Downloaded 179 times
Uploaded byIntelligent_ly
Back to Basics: Financial Fundamentals for Startups
The document provides an overview of key financial concepts for startups presented by representatives from Silicon Valley Bank. It defines important metrics like revenue, costs of goods sold, expenses, and cash flow. It explains financial statements including the income statement and balance sheet. It recommends that founders become comfortable with basic financial language and tracking their progress towards milestones. It also outlines the additional responsibilities of hired chief financial officers, such as preparing financial projections and statements.
More Related Content
Similar to Back to Basics: Financial Fundamentals for Startups
Back to Basics: Financial Fundamentals for Startups
- 1. presents Back to Basics:Financial Fundamentals For Startups
- 2. Financial Fundamentals: Money101 March 17th 2014 Smith Anderson Silicon Valley Bank (617) 796-6958 Smanderson@svb.com Twitter: @SmithTown561 Glen Mello Silicon Valley Bank (617) 630-4188 gmello@svb.com !
- 3. Startup financial matters areoften confusing…
- 4. It’s a lotlike learning a language
- 5. You need tolearn key phrases yourself...
- 6. …and rely ontranslators for the rest.
- 7. AGENDA • Key financialmetrics • Financial statements • When & how to leverage CFOs & others • Q & A
- 8. TOP LINE REV/ SALES • Gross Sales or Revenue regardless of cost, liabilities etc.. – Used to discuss growth of the business over time. – Important, however there is more to the story.
- 9. Revenue – COGS– expenses ! • Net Profit (or Net Loss) – interest, – taxes, – Depreciation – Amortization expenses ! • EBITDA: Earnings Before Interest,Taxes, Depreciation & Amortization BOTTOM LINE
- 10. BOOKINGS • The financialvalue of business that you have under contract ! • i.e.“we booked a deal with Amazon for $240k over 2 years” ! • Not a financial statement item—“dashboard” item. ! • Total ContractValue (TCV) vs. Annual ContractValue (ACV)
- 11. REVENUE • The accountingvalue of a sale during a specific time period • a.k.a: “rev rec”,“recognized revenue”,“scored revenue” ! • Sale à revenue when the product has been delivered and payment terms are defined and agreed to. • Cash upfront – Deferred Revenue (Liability) • Bookings > Delivery > Revenue > Collection > A/R
- 12. COGs • Cost ofgood sold ! • Production costs: direct product costs, hosting, etc. ! • Execution costs: commissions, revenue share, etc.
- 13. • Revenue -COGS = Gross Profit (a hard dollar number) ! ! • Gross Profit / Revenue = Gross Margin (a percentage) GROSS MARGIN
- 14. Costs to runyour business • Sales & Marketing expenses • Research & Development expenses • General & Administrative expenses EXPENSES
- 15. Sources • Trade Receivables(A/R) • Deferred Revenue (D/R) • Debt • Equity Uses • Trade Payables (A/P) • Salaries/Wages Payable • Debt SOURCES & USES OF CASH
- 16. • Cash dividedby cash burn ! • Cash burn does not necessarily equal EBITDA – depends on timing of cash receipts vs. bookings vs. revenue RUNWAY
- 17. Events that drivevalue in the company: ! • Commercial milestones: distribution agreements, customers, bookings, revenue, etc. ! • Market milestones: users, working business model, etc. ! • Technical milestones: proof of concept, working prototype, etc. MILESTONES
- 18. • One Page:Communicate progress to key stakeholders (investors, employees, etc.) ! • Time-based representation of how company is tracking against key financial goals (perhaps other time-bound goals as well) ! • Not a financial statement DASHBOARDS
- 19. • Questions toask yourself: – What drives value in the business (bookings, gross margin, technical progress, distribution deals)? – What resources do you need to drive this value (people, time, money, etc.)? ! • Your dashboard will: – Track the value you are building in the business. – Track the resources you are consuming as you build value. BUILDYOUR DASHBOARD
- 20. • Income Statement –A movie – Tells the financial story of a company over a span of time ! • Balance Sheet – A picture – Indicates the financial health of a company at a point in time FINANCIAL STATEMENTS
- 21. Over a periodof time: • Revenue (“top line”) • Minus COGS • Equals Gross Profit • Minus Expenses • Equals EBITDA (“bottom line”) INCOME STATEMENT
- 22. Assets • Cash • Receivables(A/R) • Inventory • Fixed Assets • Goodwill & Intangible Assets Liabilities • Salaries, wages • Payables (A/P) • Deferred Revenue (D/R) • Debt Assets = Liabilities plus Equity BALANCE SHEET Equity • Paid-in Capital • Retained Earnings (Loss)
- 23. • As muchas you are comfortable doing… ! • At a minimum: – Articulate how value is built in your business in financial terms. – Speak to financial resources required to build value in your business. – Represent this in terms of time and progress (i.e. dashboards), using financial language that is readily understood or simply conveyed by you. WHAT SHOULD A FOUNDER DO?
- 24. • Prepare forwardlooking financial statements (budgets, projections, etc.) ! • Close the books every month and prepare historical financial statements ! • Manage billing & collecting ! • Manage revenue recognition & educate stakeholders (including you) on complexities ! • Reality check your expense assumptions. WHAT SHOULD HIRED CFOs DO?
- 25. Q & A •Don’t be SHY
- 26. WANT TO LEARNHOW TO FILL YOUR PIGGY BANK? SVB BOSTON—FREE 1:1 SESSION http://learn.intelligent.ly/svb-office-hours
- 27. Financial Fundamentals: Money101 March 17th 2014 Smith Anderson Silicon Valley Bank (617) 796-6958 Smanderson@svb.com Twitter: @SmithTown561 Glen Mello Silicon Valley Bank (617) 630-4188 gmello@svb.com !
- 28. presents INSTRUCTOR Course Name Learn theskills you need to win, from people who’ve done it before visit