELS
(CR)
CUSTOMER
RELATIONSHIPS...
businessmodelgeneration.com
CS
CR CH
VP
KA KR
KP
R$
C$
Map Business Model Canvas to Financial Statements
Cleantech Open
We...
Beginning of Period
(Dec. 31, 2013)
End of Period /
Beginning of New
(Dec. 31, 2014)
During Period
(2014)
Cleantech Open
W...
Design
Manufacture Chips
Manufacture Fixtures
Sell Lighting Fixtures
Through Own Sales
Force
Try to be like
EXAMPLE
Cleant...
businessmodelgeneration.com
CS
CR CH
VP
KA KR
KP
R$
C$
Building
Production
Equipment
• Setting up Own Production is Capita...
businessmodelgenertion.com
• Revenue stream entirely from Products Sales
• Channel – Direct Sales, requiring Direct Sales
...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
• FIXED COSTS (in red)- Some Costs are
completely fixed like D&A ...
• Understand market segment & vendor payment
norms
• Efficiencies of production and logistics determine
cash requirement f...
Cleantech Open Webinar No 5
by University of Phoenix
Applying Business Model
Innovation to Create Value
(VP)
VALUE
PROPOSITIONS
(CH)
CHANNELS
(CR)
CUSTOMER
RELATIONSHIPS
(CS)
CUSTOMER
SEGMENTS
(R$) REVENUE STREAMS(C$) COST STR...
Business Area
Standard
Approach Company
Business
Model
Innovation
Cleantech
Company
Solar
Manufacturing
Manufacturing
Pane...
Customer
Acquisition
- Contract Sales
Variable Costs
Contract Mfg.
QC
Contract Mfg. Partner
Contract Sales /
Distribution ...
Revenue 1,000
Labor (50)
Materials (Semi-finished goods) (445)
Equipment D&A -
Occupancy Allocation (5)
COGS (500)
Gross P...
Net Income 116
D&A -
Δ Accounts Receivable (167)
Δ Inventories (167)
Δ Accounts Payable 42
Δ WC (292)
Operating Cash Flow ...
businessmodelgeneration.com
CS
CR CH
VP
KA KR
KP
R$
C
$
INVESTMENT 1,300
Breakeven CF Y3
TOTAL CF Y1-3 (590)
Rolling the M...
businessmodelgeneration.com
CS
CR CH
VP
KA KR
KP
R$
C
$
INVESTMENT 400
Break-even CF Y2
TOTAL CF Y1-3 174
Rolling the Mode...
Cash 400
Other Current Assets 0
TOTAL CURRENT ASSETS 400
Plant, Property and Equipment 0
IP 0
TOTAL ASSETS 400
Current Lia...
Cleantech Open Webinar No 5
by University of Phoenix
Scenario Analysis
Cleantech Open
Webinar 5 – Financial Analysis & Planning
• Change model assumptions to test the cash flow requirements of ...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Scenario Analysis - Assumptions
Year 1 Year 2 Year 3
Revenue
Most...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Scenario Analysis - Assumptions
Most Likely Best Worst
Receivable...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Scenario Analysis - Results
Year 1 Year 2 Year 3
Net Income
Most ...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Are there any questions?
Cleantech Open Webinar No 5
by University of Phoenix
Funding Strategy
INDUSTRY FORCES
Competitors
New Entrants
Substitute Products and
Services
Value Chain Actors
KEY TRENDS
Regulatory
Technol...
VC Funds and Angels
are investing more in
companies with:
• Proven technology
• Evidence of Market
Adoption (i.e. Sales)
•...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Funding Environment – Favors Later Stage
• Early stage companies ...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Equity/Convertible Debt Financing Options
Friends and family
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Equity/Convertible Debt Financing Options
Small Business Administ...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Equity/Convertible Debt Financing Options
Venture Angels
An angel...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Equity/Convertible Debt Financing Options
Early Stage Venture Cap...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Revenue Funding
Grant Funding
• ARPA-E
• DoE
• NSF
• DoD
• State ...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Revenue Funding
Partners (suppliers and customers)
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Revenue Funding
Asset Sale
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Revenue Funding
Get to revenue and manage cash burn rate
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Revenue Funding
Licensing
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Business models have earnings and cash flow implications
Capital ...
Cleantech Open
Webinar 5 – Financial Analysis & Planning
Are there any questions?
What will your Plan for Financing and Funding look like?
Session 1 Q&A
Accelerating Your Business
Live and Breathe the Worksheets
70 Cleantech Open Confidential Information – All Rights Reserved
Worksheet Work – Week 8/6 – 8/12
• Work on your 3-year pr...
71 Cleantech Open Confidential Information – All Rights Reserved
As of August 6th ……
Complete Business Model Canvas and Wo...
Session 2 will start at 2:45pm PDT
3:45pm MDT, 4:45pm CDT, 5:45pm EDT
73 Cleantech Open Confidential Information – All Rights Reserved
Session 2: Halfway Point Q&A
2:45pm – 4:00pm, PDT
Speaker...
74 Cleantech Open Confidential Information – All Rights Reserved
Worksheet 1: Business Model Canvas
75 Cleantech Open Confidential Information – All Rights Reserved
Worksheet 2: Product/Market Fit (Customer Discovery)
• Ch...
76 Cleantech Open Confidential Information – All Rights Reserved
Worksheet 3: Market(s) and Getting to Them
• Define, char...
77 Cleantech Open Confidential Information – All Rights Reserved
Worksheets 4: Technology / Product Validation
• Product v...
Reminders
79 Cleantech Open Confidential Information – All Rights Reserved
September 10th Deliverables
Tuesday, September 10, 11:59p...
80 Cleantech Open Confidential Information – All Rights Reserved
Reminders
• Work on your worksheets – keep up each week, ...
13 0806 session 1 & 2 webinars
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13 0806 session 1 & 2 webinars

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  • Progressive de-risking of company from concept to a venture that will achieve investment and/or sustainable revenueTraining materials, activities & workshops are integrated with these 10 steps Product-Market Fit helps each company ensure that they have identified the correct market for their product(s)/service(s) and are ready to make appropriate adjustments. 2) Technology Validation ensures that their product(s)/service(s) will credibly meet the requirements of investors and customers. 3) Business Model covers all key aspects of who and how and where money will be made, and how the product will be delivered. 4) Markets and Getting to Them covers the key, crucial steps needed to get a new product into the market (an enhanced version of ‘Go To Market Strategy’). 5) Finances & Funding focuses on producing credible financial projections. 6) Legal provides an introduction to intellectual property protection and the corporate structure required to minimize risk and provide the legal underpinnings for success (important steps often overlooked by entrepreneurs). 7) Execution and Team to Execute introduces the importance of building a strong, relevant team with the specific skills needed to hit the major milestones needed as the startup grows. 8) Sustainability introduces the importance of business practices that will improve the company’s profitability while reducing its environmental impact. 9) Presentation works on the content and skills for excellent investor/customer presentations. 10) Assessment & Review guides each entrepreneur through the importance of careful review, and provides the platform for review and refinement of the programs themselves.Physical and virtual business clinics are one-on-one sessions for each participating startup with experts from sectors such as law, marketing, design, manufacturing and finance.
