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IDEA Network Workshop 2 - Financial Concerns(Sam Keightley and Xue Angela Li)
 

IDEA Network Workshop 2 - Financial Concerns(Sam Keightley and Xue Angela Li)

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In the second half of our workshop, we covered: ...

In the second half of our workshop, we covered:
- start-up metrics
- ways to finance your start-up

Our next work with Professor Tim Kastelle is on Next Monday! Looking forward to seeing everyone.

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    IDEA Network Workshop 2 - Financial Concerns(Sam Keightley and Xue Angela Li) IDEA Network Workshop 2 - Financial Concerns(Sam Keightley and Xue Angela Li) Presentation Transcript

    • Start-up Metrics
    • What are Metrics? • A type of measurement used to quantifiably gauge performance. • Any business data that is collected and analysed periodically. © IDEA Network 2013
    • Metrics in Business • In business, metrics include: o Return of Investment (ROI) o Sales revenues o Expenditures o Customer loyalty and retention o Operating productivity etc. • Used to help make strategic business decisions. © IDEA Network 2013
    • The Problem • Metrics used in large business are not useful or effective at gauging start-up performance. • This is because start-ups require different information, at more frequent intervals to make rapid changes if needed. • The context in which the information is used is also different. © IDEA Network 2013
    • Start-ups vs large Companies • These problems exist because there are significant differences between what a Start-up is and what a large company is. • Specifically objectives and priorities. • Therefore the required information to make strategic decisions is completely different. © IDEA Network 2013
    • Focus of Start-ups • Start-ups are still figuring out a business model to adopt. • Capabilities o Management/Staff Talent o Execution Capabilities • Revenues o New customer growth/customer retention o Price optimisation © IDEA Network 2013
    • Focus of Large Companies • Operating margins o Development/Production Efficiency o Logistic Efficiencies o Customer Interaction Efficiency • Asset Efficiency o Inventory Efficiency o Receivable and Payables Efficiency © IDEA Network 2013
    • Start-up Metrics vs Accounting • Start-up metrics provide information that is generally provided by accounting departments of large companies. • These metrics also simultaneously represent company performance. • The metrics then gradually change as the start up transitions into a large company. © IDEA Network 2013
    • Another problem. © IDEA Network 2013 • You can collect data about anything. • There are a large number of tools that can be utilised to gather tremendous amounts of data about your company. • Essentially, the problem is information overload.
    • What makes a useful metric? © IDEA Network 2013 • Firstly, one that answers an important question. metrics are most often paired with questions for this reason. • One that enables clear goal creation and progress feedback. • One that focuses the entire company.
    • What makes a useful metric? © IDEA Network 2013 • One that is a ratio instead of a cumulative value (time inclusive). New users per year instead of total users. • Provides a percentage value of change periodically. Revenue increased 2% compared to this time last month. • One that is easy to understand.
    • Important Metrics for Start-ups © IDEA Network 2013 • Metrics that represent: o Distribution o Engagement o Revenue
    • Distribution © IDEA Network 2013 • New users added last month, last six month growth rate: How are well are we growing the user base? • Total user base, last six month growth rate: How important is our monthly growth compared to our total user base? • Cost of customer acquisition, lifetime value, pay back period: Can we grow faster through paid acquisition? Are we acquiring customers profitably? How much can we afford to spend on new customers? How is this changing over time?
    • Engagement © IDEA Network 2013 • Active users, growth rate: Are we getting better at giving our customers what they want/need? • % of users using top 3 key features in a given month: Are our product initiatives the right ones?
    • Revenue © IDEA Network 2013 • Revenue , Last six month revenue growth: Are we growing our revenue? • Conversion to paid rate in that month/by cohort: How many users converted to paid? Are we improving our ability to convert customers to paid? • Average spend per paying customer vs solo account: What is the impact of the account management team? • Last month churn rate, Last six month churn rate: How well do we retain our customers? • Burn rate: When are we profitable? When do we run out of cash? When do we need to raise?
    • Useful Links © IDEA Network 2013 • http://blog.kissmetrics.com/single-startup-metric/ • http://tomtunguz.com/your-startups-10-most-important-metrics • http://www.forbes.com/sites/dailymuse/2013/04/18/3-metrics-that- really-matter-for-your-start-up/ • http://www.jagannemani.com/2011/11/29/why-innovation-metrics- need-to-be-different-from-other-business-metrics/ • http://www.slideshare.net/andreasklinger/metrics-for-early-stage- startups • http://www.slideshare.net/sblank/why-accountants-dont-run- startups-041410?from_search=16
    • Ways to Finance your Start-up
    • Before we begin… Starting a business is a big commitment, not just financial: - your time - your energy - your team So, have an exit in mind before you start: - how long am I in this for? - why am I doing this? - what level of risk am I comfortable with? © IDEA Network 2013
    • The Start-up Funding Path... © IDEA Network 2013
    • Non-equity Financing 1) Crowdfunding 2) Bootstrapping 3) Loan (Debt) © IDEA Network 2013
    • 1) Crowdfunding Individuals provide monetary support to start-ups who put their ideas online. © IDEA Network 2013
    • 2) Bootstrapping - Moore’s law - Psychological kick (effective money spending) - Business decision freedom - Easy exit options - Cashflows are a must… - Investment constraint (opportunities missed) - Time restraint © IDEA Network 2013
    • 3) Loan (Debt) - family & friends - bank - KIVA, etc. - limited funds - banks need predictability and knowledge - Bankruptcy © IDEA Network 2013
    • Equity Financing 1) Seed funds 2) Seed incubators 3) Angel investors 4) Venture Capitalists ……………………………………………………………………. 5) Pre-IPO/buyout 6) Private Equity © IDEA Network 2013
    • 1) Seed Funds - grant-funding - university seed funds - friends and family - angel investors - (venture capital) © IDEA Network 2013
    • 2) Seed Incubators - seed funding + mentorship - 3 months program - launch event - usually $20K for you to launch your prototype, validate and gain traction © IDEA Network 2013
    • 3) Angel Investors - HNW individuals - successful entrepreneurs and technologists - work individually and invest their own money
    • 4) Venture Capitalists - can exist in every stage of the start-up cycle (seed, early stage, growth) - professionally managed team - invests for 3-5 yrs into a start-up - experience, contacts *crucial during exit/sell stage* - stuck in a business for 3+ years - less control over business - VCs have an exit timeline © IDEA Network 2013
    • Question Time
    • Thank You • This Week: o Jobs Movie at Southbank Cineplex starting 12:30pm on Sunday. o Registration for UQU Entrepreneurial Competition will open. • Next Week: o 09-211 Professor Tim Kastelle, 6pm, Monday 2nd September. Lean Startup and Business Models