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Tetuan Valley Startup School V (Session 3)

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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 …

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.com

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  • 1. Tetuan alleyStartup School Fall 2011This is the Land of Do-as-you-please-and-take-what-you-want Week  3   #tvssv Tetuan Valley, November 2011
  • 2. #tvssvSponsors Collaborators
  • 3. STARTUP  FINANCE  101  –  Session  3   Objec:ve   Session  1     •  Concepts   Introduce    students  with  tehcnological   •  Principals   backgrounds  to  key  financial  concepts   •  Equa=ons   that  are  esen=al  at  the  hour  of  star=ng  a   business   •  Investors;  Objec=ves  and  restric=ons,  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    projec=ons  to  investors   •  Business  Model     •  Other  tools     Dura:on     2  sessions,  4hr           28/11/11  
  • 4. TIME  VALUE  OF  MONEY   Effect  of  compound  interest   =  “A  bird  in  the  hand  is  worth  two  in  the  bush”  28/11/11   4  
  • 5. DIVERSIFICATION   Market  vs.  Company  Risk   “Don´t  put  all  your  eggs  in  one  basket”  28/11/11   5  
  • 6. PRICE  OF  RISK   Correla=on  of  Risk  &  Return     “There´s  no  such  thing  as  a  free  lunch”  28/11/11   6  
  • 7. 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   Diversifica:on   “Don´t  put  all  your  eggs  in  one   basket”   Correla=on  of  risk  &  return   Price  of  risk   “There´s  no  such  thing  as  a  free   (Sharpe  ra:o)   lunch”     28/11/11  
  • 8. STATEMENTS  OF  ANY  COMPANY   BALANCE  SHEET  28/11/11  
  • 9. RELATIONSHIP  BETWEEN   ACCOUNTS  28/11/11  
  • 10. Company  with  increasing  profits  28/11/11   10  
  • 11. 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 Collec=ons   Cobros 200 Pagos Payments   Caja 100 Cash  balance   0 -­‐100 Year  1 Year  2 Year  3 Year  4 28/11/11   11  
  • 12. PROFIT  AND  LOSS   Earnings   -­‐   COGS   Contribu:on  Margin     -­‐   Overhead  Expenses   EBITDA   -­‐   Deprecia=ons  and  amor=za=ons   EBIT   +   Financial  result     EBT   -­‐   Taxes   Net  Result  28/11/11  
  • 13. CASH  FLOW  STATEMENT   Collec=bles   -­‐   Payments  (Direct  /  Overhead)   Opera:ng  Cash   Capital  Subscrip=ons   +   New  Debt   -­‐   Principal  of  debt   -­‐   Dividends   Financial  Cash   -­‐   Investments   +   Temporary  financial  earnings   Investment  Cash   Annual  Cash  Balance  28/11/11   13  
  • 14. BALANCE  SHEET  Ac:ve  à  where  is  my  money   Passive  à  where  does  it  come  from   Long-­‐Term  Assets   Tangible  Equity   Social  Capital   Investments   Net  Results   Deprecia:ons   Earnings   Long-­‐Term  Outside   Capital   Banks   Short-­‐Term  Assets   Working  Capital   Debt   Treasury   Short-­‐Term   Inventory   Outside  Capital   Creditors   Short-­‐term  bank   VAT   28/11/11  
  • 15. 1  M  Tshirt+    94  M  EUR   1st  liga   VS   Price  is  what  you  pay.  Value  is  what  you  get   Warren  Buffeb   28/11/11  
  • 16. FCF:  what  is  it?   l  CAPM:  r%  =  α  +  βp  =  Rf  +(β*MRP)   l  WACC=  Ke  *  (E  /  (D+E))  +  Kd  (D  /  (D+E))   l  FCF  =  Net  income  +  deprecia=on  –  changes  in  working  capital   –  Capital  expenditures      Earnings   Expenses   EBITDA   Amort.   EBIT   T  in  EBIT   Amort.   NOPLAT   Varia:on   CAPEX   FCF    WC   28/11/11   16  
  • 17. 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  28/11/11  
  • 18. 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  
  • 19. INVESTMENT  STAGES  28/11/11  
  • 20. THE  CHASM  
  • 21. 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   Contribu=on  to  Industrial  Partners   Strategic  criteria   Slow   business   Source:  HighGrowth;  Elaboración  Okuri  Ventures  
  • 22. DESIRED  RETURN   Target  yearly   Holding  period   Investment   Entry/exit   return   (years)   death  rate   mul:plier   PE   25%+   3-­‐5   <20%   x3,5   VC   25%+   3-­‐5   >60%   x10+   BA   15%+   4-­‐7   >80%   x20+  28/11/11  
  • 23. ORIGIN  OF  MULTIPLIERS-­‐LEVERS   Shareholder  Return   PE   25 Investment   Mul:plier   20 15 VC   10 5 0 Source:  Cifras  orientaGvas   Sales Margin Debt Arbitration Total28/11/11  
  • 24. CONCLUSION   1  /  (1-­‐n)  Source: http://www.paulgraham.com/equity.html 28/11/11