  • Introductory slide, webinar description.
  • Our agenda for today’s topics in this webinar focus on the following:- Value Creation in context of Finances and Funding through Financial AnalysisDeveloping Financial Models for Early Stage Enterprises Applying Business Model Innovation to Create Value- Scenario Analysis – Testing your Assumptions- Funding – Sources and EnvironmentAt the conclusion of the webinar, you should have a more solid understanding of how Product and Technology fit into Osterwalder and Pigneur’s (2010) Business Model Canvas.
  • We move on to Webinar no 5 from where we left off last week on Product and Technology Validation Webinar. You shared with us what you liked about the Webinars and how we can make them more helpful. Today’s Webinar is on Value Creation through Cash and Cash Flows and Financial Models and testing your assumptions. The goal is to link the Webinar content as much as possible to the Worksheets that you are required to complete and Judging Criteria given that is your shorter term interest.
  • Create, Capture and Sustain by assessing and leveraging the three keys to building a business / Industry- Investments - Operational Excellence - FinancingInvestments - One of the ways to create value is by making Investments that result in future cash flows. Example….Tesla2) Operational Excellence – Operational efficiencies and effectiveness by business that can positively result in creation of Industry / Industries. Example…….Rise of Wafer Foundaries and Subcontractor Back End Manufacturing companies in a highly capitalized industry such as semiconductor industry.3) Financing – Instead of selling products / services one can consider financing the products and services over shorter or longer time frame. – Example….Automobile Sales to Consumers, Structure of business and or doing business within a given Industry.
  • The Canvas consists of nine building blocks, which are described from Right to Left (Front Stage and Back Stage) and then at the bottom Front Stage……..On the Right are four building blocks that form what can be called a customer view. These blocks include Customer Segments (CS), Value Propositions (VP), Customer Relationships (CR), and Channels (CH).On the Left are three building blocks that form what can be called the operations view. These blocks are Key Activities (KA), Key Resources (KR), and Key Partnerships (KP). At the bottom of the Canvas are two blocks that make up the economics view: Cost Structure (C$) and Revenue Streams (R$).The Canvas should be seen as a visual representation of the flow from suppliers to customers supported by economic elements. The organization of the elements is set up to be developed from right to left and then interpreted left to right. Like a painting it may not make sense until all elements are in place and the whole of the picture is seen through the interaction of the parts. In the following discussion we will look at each in more detail.Companies with Successful Business Models – Apple, Intel, Google and Power Assure (Smart Power Management - Dashboard)
  • By now you should be well on your way to establishing your business model. The next step is to transfer this model into a financial one. Therefore, in the next section we will show you an example of mapping the business model canvas into financial statements.During my years of working with early stage companies, I have found that this piece is often the weakest link. As many companies find out in the due diligence phase of a transaction, it is much more than a “check the box” exercise. Investors want to make sure that you have thought through the financial aspects of your strategy. In order to do this, I would like to begin by flipping it on its side.
  • I find it easier to think about the elements affecting revenue and costs streams this way, because it mimics the structure of income statements and cash flows statements.Income StatementsRevenue at the topCosts at the bottomCash Flow StatementsIncome at the topCash requirements down below
  • Financial statements capture both points in time – the Balance Sheet - as well as what goes on between those points in time - the Income and Cash Flow Statements. In their worksheets the Cleantech Open requires annual projections. In practice you will also need monthly and quarterly projections.Again, you, as an entrepreneur, should focus on the amounts of cash available at various points in time as well as understand the uses of cash during each period.
  • I find examples a useful way to understand concepts, so I would like to begin with an example of mapping a business model to financial statements. Unfortunately, we only have time to work through one example on the call today. I recommend that you work with your mentors on mapping your business model into financial statements.While the example financials on the following slides are not taken from a specific company, they are directionally instructive. In this example, we look at the income, cash flow and capital requirements for a vertically integrated company – a very conventional approach.In the lighting sector you can think of this as an early stage company trying to be like Phillips, which has a vertically integrated model.Philips’ lighting business designs and manufactures its products in-house and then sells them through its own sales force.
  • In order to produce products in-house, this company will need certain key resources:BuildingProduction EquipmentWhile this approach keeps the Intellectual Property closer to the vest, it is also much more capital intensiveIn other words these key resources will need to be financed. Also, the cash flow requirements from the business will require cash to fund operations, which we will cover on the following pages.In this example, we will assume that it is possible to borrow 200 for the equipment and the rest 1,100 is raised from equity investors.
  • Moving on to the Income Statement, we start with the revenue stream in orange, which will come from selling products to customers. The target segments for these products are taken from your Business Model Canvas process. The dynamics of these industry segments need to be well understood in order to forecast revenue growth for the company.In-house production (in beige) will require certain key resources (manufacturing labor and materials) which factor into the calculation of Cost of Goods Sold (or COGS) and determine the gross profit margins for your business. Selling directly to the customer via your own sales force requires Sales and Marketing resources (here highlighted in green).Finally, your general & administrative costs and research and development expenditures (in blue) are key resources that show up on the Income Statement as expense categories.
  • From here I would like to take a deeper dive into the income statements and separate out fixed and variable costs.In red we see expenses, like occupancy costs and depreciation and amortization, which are fixed in nature.In blue are costs, like materials, commissions, and bonuses, which go up and down based on the revenue of the business.And finally, in purple we highlight expenses that are sticky or discretionally fixed, meaning that management can change them throughout the year to a point.Before we move on I would like to point out the fact that this company’s gross profit margins reflect excess capacity in the manufacturing process to allow for future growth. As a result, gross profit margins are lower in the early years until this excess capacity is absorbed by higher volumes.
  • The Cash Flow Statement reflects the cash earnings of the business, which ultimately enables the business to grow.The target customer segments (here in dark blue) typically have payment norms, which determine how quickly you can expect to be paid by your customers. The shorter the time, the less the cash needs for a growing business.Next, we turn to the beige box, where the efficiency of your production and supply chain will determine your cash requirements for inventory as the business grows. The more times you are able to sell your inventory in a given year, the less cash required to fund your growth. In other words, the better you manage your supply chain and reduce inventory requirements, the better your cash flow will be.Also, since production equipment requires repair and maintenance and equipment will need to be added as the business grows, additional cash is required in the form of Capital expenditures (Capex).Finally, your vendor relationships and industry norms (in brown) will determine how quickly you will need to pay your suppliers. Here the longer time you have to pay them the greater the cash flow benefit.The take away here is that the vertically integrated business model requires a lot of cash flow in the first year - 570.
  • In their book, Business Model Generation, Osterwalder and Pigneur layer the blue ocean value creation concept, coined by Kim and Mauborgne in their book by the same name, over their business model canvas.While the intricacies of this are beyond the scope of our webinar today, their exercise aims at lowering costs by reducing or eliminating less valuable features or services and creating high-value features or services that do not significantly increase the cost base.
