Fall 2012 week 3 Fin 101

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Fall 2012 week 3 Fin 101

  1. 1. Tetuan ValleyStartup School 7: Fall2012 WEEK 3 “More human than human is our motto” Tetuan Valley, OCTOber 2012
  2. 2. #startspain
  3. 3. STARTUP FINANCE 101 – Session 3 Objective Session 1 • Concepts Introduce students with tehcnological • Principals backgrounds to key financial concepts • Equations that are esential at the hour of starting a business • Investors; Objectives and restrictions, 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 projections to investors • Business Model • Other tools Duration 2 sessions, 4hr 24/10/2012
  4. 4. disclaimer Katelyn made these slides LlUIS COBI AND NASTare not responsible for her tastelessnessPLEASE MAKE all COMPLAINTSaddressed TO HER
  5. 5. TIME VALUE OF MONEY Effect of compound interest“A bird in the hand is worth two in the bush”24/10/2012 = 5
  6. 6. Time value of money Effect of compound interest“A bird in the hand is worth two in the bush”
  7. 7. PRICE OF RISK Correlation of Risk & Return “There´s no such thing as a free lunch”24/10/2012 7
  8. 8. Price of risk (Sharpe ratio) Correlation of risk & return“There´s no such thing as a free lunch”
  9. 9. RISK = MARKET COMPANY24/10/2012 9
  10. 10. MARKET RISK24/10/2012 10
  11. 11. COMPANY RISK24/10/2012 11
  12. 12. DIVERSIFICATION Market vs. Company Risk “Don´t put all your eggs in one basket”24/10/2012 12
  13. 13. Diversification Market vs. Company Risk“Don´t put all your eggs in one basket”
  14. 14. STATEMENTS OF ANY COMPANY BALANCE SHEET24/10/2012
  15. 15. RELATIONSHIP BETWEEN ACCOUNTS24/10/2012
  16. 16. RELATIONSHIP BETWEEN ACCOUNTS24/10/2012
  17. 17. PROFIT AND LOSS Earnings - COGS Contribution Margin - Overhead Expenses EBITDA - Depreciations and amortizations EBIT + Financial result EBT - Taxes Net Result10/24/2012
  18. 18. EARNINGS How many things you sell X At what price10/24/2012
  19. 19. PROFIT AND LOSS Earnings - COGS Contribution Margin - Overhead Expenses EBITDA - Depreciations and amortizations EBIT + Financial result EBT - Taxes Net Result10/24/2012
  20. 20. COST OF GOODS SOLD How many things you sell XHow much it costs to make them10/24/2012
  21. 21. PROFIT AND LOSS Earnings - COGS Contribution Margin - Overhead Expenses EBITDA - Depreciations and amortizations EBIT + Financial result EBT - Taxes Net Result10/24/2012
  22. 22. OVERHEAD = FIXED COSTS10/24/2012
  23. 23. Depreciations and amortizations Earnings - COGS Contribution Margin - Overhead Expenses EBITDA - Depreciations and amortizations EBIT + Financial result EBT - Taxes Net Result10/24/2012
  24. 24. We buy a machine in year 1 for 6k
  25. 25. We buy a machine in year 1 for 6k 10.000- 5.000 5.000- 1.000 4.000- 6.000 -2.000+0 -2.000- 0 or credit BAD
  26. 26. 6k amortized over 3 years… 10.000 10.000 10.000- 5.000 - 5.000 - 5.000 5.000 5.000 5.000- 1.000 - 1.000 - 1.000 4.000 4.000 4.000- 2.000 - 2.000 - 2.000 2.000 2.000 2.000+0 +0 +0 2.000 2.000 2.000- 666 - 666 - 666 1334 1334 1334
  27. 27. PROFIT AND LOSS Earnings - COGS Contribution Margin - Overhead Expenses EBITDA - Depreciations and amortizations EBIT + Financial result EBT - Taxes Net Result10/24/2012
  28. 28. CASH FLOW STATEMENT Collectibles - Payments (Direct / Overhead) Operating Cash Capital Subscriptions + New Debt - Principal of debt - Dividends Financial Cash - Investments + Temporary financial earnings Investment Cash Annual Cash Balance10/24/2012 28
  29. 29. Company with increasing profits24/10/2012 29
  30. 30. 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 Collections Cobros 200 Pagos Payments Caja Cash balance 100 0 -100 Year 1 Year 2 Year 3 Year 4 24/10/2012 30
  31. 31. We want to be more top heavy Price - Cost Contribution Margin - Overhead Expenses EBITDA24/10/2012 31
  32. 32. But not too much Price - Cost Contribution Margin - Overhead Expenses EBITDA24/10/2012 32
