MedTech 2021 - Workshop "FINANCE & ACCOUNTING
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Workshop "FINANCE & ACCOUNTING" for the Brussels' MedTech accelerator programme 2021, HUB.brussels
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MedTech 2021 - Workshop "FINANCE & ACCOUNTING
- 1. Accounting basics, business plan & funding September 23rd , 2021
- 2. Introduction
- 3. Introduction 6.768.000.000 USD (loss…) Profit or Loss in 2020?
- 4. Introduction 23.130.000.000 USD (loss…) Accumulated Profit or Loss, since the start of the company ?
- 7. Introduction
- 8. Introduction
- 9. Speaker 1 Hello, I’m Martin Speaker 1 Speaker 2
- 11. A very long acronym CIMITYM Cash is more important than your mother!
- 12. Clinical trials, Regulatory compliance, MVP, Prototype…
- 13. Cash is king !
- 14. Cash Where does your cash go to…?
- 15. Investments • MVP / Prototype • Device/Hardware • Software • IP Patent Operational costs (fixed or variable): FIXED • Office rent • Employees’ salaries • Your own salary! • Phone and internet • Marketing base-line Using your cash to pay for… VARIABLE • Office rent (co-working) • Consumables • Specialized services, like: lawyer/accountant/notary… • Marketing GTM (GoToMarket)
- 21. Financial plan: Investments To realize our strategy/roadmap/mission in Year 1 we will invest XXX EUR for asset ABC It’s economic life is 3/5/… years The expected deliverables will be a) b) and c) (measureable please!) In Year 2 we will invest…
- 23. Cash Where to get some Cash?
- 24. Starting capital Shareholders’ loan Government grants, Subsidies, … FFF – Family, Fools and Friends … FFF – Family, Fools and Friends, Business Angels, Spin-out / Universities, Investors Crowdfunding & -lending … For FREE YOURSELF Not for FREE Getting cash from…
- 25. YOUR CUSTOMERS ! Getting cash from…
- 26. Everything you wanted to know about Accounting but were afraid to ask…
- 27. Introduction = Sales - Costs -6.768.000.000 USD
- 28. Loss Cost of Goods General expenditures Personnel costs (19,2) Depreciations Financial costs Gross Margin Sales P x Q EBITDA EBIT P & L – Profit and Loss Statement Profit Taxes
- 29. Introduction « Adjusted EBITDA »…? We define Adjusted EBITDA as net income (loss), excluding (i) income (loss) from discontinued operations, net of income taxes, (ii) net income (loss) attributable to non-controlling interests, net of tax, (iii) provision for (benefit from) income taxes, (iv) income (loss) from equity method investments, (v) interest expense, (vi) other income (expense), net, (vii) depreciation and amortization, (viii) stock- based compensation expense, (ix) certain legal, tax, and regulatory reserve changes and settlements, (x) goodwill and asset impairments/loss on sale of assets, (xi) acquisition, financing and divestitures related expenses, (xii) restructuring and related charges and (xiii) other items not indicative of our ongoing operating performance, including COVID-19 response initiatives related payments for financial assistance to Drivers personally impacted by COVID-19, the cost of personal protective equipment distributed to Drivers, Driver reimbursement for their cost of purchasing personal protective equipment, the costs related to free rides and food deliveries to healthcare workers, seniors, and others in need as well as charitable donations. We have included Adjusted EBITDA because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors. In addition, it provides a useful measure for period-to-period comparisons of our business, as it removes the effect of certain non-cash expenses and certain variable charges. To help our board, management and investors assess the impact of COVID-19 on our results of operations, we are excluding the impacts of COVID-19 response initiatives related payments for financial assistance to Drivers personally impacted by COVID-19, the cost of personal protective equipment distributed to Drivers, Driver reimbursement for their cost of purchasing personal protective equipment, the costs related to free rides and food deliveries to healthcare workers, seniors, and others in need as well as charitable donations from Adjusted EBITDA. Our board and management find the exclusion of the impact of these COVID-19 response initiatives from Adjusted EBITDA to be useful because it allows us and our investors to assess the impact of these response initiatives on our results of operations. Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following: •Adjusted EBITDA excludes certain recurring, non-cash charges, such as depreciation of property and equipment and amortization of intangible assets, and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements; •Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy; •Adjusted EBITDA excludes certain restructuring and related charges, part of which may be settled in cash; •Adjusted EBITDA excludes other items not indicative of our ongoing operating performance, including COVID-19 response initiatives related payments for financial assistance to Drivers personally impacted by COVID-19, the cost of personal protective equipment distributed to Drivers, Driver reimbursement for their cost of purchasing personal protective equipment, the costs related to free rides and food deliveries to healthcare workers, seniors, and others in need as well as charitable donations; •Adjusted EBITDA does not reflect period to period changes in taxes, income tax expense or the cash necessary to pay income taxes; •Adjusted EBITDA does not reflect the components of other income (expense), net, which primarily includes: interest income; foreign currency exchange gains (losses), net; gain (loss) on business divestitures, net; unrealized gain (loss) on debt and equity securities, net; impairment of debt and equity securities; and other; and •Adjusted EBITDA excludes certain legal, tax, and regulatory reserve changes and settlements that may reduce cash available to us.
- 30. BALANCE SHEET Fixed ASSETS Equity = Capital + Accumulated Results Long term DEBT Short term DEBT Current ASSETS ASSETS LIABILITIES Loss
- 31. BALANCE SHEET Fixed ASSETS Equity = Capital + Accumulated Results Long term DEBT Short term DEBT Current ASSETS ASSETS LIABILITIES Profit Taxes
- 32. Business plan What is a business plan?