  • Before we return to our example, I would like to highlight some business model innovation that has occurred in the cleantech sector.SunEdison, which you learned about in a previous Webinar, employed a model to sell electricity rather than panels.Solar City has developed a lease-oriented business that aggregates residential leases and seeks tax equity from large institutions instead of simply installing panels on homes.Better Place tried to sell miles instead of cars and batteries.ZipCar simplified short-term car sharing instead of car rental.However, it should be noted that not all business model innovation is successful. Better Place filed for bankruptcy earlier this year after raising $850 million. While innovative, their business model was capital intensive.
  • Now we turn to a simple application of business model innovation.Today, we will look at improving the cost side of value creation.Eliminating certain cost factorsReducing Cost For simplicity of comparison, we will look at business model innovation which changes the original vertically integrated model to a more flexible one. Here the early stage company tries to be more like GE by outsourcing certain functions of its business.In the Business Model Canvas context:As illustrated in green, we first change the customer acquisition costs from direct sales to contract sales, or selling through distributors. This may require key partnership agreements.As illustrated in beige, we next change fixed, in-house production costs into variable manufacturing costs through a contract manufacturing agreement.
  • By moving from a vertically integrated model to a more flexible one, the company transforms fixed costs into variable ones.Labor costs, equipment and occupancy costs are reduced and materials costs in the form of finished goods are increased.Depending on the contract manufacturing agreement this can lead to higher margins.Commissions become a larger component of customer acquisitions costs, making this cost more variable.The result is more flexible earnings capability and a potential increase in profits.Whatever your business model looks like, you will want to make sure that you understand the fixed and variable nature of your costs. Finding ways to convert fixed costs to variable ones will improve the resilience of your business to downturns.
  • Our more flexible model can also lead to improved cash flow, in other words, it is more capital light.By shifting to outsourced production, inventory can be turned over more quickly (think Dell/Toyota).Because there are no equipment upgrades to finance, there is no need for additional capex.The result is improved cash flow, or in this case, less negative cash flow. In our example the vertically integrated model yields a cash need of 570 in the first year versus only 176 for the Flexible one.
  • Rolling this model forward for three years, shows that the vertically integrated model requires:1,300 of investmentIs not cash flow breakeven until Year 3If things go as planned, requires 813 of cash to fund operations in the first two yearsNegative cumulative cash flow over the three-year period
  • Doing the same for our more flexible, capital light model: Requires of 400 of investmentIs cash flow breakeven in Year 2Requires cash flow of 176 in year 1Produces cumulative cash flows over a three-year period to 174
  • Financial modelling is an iterative process, which is designed in part to determine the amount of capital required to fund your business. In our example, because less cash is required for the flexible model to fund the business, you need to raise less money – 400 versus 1,300.
  • I see entrepreneurs coming in without have done this and it is often something they trip up on during due diligence. You will want to be prepared, so you can avoid saying, “I’ll have to get back to you on that one.”Scenario analysis is also a way to validate your assumptions, including how resilient your business model is and how much capital you need to raise.To begin this process, start with the most likely case - this is the one you have been working hardest to build and should represent a realistic view of the future.Then, increase or decrease the main model drivers: Revenue, Gross Profit Margin (COGS), Operating Expenses and Working Capital Assumptions.
  • In this table we summarize the assumptions from Model 2, which has become our preferred business model, given its flexibility and lower capital intensiveness.Then, we do scenario/sensitivity analysis to this set of assumptions. The best case assumes higher revenue growth and margins, and lower operating expenses as a % of sales. The worst case conversely assumes slower revenue growth, lower margins and higher operating expenses as a % of Sales.In practice, you will actually want to make more detailed changes to your models, changing the elements of operating expenses, such as staffing levels, advertising, marketing, etc. I suggest that you work with your mentors on identifying these areas.
  • Next we move on to the working capital assumptions. A typical way to think about accounts receivable and accounts payable is the number of days it takes to collect from customers or pay suppliers. Then a simple formula can be applied to project expected changes in these working capital items and their corresponding cash flow impact.In order to project inventory levels, most financial modelers analyze how many times inventory turns over or is sold in a year. Again a simple formula can be applied to turn this assumption into a projected inventory level. In this example, we begin by assuming that customer collections take an average of 60 days and suppliers are paid in 30 days. Inventory turns over 3x per year. We use these assumptions for all three year of our projection period.Then, we do sensitivity analysis on these assumptions.
  • As expected Net Income and Cash Flow are much higher under the Best case.However, with the Worst case we discover that 365 of cash is needed in Year 1 and 163 is needed in Year 2 to fund operations. This total of 528 is higher than the 400 that we originally thought we might need.As a result, the size of the raise should be increased to at least 600 in order to provide enough cushion to absorb unforeseen challenges.
  • Your business model does not exist in a vacuum. As Osterwalder and Pigneur, point out in their book, Business Model Generation, your business is affected by:Key TrendsIndustry ForcesMarket ForcesMacroeconomic forcesConditions in capital markets determine from whom and how much money you can raise as an early stage company
  • Today VC Funds and Angels are pickier about their investments, particularly in the Cleantech space.There has been a return to businesses with limited capital needs. Everyone wants the next Facebook, Twitter, etc.When they do invest in the cleantech sector, they have moved toward later stage opportunities, where:The technology is provenThere is evidence of market adoption in the form of salesA strong management team is in place with an ability to be resourcefulCapital efficient business models are pursued
  • Early stage companies should not look for hot money. As a result of changes in the capital markets, you should seek alternative funding sources in parallel with pursuing traditional paths like VC firms. Whatever funding you obtain, make it stretch.Such equity and convertible debt financing options include:Friends and FamilySmall Business Administration SBICVenture AngelsEarly Stage VCsRevenue Funding options include:plan a lean business model to reach point of validation and revenues as soon as possible – manage cash burn like a hawkSeek grant funding – federal and stateSeek industry partnersSell assetsLicense non-core aspects of your intellectual property
  • Transcript of "13 0806 session 1 & 2 webinars"

    1. 1. Cleantech Open 2013 Webinar Series Tuesday, August 6, 2013
    2. 2. 2 Cleantech Open Confidential Information – All Rights Reserved Welcome to the National Webinar Series • With the Cleantech Open since 2007 • Mentor Chair 2007 - 2008 • Executive Director 2008 - present MC: Rex Northen, Executive Director, Cleantech Open
    3. 3. 3 Cleantech Open Confidential Information – All Rights Reserved Global Partner
    4. 4. 4 Cleantech Open Confidential Information – All Rights Reserved National Sponsors
    5. 5. 5 Cleantech Open Confidential Information – All Rights Reserved Thank You To All Our Sponsors!
