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:
- 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)

  1. 1. Start-up Metrics
  2. 2. What are Metrics? • A type of measurement used to quantifiably gauge performance. • Any business data that is collected and analysed periodically. © IDEA Network 2013
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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.
  10. 10. 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.
  11. 11. 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.
  12. 12. Important Metrics for Start-ups © IDEA Network 2013 • Metrics that represent: o Distribution o Engagement o Revenue
  13. 13. 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?
  14. 14. 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?
  15. 15. 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?
  16. 16. Useful Links © IDEA Network 2013 • • • really-matter-for-your-start-up/ • need-to-be-different-from-other-business-metrics/ • startups • startups-041410?from_search=16
  17. 17. Ways to Finance your Start-up
  18. 18. 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
  19. 19. The Start-up Funding Path... © IDEA Network 2013
  20. 20. Non-equity Financing 1) Crowdfunding 2) Bootstrapping 3) Loan (Debt) © IDEA Network 2013
  21. 21. 1) Crowdfunding Individuals provide monetary support to start-ups who put their ideas online. © IDEA Network 2013
  22. 22. 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
  23. 23. 3) Loan (Debt) - family & friends - bank - KIVA, etc. - limited funds - banks need predictability and knowledge - Bankruptcy © IDEA Network 2013
  24. 24. Equity Financing 1) Seed funds 2) Seed incubators 3) Angel investors 4) Venture Capitalists ……………………………………………………………………. 5) Pre-IPO/buyout 6) Private Equity © IDEA Network 2013
  25. 25. 1) Seed Funds - grant-funding - university seed funds - friends and family - angel investors - (venture capital) © IDEA Network 2013
  26. 26. 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
  27. 27. 3) Angel Investors - HNW individuals - successful entrepreneurs and technologists - work individually and invest their own money
  28. 28. 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
  29. 29. Question Time
  30. 30. 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