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Methods and approached to startup and company valuations.
Please be free to send me any additions/correction proposals.
Prepared for Startup&co lecture in Freud cafe, Kyiv, April 30, 2014
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This slide deck is part of a follow-on post by Carmel Ventures Partner Omry Ben David to his post on "5 Tips for building a financial plan for your startup (and why it’s more important for you than for your VCs)" http://bit.ly/2reLIB0
Startup Valuation: from early to mature stagesTatiana Siyanko
Methods and approached to startup and company valuations.
Please be free to send me any additions/correction proposals.
Prepared for Startup&co lecture in Freud cafe, Kyiv, April 30, 2014
How to present your startup financials in just 3 slidesViola Group
This slide deck is part of a follow-on post by Carmel Ventures Partner Omry Ben David to his post on "5 Tips for building a financial plan for your startup (and why it’s more important for you than for your VCs)" http://bit.ly/2reLIB0
"Rewarding Talent: getting stock options right!” presented by Index VenturesTheFamily
Did you know that employees in EU startups own only half as much equity compared to US ones? (10% vs 20% by the time of exit). This is crazy when we know that talent is one of the key driver of Silicon Valley’s success!
Joining a startup is risky, yet too many startups fail to reward their team adequately. Some of this is caused by poor government policy, but there is much more that entrepreneurs can do. ✨
So Index Ventures, one of the most prestigious VC, took the matter into their own hands and wrote a comprehensive guide to stock options for EU startups! Dominic, Head of Talent at Index, will be with us to present their 16 best practices for the next-gen of European startups:
- How much to award to whom?
- When to make grants & how to communicate their potential value?
- How big should your ESOP be?
- What to do about promotions? High performers and leavers?
And many more!
Do yourself (and your team) a favour and learn the best way to attract & retain your best talent
** Dominic is working with Europe-based founders and senior executives across Index’s portfolio, on talent-related issues including assisting select executive searches, international expansion, building in-house talent operations, and providing functional expertise in various HR areas such as compensation and org design. Prior to joining Index, Dominic served twice as a Chief Operating Officer and has first-hand experience scaling companies between zero and 400 people.
Fractional CFO that helps businesses grow exponentially - Technology, Operati...pwhitley100
My name is Paul Whitley, and I help businesses grow exponentially. I am a strategic Fractional CFO and Transformational Technology Leader with extensive experience in creative problem solving, operations management, coaching, mentoring and training. I’m a Servant Leader with a real passion for helping both large and small companies’ setup and implement financial, operational and digital transformation initiatives that improve processes, reduce expense and drive bottom-line profits….
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- How to build a basic financial model.
- How to articulate your financial story.
One of the main reasons startups fail is they run out of capital. Learn how to master your startup's financials and stay in the game!
Financial Projections are key in all aspects of the fundraising process: Pitching, Valuation, Due Diligence, and in the long term planning of your company. Join our experts in an overview discussion of financial projections and learn the key metrics that will get investors to notice you, as well as those that will get you rejected. With the expert advice of serial Startup CFOs and VC Analysts we’ll walk you though the process of what you need to know. If you have no or little idea where to begin with your financial projections, this program is for you.
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"Rewarding Talent: getting stock options right!” presented by Index VenturesTheFamily
Did you know that employees in EU startups own only half as much equity compared to US ones? (10% vs 20% by the time of exit). This is crazy when we know that talent is one of the key driver of Silicon Valley’s success!
Joining a startup is risky, yet too many startups fail to reward their team adequately. Some of this is caused by poor government policy, but there is much more that entrepreneurs can do. ✨
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- What to do about promotions? High performers and leavers?
And many more!
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Fractional CFO that helps businesses grow exponentially - Technology, Operati...pwhitley100
My name is Paul Whitley, and I help businesses grow exponentially. I am a strategic Fractional CFO and Transformational Technology Leader with extensive experience in creative problem solving, operations management, coaching, mentoring and training. I’m a Servant Leader with a real passion for helping both large and small companies’ setup and implement financial, operational and digital transformation initiatives that improve processes, reduce expense and drive bottom-line profits….
Make sure to impress your shareholders with this standard board deck for SaaS companies.
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Quarterly Business Review Framework PowerPoint Presentation SlidesSlideTeam
Here is a content ready quarterly business review framework PowerPoint presentation to benefit the professionals overcome restrictions to run a corporate. Highlighting the important facts of this business information review PPT slides, here we have come up with readymade presentation related to your topic. In this quarterly business overview PPT templates, we have included a firm overview, financial performance, CSR, competitor’s analysis, future roadmap, client & project updates etc. You can also use this complete company summary PowerPoint sample slide with related topics like economic assessment, company evaluation, organizational study, company information analysis, enterprise audit, enterprise assessment, organizational appraisal and many more. Organizational summary is required to ensure the challenges of economic and financial performance. This is the most suitable QBR PPT designs for middle and top-level management. This professionally pre-designed quarterly business review framework presentation graphics are available to download. Our Quarterly Business Review Framework PowerPoint Presentation Slides are truly out of this world. Even the MIB duo has been keeping tabs on our team.