    6. 6. 6 Cleantech Open Confidential Information – All Rights Reserved The Summer Program – July – September 2013 Date Time (PDT) Session I – Worksheets Time (PDT) Special Topic Sessions 7/9 1:30 to 2:30pm Business Model Canvas (Review) 2:45 to 4:00pm LaunchPad Central (Review) 7/16 1:30 to 2:30pm Product/Market Fit 2:45 to 4:00pm Systems Review, PR 101 7/23 1:30 to 2:30pm Markets and Getting to Them 2:45 to 4:00pm Term Sheets 7/30 1:30 to 2:30pm Product/Technology Validation 2:45 to 4:00pm Alternative Sources of Funding - Grant Writing / Crowd Sourcing 8/6 1:30 to 2:30pm Financials Analysis & Planning 2:45 to 4:00pm Review of Worksheets to date 8/13 1:30 to 2:30pm Legal Environment, Issues and Risks 2:45 to 4:00pm Cap Tables 8/20 1:30 to 2:30pm Management Team 2:45 to 4:00pm Working with the Utilities 8/27 1:30 to 2:30pm Sustainability 2:45 to 4:00pm Tell Your Story, Sell Your Story (Communicating value to stake holders) 9/10 1:30 to 2:30pm Last Chance For Questions 2:45 to 4:00pm IP Licensing from 3rd Parties 9/11 1:30 to 2:30pm Investor Presentation Mentor Assessment 2:45 to 4:00pm Mock Judging, Regional Awards, Global Forum
    7. 7. 7 Cleantech Open Confidential Information – All Rights Reserved Session 1: Financial Analysis & Planning 1:30pm – 2:30pm, PDT • 30 year technology industry veteran, having run global businesses based in USA and Asia • Practitioner Lead Faculty for Strategy in the School of Business Speaker: Niraj Kohli President, CSC • 18 years - provided strategic and M&A advisory, capital raising, & financial modeling services for large corporations, renewable energy developers, middle market companies and early stage companies Speaker: Timothy Hoffman Managing Director, Watts Capital, LLC
    8. 8. Cleantech Open Financial Analysis and Planning By Niraj Kohli - University of Phoenix Tim Hoffman – Watts Capital / Cleantech Open
    9. 9. Cleantech Open Webinar 5 – Financial Analysis & Planning Copyright © 2013 University of phoenix. All rights reserved. Reproduction in copies, distribution to others, preparation of modified or derivative works, or sublicensing others without express written consent of University Phoenix is prohibited. University of Phoenix webinars include content from: businessmodelgeneration.com and from Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers [ISBN: 978-0-470- 87641-1] by Alexander Osterwalder and Yves Pigneur, (hereafter referred to as the “Work”). Copyright © 2010 by Alexander Osterwalder and Yves Pigneur. All rights reserved. Used by arrangement with John Wiley & Sons, Inc. Unless John Wiley and Sons, Inc.’s (“Publisher”) express prior written permission is obtained, it is prohibited to (a) remove or alter the author’s name, Publisher’s copyright notices, or other means of identification or disclaimers as they appear in the Work; (b) make electronic copies of the Work other than as permitted pursuant to Section 1.1 of Agreement between Publisher and Apollo Group, Inc. “(Apollo”); (c) mount or distribute any part of the Work on any electronic network (including without limitation, the Internet and the World Wide Web) other than the Sites; (d) use all or any part of the Work for the purposes of monetary reward by means of sale, resale, loan, transfer, hire, or other form of distribution of the Work; (e) distribute the whole or any part of the Work to anyone other than Authorized Registrants (as defined in the Agreement between Publisher and Apollo; (f) publish, distribute, or make available the Work, works based on the Work or which combine it with any other material, other than on the Sites as expressly permitted in this Agreement between Publisher and Apollo.
    10. 10. This webinar is a 60-minute meeting presented as part of the Cleantech Open, which focuses specifically on finances and funding. Cleantech Open Webinar No 5 by University of Phoenix
    11. 11. Cleantech Open Webinar 5 – Financial Analysis & Planning Agenda o Value Creation in context of Finances and Funding through Financial Analysis  10 minutes o Developing Financial Models for Early Stage Enterprises  10 minutes o Applying Business Model Innovation to Create Value  10 minutes o Scenario Analysis  10 minutes o Funding – Sources and Environment  10 minutes o Questions  10 minutes
    12. 12. Cleantech Open Webinar 5 – Financial Analysis & Planning Financial Analysis & Planning Worksheet and Judging Criteria Worksheets • Validating The Financial Model o Fixed/Variable Costs o Margins o Customer Acquisition Costs o Break Even • Scenarios o Best, Worst, Most Likely • Best Source of Financing – for your company Judging Criteria • How credible are the revenue and cost projections? • Does the team understand how much funding they will need and where they will get it, and does their financing strategy make sense?
    13. 13. Cleantech Open Webinar No 5 by University of Phoenix Understanding Value Creation in context of Business Model through financial modeling, Analysis, budgeting, and analysis for early-stage enterprises
    14. 14. Cleantech Open Webinar 5 – Financial Analysis & Planning How to Get Business Model Right? Stay Focused on Value Creation, Capturing and Sustaining!
    15. 15. Cleantech Open Webinar 5 – Financial Analysis & Planning (VP) VALUE PROPOSITIONS (CH) CHANNELS (CR) CUSTOMER RELATIONSHIPS (CS) CUSTOMER SEGMENTS (R$) REVENUE STREAMS(C$) COST STRUCTURE (KP) KEY PARTNERSHIPS (KR) KEY RESOURCES (KA) KEY ACTIVITIES Customer view – Front StageOperations view- Back Stage Economics view – Business Performance Stage businessmodelgeneration.com
    16. 16. Cleantech Open Webinar 5 – Financial Analysis & Planning What are the key financial metrics? Cash
    17. 17. Cleantech Open Webinar 5 – Financial Analysis & Planning What types of financial information are key to a start-up business? Revenue
    18. 18. Cleantech Open Webinar 5 – Financial Analysis & Planning What types of financial information are key to a start-up business? Cost. Burn rate of a start-up business (the monthly cost of staying in business)
    19. 19. Cleantech Open Webinar 5 – Financial Analysis & Planning What types of financial information are key to a start-up business? Gross Margin (unit) ASP Direct Cost Gross Margin (unit)
    20. 20. Cleantech Open Webinar 5 – Financial Analysis & Planning What are the costs of relationships? Customer
    21. 21. Cleantech Open Webinar 5 – Financial Analysis & Planning What are the costs of relationships? Supplier
    22. 22. Cleantech Open Webinar 5 – Financial Analysis & Planning What are the costs of relationships? Developer
    23. 23. Cleantech Open Webinar 5 – Financial Analysis & Planning What are the key financial metrics? Inventory
    24. 24. Cleantech Open Webinar 5 – Financial Analysis & Planning What are the key financial metrics? Cycle Time This metric measures liquidity risk (how long will a company can be deprived of cash). It’s the timespan between disbursing and collecting cash.
    25. 25. Cleantech Open Webinar 5 – Financial Analysis & Planning What types of financial information are key to a start-up business? Capital Needs
    26. 26. Cleantech Open Webinar 5 – Financial Analysis & Planning What types of financial information are key to a start-up business? Cash Flow
    27. 27. Cleantech Open Webinar 5 – Financial Analysis & Planning Are there any questions?