- 33. Business plan What is a business plan? YOUR STRATEGY ! www.entrepreneur.com/article/281416 7 Steps to a Perfectly Written Business Plan
- 34. Business plan Write down your mission statement, product or service, offered value, strategy, typical customer and characteristics, sales channels, key market indicators and future evolutions, your team, … www.entrepreneur.com/article/281416 7 Steps to a Perfectly Written Business Plan
- 37. REVENUES
- 38. Financial plan What is a financial plan? YOUR FINANCIAL STRATEGY ! « The Figures Behind Your Story »
- 39. Financial plan Financial plan = Translation of your business plan in numbers & assumptions in a pre-formatted way: P&L Statement Balance sheet Cash flow statement
- 40. FINANCIAL PLAN Horizon 3 to 5 years (per month, per quarter, per year) Sales Investments Costs (fixed / variable) Answers the question: Is your idea economically viable ?
- 41. Financial plan Always start with your estimated sales !! Based upon: . A clear product definition . Added value . Typical customer(s) . How to access your typical customer . Market / top-down and bottom-up . Pricing structure
- 42. Financial plan: Sales Who is your paying customer, and how will you reach them (at what cost)? Your total sales = unit price x quantities: What is your “unit” or "units", and at which “unit price” following which pricing strategy Sales P x Q
- 43. Market demand: Top down Bottom up Always offer choice: A or B !! Pricing strategies: https://www.slideshare.net/omohout/lean-pricing-startups Financial plan: Sales
- 45. Financial plan: Costs Costs Cost of Goods General expenditures Personnel costs (19,2) Depreciations Financial costs
- 47. Is it an investment or not? (economical life)? FIXED VARIABLE Do benchmark !! Own salary…? Financial plan: Costs
- 48. Financial plan: Results Results Loss Profit Taxes
- 49. Financial plan: Profit or Loss
- 50. Financial plan: Profit or Loss
- 51. Financial plan: Profit or Loss
- 52. https://www.reuters.com/technology/uber-expects-record-breakeven- adjusted-ebitda-current-quarter-2021-09-21/ Uber said on Tuesday it was expecting adjusted EBITDA, a profitability metric it uses, to breakeven in the third quarter. It forecast between a loss of $25 million and a profit of $25 million
- 53. Financial plan: Balance sheet
- 54. Financial plan: Cash flow statement
- 55. FUNDING
- 56. https://twitter.com/lectrr/status/1260436836805234690 Si tu n’arrives pas en vivre sans subsides, tu devrais mieux le garder comme un hobby… Funding
- 57. Funding Why would somebody fund your project ?
- 59. Funding: Equity 100% EQUITY = ACCOUNTING VALUATION CONVERTIBLE NOTE : DEBT => EQUITY Equity = Capital + Accumulated Results Long term DEBT Short term DEBT LIABILITIES
- 60. Funding: Shareholders SHA –Shareholder Agreement / Terms sheet Shareholders Control (>51%) Absolute / Relative majority 40% - 60% 40% - 10% - 10% -10% -10% -10% -10% Voting Rights Class A & B Minority (blocking) interest Stock options: fiscal implications, buyer required vesting conditions : targets, period (4y) Investors per phase (dilution)!
- 63. Funding: Audited figures Investors might require Audited figures on a yearly or quarterly basis
- 64. Auditors declare (or not) that: • the provided financial actuals at the end of the period • give a true and fair view of the business, • and that they believe going-concern is not at risk. Funding: Audited figures
- 66. Funding Over 99% of entrepreneurs who seek funding get rejected. Yet, the entire world is focused on the 1% that is "fundable." Source: internet quote
- 67. So, where to go…?
- 68. Funding mix
- 69. VALUATION
- 70. What is your pre-money valuation? 6.200 EUR (SPRL / BVBA) Even less now (SRL/BV)! Valuation
- 71. Valuation = a mix of: Multidisciplinary team, Personality « salesman of your idea », Previous experiences (and failures), Your own network, Your financial & business plan, Oh, yes, and also paying customers Valuation
- 73. Valuation
- 74. YOU FFF BA VC VC/IPO Horizon (2, 5, 7… years) => Think already of the next threshold! Valuation
- 75. An evolving mix of funding Valuation
- 77. Valuation
- 78. How much time does a funding round take? +/- 6 to 9 months Valuation
- 80. 1) What if Google Builds It? 2) We don’t invest in hardware 5) We’d be interested when we see a bit more traction. 6) Maybe you should raise more and grow quicker 7) Come back when you have a lead 12) Why hasn’t this been done before? Valuation
- 81. Be predictable! Investors do not like surprises Provide frequent (and correct) financial information Valuation
- 82. A Banker
- 83. Bank
- 84. What does a banker look at? Your capacity to pay back the loan, i.e. the « guarantee » not to have a reimbursement default Personal guarantees => to avoid! « Brussels guarantee fund » www.fondsbruxelloisdegarantie.be Bank
- 86. Always ask for (more) money at the bank at moments when you do not need it. At other moments, it might become complicated and with less favourable conditions Bank
- 88. 1. Manque de confiance envers l’entrepreneur 2. Manque de confiance envers le projet 3. Capacité de remboursement insuffisante 4. Risques excessifs 5. Objet non finançable 6. Apport propre insuffisant 7. Déséquilibres financiers 9. Demande non rentable 10. Autres éléments liés à la banque et son environnement Bank
- 89. Key Take Aways
- 90. Introduction
- 92. Thank you
- 94. Contact details Name E-mail address Phone Martin van Wunnik martin.vanwunnik@arsimaprojects.eu +32 475 96 95 91