Be prepared financially - Rob Godschalk

1. Be prepared financially
Rob Godschalk

2. Business angels
• Seasoned entrepreneurs
• Sharing experience, network and knowledge on which
you can bank
• Value creation is addictive
• Multiple early stage investments (€ 25-500K)
• Often working privately

3. ‘Clean up and put your lipstick on’
• Do not discount on your proposition, be realistic
• Be ready to accept and agree to disagree
• Challenge your investor readiness
• Embrace your failures

4. Team first, the plan very close fourth
• Team
• Found P/M fit
• Subsidising customers
• Showing growth at relevant metrics
• Differentiator

5. Typical first date Qs
• WHERE does the cash go?
• WHEN cash flow break-even? Burn rate?
• WHAT is the ticket size? % interest?

6. WHERE does the cash go?
• Have a financial plan
• Minimal viable product
• Development of assets (i.e. intellectual property) or
working capital funding
• Repayment financing / backlog trade creditors and taxes

7. WHEN cash flow break-even?
• Recurring and non-recurring revenues/margins
• Determine key business drivers and metrics
• Scenario planning
• Sensitivity analysis
• Management fees

8. WHAT is the ticket size?
EUR X for
a Y% interest
in my company

9. WHAT is the ticket size?
Relevant factors
• Pre and post money valuation
• Cash need
• Other perks

10. WHAT is the ticket size?
Pre and post money valuation
‘THE company valuation
is non-existence’

11. WHAT is the ticket size?
Pre and post money valuation
Real life example mature business to understand
principles
– Building valued at cost EUR 2m, fair value EUR 4m
– Net sales 25m
– Profit after tax EUR 2m
– Equity EUR 2m
– Balance sheet total EUR 6m
– P/E multiple 12
– Anticipated growth 10% YOY

12. WHAT is the ticket size?
Pre and post money valuation
Real life example mature business to understand
principles
• Spread in technical company valuation
– Fair value equity EUR 4m
– Market value EUR 24m
– Capitalised earnings EUR 15m
– Discounted cash flows EUR 20m
• What is the price?
• Where are the differences with current state of your
business?

13. WHAT is the ticket size?
Pre and post money valuation
• Dependant upon investor (profile)
• Progress and route to date
– team
– plan, targets and milestones
– traction and acceptance
– account management
• Current cap table
• Prior and anticipated valuations
• Exit strategy

14. WHAT is the ticket size?
Cash need
• Triple F
• Bootstrapping
• Skin-in-the-game
• Bootstrapping
• Alternative financing schemes (parallels to film industry)
– Contract developing, funding the Company/working capital
– Publisher/Distributors funding
– Project finance (SPVs)
– Slate financing (diversification) to reduce single game flopping
risk
– Royalty based

15. WHAT is the ticket size?
Other perks
• Structuring financing
– Milestones
– Conversion
– Repayment / Interest
– Ranking / Securities
• Anti dilution
• Covenants
• Preferences
• Decision making / Board

16. Due diligence
• Have file ready every day
• Confirmatory
• Robustness
• Assumptions
• Balance sheet

17. Funding is a
core business process
Rob Godschalk