    28. 28. Cleantech Open Webinar No 5 by University of Phoenix Developing financial models for early stage enterprises
    29. 29. Cleantech Open Webinar 5 – Financial Analysis & Planning (VP) VALUE PROPOSITIONS (CH) CHANNELS (CR) CUSTOMER RELATIONSHIPS (CS) CUSTOMER SEGMENTS (R$) REVENUE STREAMS(C$) COST STRUCTURE (KP) KEY PARTNERSHIPS (KR) KEY RESOURCES (KA) KEY ACTIVITIES businessmodelgeneration.com Map Business Model Canvas to Financial Statements
    30. 30. businessmodelgeneration.com CS CR CH VP KA KR KP R$ C$ Map Business Model Canvas to Financial Statements Cleantech Open Webinar 5 – Financial Analysis & Planning Revenue 1,000 COGS (750) Gross Profit 250 Operating Expenses (275) Interest Expense, net (16) Pretax Income (41) Taxes - Net Income before dividend (41) Dividend (25) Net Income (66) Cash 380 Other Current Assets 542 TOTAL CURRENT ASSETS 922 L-t Assets 350 TOTAL ASSETS 1,272 Current Liabilities 63 Debt 175 Other Liabilities - TOTAL LIABILITIES 238 Paid-in Capital 1,100 Retained Earnings (66) TOTAL LIABILITIES & EQUITY 1,272 Operating Cash Flow (495) Capex (50) Financing Cash Flow (25) Change in Cash (570) Beginning of Year Cash 950 End of Year Cash 380 Income Statement (IS1) Balance Sheet (BS1) Cash Flow Statement (CF1)
    31. 31. Beginning of Period (Dec. 31, 2013) End of Period / Beginning of New (Dec. 31, 2014) During Period (2014) Cleantech Open Webinar 5 – Financial Analysis & Planning Revenue 1,000 COGS (750) Gross Profit 250 S&M (150) G&A (100) R&D (25) Operating Expenses (275) Cash 950 Interest Expense, net (16) Cash 380 Other Current Assets 0 Pretax Income (41) Other Current Assets 542 TOTAL CURRENT ASSETS 950 Taxes - TOTAL CURRENT ASSETS 922 Net Income before dividend (41) Plant, Property and Equipment 350 Dividend (25) Plant, Property and Equipment 350 IP 0 Net Income (66) IP 0 TOTAL ASSETS 1,300 TOTAL ASSETS 1,272 Current Liabilities 0 Current Liabilities 63 Debt 200 Debt 175 Other Liabilities 0 Net Income (66) Other Liabilities 0 TOTAL LIABILITIES 200 D&A 50 TOTAL LIABILITIES 237.5 Paid-in Capital 1,100 Δ WC (479) Paid-in Capital 1100 Retained Earnings 0 Operating Cash Flow (495) Retained Earnings (66) TOTAL LIABILITIES & EQUITY 1,300 Capex (50) TOTAL LIABILITIES & EQUITY 1,272 Financing Cash Flow (25) Change in Cash (570) Beginning of Year Cash 950 End of Year Cash 380 Income Statement (IS1) Balance Sheet (BS0) Balance Sheet (BS1) Cash Flow Statement (CF1)
    32. 32. Design Manufacture Chips Manufacture Fixtures Sell Lighting Fixtures Through Own Sales Force Try to be like EXAMPLE Cleantech Open Webinar 5 – Financial Analysis & Planning Vertically Integrated Business Model
    33. 33. businessmodelgeneration.com CS CR CH VP KA KR KP R$ C$ Building Production Equipment • Setting up Own Production is Capital Intensive, but IP closer to home • Our example assumes Opening Balance Sheet with 1,100 equity and 200 debt financing • The model will require a lot of cash as we will see Business Model Canvas to Balance Sheet Cleantech Open Webinar 5 – Financial Analysis & Planning Cash 950 Other Current Assets 0 TOTAL CURRENT ASSETS 950 Plant, Property and Equipment 350 IP 0 TOTAL ASSETS 1,300 Current Liabilities 0 Debt 200 Other Liabilities 0 TOTAL LIABILITIES 200 Paid-in Capital 1,100 Retained Earnings - TOTAL LIABILITIES & EQUITY 1,300 Balance Sheet (BS0)
    34. 34. businessmodelgenertion.com • Revenue stream entirely from Products Sales • Channel – Direct Sales, requiring Direct Sales People Resources • Other Key Resources include G&A and R&D Business Model Canvas to Income Statement businessmodelgeneration.com CS CR CH VP KA K R KP R$ C$ In-house production Mfg Labor Materials Product Sales Customer Acquisition - Direct Sales Sales & Mktg Staff G&A Staff R&D Staff Cleantech Open Webinar 5 – Financial Analysis & Planning Revenue 1,000 COGS (750) Gross Profit 250 Gross Profit Margin 25% Sales & Marketing (150) General & Administrative (100) Research & Development (25) Interest Expense, net (16) Pretax Income (41) Taxes - Net Income before dividend (41) Dividend (25) Net Income (66) Income Statement (IS1)
    35. 35. Cleantech Open Webinar 5 – Financial Analysis & Planning • FIXED COSTS (in red)- Some Costs are completely fixed like D&A on Production equipment, occupancy costs, etc. • VARIABLE COSTS (in blue) include those that move up and down depending on the level of Revenue activity, e.g. materials, commission and bonuses. • DISCRETIONARY FIXED COSTS (in purple) Costs that can be adjusted within a year. However, many like sales staff, T&E and advertising can have an impact on future sales growth. Income Statement – Fixed Versus Variable Revenue 1,000 Labor (250) Materials (200) Equipment D&A (50) Occupancy Allocation (15) COGS (750) Gross Profit 250 Gross Profit Margin 25.0% Sales Staff (50) Commission (25) T&E (10) Sales Support (5) Marketing Staff (25) Advertising/Trade Shows (25) Occupancy Allocation (10) Sales and Marketing (150) Senior Mgmt Salaries (30) Bonus (10) Finance & Accounting (20) HR (10) Occupancy Allocation (15) Office Expenses (15) G&A (100) R&D Staff (15) Occupancy Allocation (5) R&D Expenses (5) R&D (25) Income Statement (IS1)
    36. 36. • Understand market segment & vendor payment norms • Efficiencies of production and logistics determine cash requirement for changes in inventory • Vendor relationships have impact on payables Map Business Model Canvas to Cash Flow Statement businessmodelgeneration.com CS CR CH VP KA KR KP R$ C$ Customer Segment Payment Norms Vendor relationship – industry norms In-house Production – Inventory Turns Equipment Capex Cleantech Open Webinar 5 – Financial Analysis & Planning Net Income (66) D&A 50 Δ Accounts Receivable (167) Δ Inventories (375) Δ Accounts Payable 63 Δ WC (479) Operating Cash Flow (495) Capex (50) Financing Cash Flow (25) Change in Cash (570) Beginning of Year Cash 950 End of Year Cash 380 Cash Flow Statement (CF1)