  33. 33. And Not bottom heavy Price - Cost Contribution Margin - Overhead EBITDA24/10/2012 33
  34. 34. BALANCE SHEETActive  where is my money Passive  where does it come from Long-Term Assets Tangible Equity Social Capital Investments Net Results Depreciations Earnings Long-Term Outside Capital Banks Short-Term Assets Working Capital Debt Treasury Short-Term Outside Inventory Capital Creditors Short-term bank VAT 24/10/2012
  35. 35. 1 M Tshirt+94 M EUR 1st liga VS Price is what you pay. Value is what you get Warren Buffett24/10/2012
  36. 36. FCF: what is it?  CAPM: r% = α + βp = Rf +(β*MRP)  WACC= Ke * (E / (D+E)) + Kd (D / (D+E))  FCF = Net income + depreciation – changes in working capital – Capital expendituresEarnings Expenses EBITDA Amort. EBIT T in EBIT Amort. NOPLAT Variation CAPEX FCF WC24/10/2012 36
  37. 37. CAPM r% = Rf +(MRP*β)Price of Risk EQUALS Market Risk Prem, Non Risky How much it Stuff that matters
  38. 38. Market Risk Premium= Market Risk - Risk Free Rate
  39. 39. CAPM r% = Rf +(MRP*β)Price of Risk EQUALS Market Risk Prem, Non Risky How much it Stuff that matters
  40. 40. β=Positive
  41. 41. β=Negative
  42. 42. WACCWACC= Ke * (%e) + Kd (%d)
  43. 43. WACC WACC= Ke * (%e) + Kd * (%d)MoneyCOSTS How much You use Equity Costs Debt Costs
  44. 44. FCF: what is it?  CAPM: r% = α + βp = Rf +(β*MRP)  WACC= Ke * (E / (D+E)) + Kd (D / (D+E))  FCF = Net income + depreciation – changes in working capital – Capital expendituresEarnings Expenses EBITDA Amort. EBIT T in EBIT Amort. NOPLAT Variation CAPEX FCF WC24/10/2012 44
  45. 45. WHO IS WHO #StartSpain
  46. 46. WHO IS WHO #StartSpain
  47. 47. WHO IS WHO #StartSpain #StartSpain
  48. 48. WHO IS WHO #StartSpain #StartSpain
  49. 49. HOW PLAYERS INVEST Friends and Capital family Family Office Riesgo 1nvolucración Business Angels Industriales Source: Perennius #StartSpain #StartSpain
  50. 50. HOW PLAYERS INVEST Friends and Capital family Family Office Riesgo 1nvolucración Business Angels Industriales 2 Pureza financiera Source: Perennius #StartSpain #StartSpain
  51. 51. HOW PLAYERS INVEST Friends and Capital Origen de los fondos family 3 1 Family Office Riesgonvolucración Dinero propio Dinero de terceros Business Angels Industriales 2 Pureza financiera Source: Perennius #StartSpain #StartSpain
  52. 52. INVESTMENT STAGES24/10/2012
  53. 53. THE CHASM
  54. 54. INVESTMENT CRITERIA Why they Invest What they Measure Decision TimeFamily, Friends and Personal Confidence Fast Fools Commitment Subsidies and Policy Compliance Slow Public Assistence alignments merits Business Angels Personal affinity Profitability Fast InvestmentVenture Capitalists Profitability Slow criteria Contribution toIndustrial Partners Strategic criteria Slow business Source: HighGrowth; Elaboración Okuri Ventures
  55. 55. DESIRED RETURN Target yearly Holding period Investment Entry/exit return (years) death rate multiplier PE 25%+ 3-5 <20% x3,5 VC 25%+ 3-5 >60% x10+ BA 15%+ 4-7 >80% x20+24/10/2012
  56. 56. ORIGIN OF MULTIPLIERS-LEVERS Shareholder Return PE 25 Investment Multiplier 20 15 VC 10 5 0Source: Cifras orientativas Sales Margin Debt Arbitration Total24/10/2012
  57. 57. CONCLUSION 1 / (1-n)Source: http://www.paulgraham.com/equity.html 24/10/2012
  58. 58. ITS BETTER TO HAVE A SMALLER PIECESource: http://www.paulgraham.com/equity.html 24/10/2012
  59. 59. OF A BIGGER PIESource: http://www.paulgraham.com/equity.html 24/10/2012
  60. 60. CONCLUSION 8%Source: http://www.paulgraham.com/equity.html 24/10/2012
  61. 61. CONCLUSION 1 / (1-.08)Source: http://www.paulgraham.com/equity.html 24/10/2012
  62. 62. CONCLUSION 8.7%Source: http://www.paulgraham.com/equity.html 24/10/2012
  63. 63. CONCLUSION 1 / (1-n)Source: http://www.paulgraham.com/equity.html 24/10/2012

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