    37. 37. Cleantech Open Webinar No 5 by University of Phoenix Applying Business Model Innovation to Create Value
    38. 38. (VP) VALUE PROPOSITIONS (CH) CHANNELS (CR) CUSTOMER RELATIONSHIPS (CS) CUSTOMER SEGMENTS (R$) REVENUE STREAMS(C$) COST STRUCTURE (KP) KEY PARTNERSHIPS (KR) KEY RESOURCES (KA) KEY ACTIVITIES businessmodelgeneration.com - COSTS + VALUE ELIMINATE REDUCE RAISE CREATE Blending with Blue Ocean Value Creation Cleantech Open Webinar 5 – Financial Analysis & Planning
    39. 39. Business Area Standard Approach Company Business Model Innovation Cleantech Company Solar Manufacturing Manufacturing Panels Cell and Panel Manufacturers Sell Electricity SunEdison, SunPower, First Solar Residential Solar Installation Installers Westinghouse Solar, Real Goods Solar, REC Solar Lease, PPA and aggregate SolarCity EV / Battery Sell Cars/battery Fisker Karma, Nissan Leaf, Tesla, Th!nk Sell Miles better place Car Rental Rent Cars Hertz, Avis, National Short-term car sharing Zipcar Real World Examples of Business Model Innovation in Cleantech Cleantech Open Webinar 5 – Financial Analysis & Planning
    40. 40. Customer Acquisition - Contract Sales Variable Costs Contract Mfg. QC Contract Mfg. Partner Contract Sales / Distribution Partner MODEL 1 – Vertically Integrated (Fixed) MODEL 2 – Flexible businessmodelgeneration.com CS CR CH VP KA KR KP R$ C$ Fixed Costs In-house Mfg. Labor Equipment businessmodelgeneration.com CS CR CH VP KA KR KP R$ C$ Customer Acquisition - Direct Sales Cleantech Open Webinar 5 – Financial Analysis & Planning
    41. 41. Revenue 1,000 Labor (50) Materials (Semi-finished goods) (445) Equipment D&A - Occupancy Allocation (5) COGS (500) Gross Profit 500 Gross Profit Margin 50% Sales Staff (20) Commission (55) T&E (5) Sales Support (5) Marketing Staff (25) Advertising/Trade Shows (25) Occupancy Allocation (5) Sales and Marketing (140) G&A (100) R&D (25) Income Statement (IS1) - MODEL 2 Net Income 116 businessmodelgeneration.com CS CR CH VP KA KR KP R$ C$ Customer Acquisition - Direct Sales Customer Acquisition - Contract Sales Fixed Costs In-house Mfg. Labor Materials Variable Costs Contract Mfg. QC Contract Mfg. Partner Contract Sales / Distribution Partner MODEL 1 – Vertically Integrated (Fixed) MODEL 2 – Flexible CS CR CH VP KA KR KP R$ C$ Net Income (66) Cleantech Open Webinar 5 – Financial Analysis & Planning Revenue 1,000 Labor (400) Materials (275) Equipment D&A (50) Occupancy Allocation (25) COGS (750) Gross Profit 250 Gross Profit Margin 25% Sales Staff (50) Commission (25) T&E (10) Sales Support (5) Marketing Staff (25) Advertising/Trade Shows (25) Occupancy Allocation (10) Sales and Marketing (150) G&A (100) R&D (25) Income Statement (IS1) - MODEL 1
    42. 42. Net Income 116 D&A - Δ Accounts Receivable (167) Δ Inventories (167) Δ Accounts Payable 42 Δ WC (292) Operating Cash Flow (176) Capex - Financing Cash Flow - Change in Cash (176) Beginning of Year Cash 400 End of Year Cash 224 Cash Flow Statement (CF1) - MODEL 2 Contract Mfg. Partner Supply chain mgmt Customer Segment Payment Norms Loose set of suppliers  More flexible model leads to improved cash flow businessmodelgeneration.com CS CR VP KA KR KP R$ C$ Direct Sales Contract Sales Fixed Costs In-house Mfg. Labor Materials Variable Contract Mfg. QC Distribution Partner CS CR CH VP KA KR KP R$ C$ MODEL 1 – Vertically Integrated (Fixed) MODEL 2 – Flexible Cleantech Open Webinar 5 – Financial Analysis & Planning CH Net Income (66) D&A 50 Δ Accounts Receivable (167) Δ Inventories (375) Δ Accounts Payable 63 Δ WC (479) Operating Cash Flow (495) Capex (50) Financing Cash Flow (25) Change in Cash (570) Beginning of Year Cash 950 End of Year Cash 380 Cash Flow Statement (CF1) - MODEL 1 Vendor relationships Vendor relationships
    43. 43. businessmodelgeneration.com CS CR CH VP KA KR KP R$ C $ INVESTMENT 1,300 Breakeven CF Y3 TOTAL CF Y1-3 (590) Rolling the Model Forward Three Years – In-house Production / Capital Intensive Cleantech Open Webinar 5 – Financial Analysis & Planning Year 1 Year 2 Year 3 Revenue 1,000 Revenue 2,500 Revenue 5,000 COGS (750) COGS (1,500) COGS (2,500) Gross Profit 250 Gross Profit 1,000 Gross Profit 2,500 Gross Profit Margin 25% Gross Profit Margin 40% Gross Profit Margin 50% Operating Expenses (275) Operating Expenses (450) Operating Expenses (700) Interest Expense, net (16) Interest Expense, net (14) Interest Expense, net (12) Pretax Income (41) Pretax Income 536 Pretax Income 1,788 Taxes - Taxes (198) Taxes (715) Net Income before dividend (41) Net Income before dividend 338 Net Income before dividend 1,073 Dividend (25) Dividend (25) Dividend (25) Net Income (66) Net Income 313 Net Income 1,048 Cash 380 Cash 136 Cash 360 Other Current Assets 542 Other Current Assets 1,167 Other Current Assets 2,083 TOTAL CURRENT ASSETS 922 TOTAL CURRENT ASSETS 1,303 TOTAL CURRENT ASSETS 2,444 L-t Assets 350 L-t Assets 319 L-t Assets 284 TOTAL ASSETS 1,272 TOTAL ASSETS 1,622 TOTAL ASSETS 2,728 Current Liabilities 63 Current Liabilities 125 Current Liabilities 208 Debt 175 Debt 150 Debt 125 Other Liabilities - Other Liabilities - Other Liabilities - TOTAL LIABILITIES 238 TOTAL LIABILITIES 275 TOTAL LIABILITIES 333 Paid-in Capital 1,100 Paid-in Capital 1,100 Paid-in Capital 1,100 Retained Earnings (66) Retained Earnings 247 Retained Earnings 1,295 TOTAL LIABILITIES & EQUITY 1,272 TOTAL LIABILITIES & EQUITY 1,622 TOTAL LIABILITIES & EQUITY 2,728 Operating Cash Flow (495) Operating Cash Flow (193) Operating Cash Flow 274 Capex (50) Capex (25) Capex (25) Financing Cash Flow (25) Financing Cash Flow (25) Financing Cash Flow (25) Change in Cash (570) Change in Cash (243) Change in Cash 224 Beginning of Year Cash 950 Beginning of Year Cash 380 Beginning of Year Cash 136 End of Year Cash 380 End of Year Cash 136 End of Year Cash 360 Income Statement (IS3) Balance Sheet (BS3) Cash Flow Statement (CF3) Income Statement (IS1) Cash Flow Statement (CF1) Balance Sheet (BS1) Income Statement (IS2) Balance Sheet (BS2) Cash Flow Statement (CF2)
    44. 44. businessmodelgeneration.com CS CR CH VP KA KR KP R$ C $ INVESTMENT 400 Break-even CF Y2 TOTAL CF Y1-3 174 Rolling the Model Forward Three Years – Outsource Production / Capital Light Cleantech Open Webinar 5 – Financial Analysis & Planning Year 1 Year 2 Year 3 Revenue 1,000 Revenue 2,500 Revenue 5,000 COGS (500) COGS (1,250) COGS (2,500) Gross Profit 500 Gross Profit 1,250 Gross Profit 2,500 Gross Profit Margin 50% Gross Profit Margin 50% Gross Profit Margin 50% Operating Expenses (265) Operating Expenses (450) Operating Expenses (690) Interest Expense, net - Interest Expense, net - Interest Expense, net - Pretax Income 235 Pretax Income 800 Pretax Income 1,810 Taxes (94) Taxes (320) Taxes (724) Net Income before dividend 141 Net Income before dividend 480 Net Income before dividend 1,086 Dividend (25) Dividend (25) Dividend (25) Net Income 116 Net Income 455 Net Income 1,061 Cash 224 Cash 242 Cash 574 Other Current Assets 333 Other Current Assets 833 Other Current Assets 1,667 TOTAL CURRENT ASSETS 558 TOTAL CURRENT ASSETS 1,075 TOTAL CURRENT ASSETS 2,240 L-t Assets - L-t Assets - L-t Assets - TOTAL ASSETS 558 TOTAL ASSETS 1,075 TOTAL ASSETS 2,240 Current Liabilities 42 Current Liabilities 104 Current Liabilities 208 Debt - Debt - Debt - Other Liabilities - Other Liabilities - Other Liabilities - TOTAL LIABILITIES 42 TOTAL LIABILITIES 104 TOTAL LIABILITIES 208 Paid-in Capital 400 Paid-in Capital 400 Paid-in Capital 400 Retained Earnings 116 Retained Earnings 571 Retained Earnings 1,632 TOTAL LIABILITIES & EQUITY 558 TOTAL LIABILITIES & EQUITY 1,075 TOTAL LIABILITIES & EQUITY 2,240 Operating Cash Flow (176) Operating Cash Flow 17 Operating Cash Flow 332 Capex - Capex - Capex - Financing Cash Flow - Financing Cash Flow - Financing Cash Flow - Change in Cash (176) Change in Cash 17 Change in Cash 332 Beginning of Year Cash 400 Beginning of Year Cash 224 Beginning of Year Cash 242 End of Year Cash 224 End of Year Cash 242 End of Year Cash 574 Cash Flow Statement (CF1) Cash Flow Statement (CF2) Cash Flow Statement (CF3) Income Statement (IS1) Income Statement (IS2) Income Statement (IS3) Balance Sheet (BS1) Balance Sheet (BS2) Balance Sheet (BS3)
    45. 45. Cash 400 Other Current Assets 0 TOTAL CURRENT ASSETS 400 Plant, Property and Equipment 0 IP 0 TOTAL ASSETS 400 Current Liabilities 0 Debt 0 Other Liabilities 0 TOTAL LIABILITIES 0 Paid-in Capital 400 Retained Earnings 0 TOTAL LIABILITIES & EQUITY 400 Balance Sheet (BS0) businessmodelgeneration.com CS CR CH VP KA KR KP R$ C$ Direct Sales Contract Sales Fixed Costs In-house Mfg. Mfg. Labor Materials Variable Costs Contract Mfg. QC Contract Mfg. Partner Contract Sales / Distribution Partner CS CR CH VP KA KR KP R$ C$ MODEL 1 – Vertically Integrated (Fixed) MODEL 2 – Flexible Cleantech Open Webinar 5 – Financial Analysis & Planning Cash 950 Other Current Assets 0 TOTAL CURRENT ASSETS 950 Plant, Property and Equipment 350 IP 0 TOTAL ASSETS 1,300 Current Liabilities 0 Debt 200 Other Liabilities 0 TOTAL LIABILITIES 200 Paid-in Capital 1,100 Retained Earnings - TOTAL LIABILITIES & EQUITY 1,300 Balance Sheet (BS0)
    46. 46. Cleantech Open Webinar No 5 by University of Phoenix Scenario Analysis
    47. 47. Cleantech Open Webinar 5 – Financial Analysis & Planning • Change model assumptions to test the cash flow requirements of the business under various conditions • Start with the most likely case • Change Assumptions o Revenue and Revenue growth +/- o Gross Profit Margins +/- (i.e. COGS -/+) o Operating Expenses (S&M/G&A/R&D) +/- o Working Capital assumptions +/- Scenario Analysis
    48. 48. Cleantech Open Webinar 5 – Financial Analysis & Planning Scenario Analysis - Assumptions Year 1 Year 2 Year 3 Revenue Most Likely 1,000 2,500 5,000 Best 1,500 3,000 6,000 Worst 750 1,500 2,750 Gross Profit Margins Most Likely 50% 50% 50% Best 55% 55% 55% Worst 45% 45% 45% OpEx as a % of Sales Most Likely 27% 18% 14% Best 18% 16% 12% Worst 35% 25% 9%
    49. 49. Cleantech Open Webinar 5 – Financial Analysis & Planning Scenario Analysis - Assumptions Most Likely Best Worst Receivable Days 60 60 90 Inventory Turns 3.0x 3.5x 2.5x Payable Days 30 60 30
    50. 50. Cleantech Open Webinar 5 – Financial Analysis & Planning Scenario Analysis - Results Year 1 Year 2 Year 3 Net Income Most Likely 116 455 1,061 Best 441 677 1,508 Worst (47) 155 566 Cash Flow Most Likely (176) 17 332 Best 111 347 847 Worst (365) (163) 36 • In our Worst the Negative Cash Flow (528) is greater than the cash received from the equity financing (400). • As a result, the size of the raise should be increased to at least 600.
    51. 51. Cleantech Open Webinar 5 – Financial Analysis & Planning Are there any questions?
    52. 52. Cleantech Open Webinar No 5 by University of Phoenix Funding Strategy
    53. 53. INDUSTRY FORCES Competitors New Entrants Substitute Products and Services Value Chain Actors KEY TRENDS Regulatory Technology Societal and Cultural MARKET FORCES Market Segments Demands Switching Costs Revenue Attractiveness MACROECONOMIC FORCES Global Market Conditions Capital Markets Commodity Prices Capital Markets Cleantech Open Webinar 5 – Financial Analysis & Planning
    54. 54. VC Funds and Angels are investing more in companies with: • Proven technology • Evidence of Market Adoption (i.e. Sales) • Resourceful Management Teams • Capital-efficient business models Source: European Commission Enterprise and Industry Cleantech Open Webinar 5 – Financial Analysis & Planning
    55. 55. Cleantech Open Webinar 5 – Financial Analysis & Planning Funding Environment – Favors Later Stage • Early stage companies need to do following: o Seek alternative funding sources o Develop business models that have fewer cash needs, and o Make that funding stretch – manage burn rate • Equity/Convertible Debt Financing Options include: o Friends and Family o Small Business Administration SBIC o Venture Angels o Early stage VCs • Revenue Funding o Plan a lean business model to reach point of validation as soon as possible o Seek grant funding (federal and state) o Non-recurring Engineering Services from industry partners o Asset sale o Licensing technology  Fields of use  Geography  Exclusive/non-exclusive
    56. 56. Cleantech Open Webinar 5 – Financial Analysis & Planning Equity/Convertible Debt Financing Options Friends and family
    57. 57. Cleantech Open Webinar 5 – Financial Analysis & Planning Equity/Convertible Debt Financing Options Small Business Administration (SBA) Venture capital program (equity financing)
    58. 58. Cleantech Open Webinar 5 – Financial Analysis & Planning Equity/Convertible Debt Financing Options Venture Angels An angel is an individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
    59. 59. Cleantech Open Webinar 5 – Financial Analysis & Planning Equity/Convertible Debt Financing Options Early Stage Venture Capital Funds
    60. 60. Cleantech Open Webinar 5 – Financial Analysis & Planning Revenue Funding Grant Funding • ARPA-E • DoE • NSF • DoD • State Agencies like: o NYSERDA o NJ EDA o CT Innovations
    61. 61. Cleantech Open Webinar 5 – Financial Analysis & Planning Revenue Funding Partners (suppliers and customers)
    62. 62. Cleantech Open Webinar 5 – Financial Analysis & Planning Revenue Funding Asset Sale
    63. 63. Cleantech Open Webinar 5 – Financial Analysis & Planning Revenue Funding Get to revenue and manage cash burn rate
    64. 64. Cleantech Open Webinar 5 – Financial Analysis & Planning Revenue Funding Licensing
    65. 65. Cleantech Open Webinar 5 – Financial Analysis & Planning Business models have earnings and cash flow implications Capital markets today favor later stage of development companies Early Stage Companies should pursue business model innovation to o create value o transform fixed costs into variable costs o reduce capital intensity, i.e. burn rate o reduce cash flow required to reach breakeven Achieving these goals involves an iterative process of o Filling out the business model canvas o Creating financial projections and review the cash flow implications o Conducting Scenario Analysis o Repeating the process Summary:
    66. 66. Cleantech Open Webinar 5 – Financial Analysis & Planning Are there any questions?
    67. 67. What will your Plan for Financing and Funding look like?
    68. 68. Session 1 Q&A
    69. 69. Accelerating Your Business Live and Breathe the Worksheets
    70. 70. 70 Cleantech Open Confidential Information – All Rights Reserved Worksheet Work – Week 8/6 – 8/12 • Work on your 3-year projection – Use formulae, not fixed values – Use customer interviews on which to base your assumptions – Add milestones you must hit in the next 18 months – Template available at: http://wiki.cleantechopen.com/accelerator- wiki/ under “September 10th Deliverables” • Start thinking of: – Ways to reduce legal risks in your business • Your legal structure • What IP do you own and need to protect • What is your IP Strategy going forward & how do you intend to protect it
    71. 71. 71 Cleantech Open Confidential Information – All Rights Reserved As of August 6th …… Complete Business Model Canvas and Worksheet (Wiki) Complete Product/Market Fit Worksheet (Wiki) Complete Markets and Getting to Them Worksheet (Wiki) Complete Product/Technology Validation Worksheet (Wiki) Begin (or continue) to develop Financials Worksheet (Wiki) Contact Your Mentor or Regional Mentor Chair With All Questions
    72. 72. Session 2 will start at 2:45pm PDT 3:45pm MDT, 4:45pm CDT, 5:45pm EDT
    73. 73. 73 Cleantech Open Confidential Information – All Rights Reserved Session 2: Halfway Point Q&A 2:45pm – 4:00pm, PDT Speaker: Niraj Kohli President, CSC Speaker: Rex Northen, Executive Director, Cleantech Open Speaker: Paul deGive National Curriculum Chair, Cleantech Open
    74. 74. 74 Cleantech Open Confidential Information – All Rights Reserved Worksheet 1: Business Model Canvas
    75. 75. 75 Cleantech Open Confidential Information – All Rights Reserved Worksheet 2: Product/Market Fit (Customer Discovery) • Characterize your product • Identify several possible customer sets or segments • Interview customers in the “most likely” market segment to test (not sell) your product vision – does your product solve the solution they are seeking? - Good goal is 50 customer interviews • After testing and validating: – State clearly Value Proposition – Identify the End Users, the Influencers, the Recommenders, the Economic Buyers, the Decision Makers, the “Saboteurs” – Identify possible distribution partners – Who will be the early adopters (“earlyvangelists”) – What’s the minimum (not maximum) product they require
    76. 76. 76 Cleantech Open Confidential Information – All Rights Reserved Worksheet 3: Market(s) and Getting to Them • Define, characterize and size your Served Available Market (not the TAM). • What niche or segment within that SAM are you targeting as the first customer segment? How big is that? Why is it first? What are the trends in its favor? • How advanced is your customer validation in the first segment? • What are your second and third segment targets? Size? Trends for or against?
    77. 77. 77 Cleantech Open Confidential Information – All Rights Reserved Worksheets 4: Technology / Product Validation • Product validated? Have you completed a Proof of Concept? • State clearly where in the development cycle the Product is? – Use DOE MRLs/TRLs to designate the stage of development – Tell us too whether an initial prototype or full scale prototype has been successfully developed? – Field installation? – Ready for manufacture? • Third party validation (e.g. National R&D Labs, Certification Organizations, etc)? • Manufacture ready? – be sure there are no residual technical issues to be resolved and that you have credibly costed the manufacture
    78. 78. Reminders
    79. 79. 79 Cleantech Open Confidential Information – All Rights Reserved September 10th Deliverables Tuesday, September 10, 11:59pm, Pacific Daylight Time • Deadline for submitting your completed worksheets and required additional documents – Eight (8) worksheets in your dashboard, plus • Business Model Canvas - If you are using LaunchPad Central, export your Business Model Canvas from the system then convert to pdf before uploading. • Financial Projections – Executive Summary – Investor Presentation – but you can fine tune until October Go to “September 10th Deliverables” on Accelerator wiki homepage for templates & list
    80. 80. 80 Cleantech Open Confidential Information – All Rights Reserved Reminders • Work on your worksheets – keep up each week, it will make it easier • Complete webinar survey Next webinar is Tuesday, August 13th – Check your Accelerator wiki http://wiki.cleantechopen.com/accelerator- wiki/2013-webinars/ for updates on webinars – Session 1: Legal Environment, Issues and Risk - 1:30pm to 2:30pm, PDT • Speakers: Niraj Kohli, President, CSC Robert B. Anderson, Partner, Faegre, Baker, Daniels • Be sure to send in your top 3 expectations you have for the next worksheet webinar. Link is in the August 13th Session 1 webinar – Session 2: Cap Tables- 2:45pm-4:00pm, PDT • Speakers: Deborah Marshall, Partner, Sidley Austin, LLP Ilan B. Hornstein, Associate, Sidley Austin LLP
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