Quarterly Business Review Framework Powerpoint Presentation SlidesSlideTeam
Here is a content ready quarterly business review framework PowerPoint presentation to benefit the professionals overcome restrictions to run a corporate. Highlighting the important facts of this business information review PPT slides, here we have come up with readymade presentation related to your topic. In this quarterly business overview PPT templates, we have included a firm overview, financial performance, CSR, competitor’s analysis, future roadmap, client & project updates etc. You can also use this complete company summary PowerPoint sample slide with related topics like economic assessment, company evaluation, organizational study, company information analysis, enterprise audit, enterprise assessment, organizational appraisal and many more. Organizational summary is required to ensure the challenges of economic and financial performance. This is the most suitable QBR PPT designs for middle and top-level management. This professionally pre-designed quarterly business review framework presentation graphics are available to download. Our Quarterly Business Review Framework Powerpoint Presentation Slides are truly out of this world. Even the MIB duo has been keeping tabs on our team. https://bit.ly/3jI3M1z
This presentation was delivered at the April 23, 2009 Smart-ups event in Eugene, OR by Dan Vishny (CFO for two start-ups companies). Dan is also known for having one of the top 10 best scores on the CPA exam - for the entire U.S.A.!
This complete presentation has PPT slides on wide range of topics highlighting the core areas of your business needs. It has professionally designed templates with relevant visuals and subject driven content. This presentation deck has total of fourty five slides. Get access to the customizable templates. Our designers have created editable templates for your convenience. You can edit the colour, text and font size as per your need. You can add or delete the content if required. You are just a click to away to have this ready-made presentation. Click the download button now. https://bit.ly/3goZGY8
Dashboards By Function Powerpoint Presentation SlidesSlideTeam
“You can download this product from SlideTeam.net”
Nail your business presentation in moments with the help of the data-driven visuals of Dashboards By Function PowerPoint Presentation Slides. This all-in-one performance indicator PPT template deck allows you to showcase data on marketing, and HR to IT infrastructure. Use our well-structured business KPI dashboard PowerPoint slideshow to summarize relevant information in minimal words but with maximum visual effect. The executive management can take advantage of our functions dashboard PPT theme to skim quarterly revenue and customer overview. Business professionals can also edit information in this operational dashboard PowerPoint presentation to create a personalized overview of financial health. Represent investor relations using parameters like return on equity, working capital ratio, and share price through this business KPIs and metrics PPT slideshow. Sales personnel benefit from the sales performance, sales KPI, and sales cycle conversion rate layouts in the key performance indicators PowerPoint template. IT professionals can showcase important information about costs, project management, and issue management by downloading this operational metrics PPT theme. https://bit.ly/3wuDvrK
This is a presentation I made at MIT in January 2016 on how to build an excel spreadsheet for your business plan. I also discuss equity distribution among founders, employees, and investors.
Showcase the role of financial management with this content ready Financial Planning PowerPoint Presentation Slides. The ready to use financial management PowerPoint complete deck comprises of templates such as financial management goals, objectives, US financial system, financial instruments, rights issue, debenture, time value for money parameters, valuation of bonds, comparative statement, common size statement, balance sheet , cash flow statement, trend analysis, ratio analysis, cash flow for operating activities and many more. Estimate the requirement and make a forecast of funds needed. Get your audience focus on forex capital analysis, capital budgeting evaluation techniques of projects, capital structure and dividend policy, leverage analysis, cost of capital, working capital analysis, receivable management, inventory management, economic order quality, FIFO and LIFO method, commodity exchange basics and types, commodity exchange structure, financial risk management, types and components, financial risk analysis, capital asset pricing model, etc. Download the corporate finance management PPT slides to prepare financial plans. Leave them gaping with our Financial Planing PowerPoint Presentation Slides. They will be dumbstruck by your abilities.
Chapter 18, Question 1- The following is the financial statement o.docxcravennichole326
Chapter 18, Question 1- The following is the financial statement of Executive Fruit Company for the year ended December 2014.
INCOME STATEMENT, 2014
(Figures in $ Thousands)
Revenue
$
3,500
Cost of goods sold
3,150
EBIT
$
350
Interest
70
Earnings before taxes
$
280
State and federal tax
112
Net income
$
168
Dividends
112
Additions to retained earnings
$
56
BALANCE SHEET (Year-End, 2014)
(Figures in $ Thousands)
Assets
Net working capital
$
350
Fixed assets
1,400
Total assets
$
1,750
Liabilities and shareholders' equity
Long-term debt
$
700
Shareholders' equity
1,050
Total liabilities and shareholders' equity
$
1,750
The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015.
First stage pro forma statements:
PRO FORMA INCOME STATEMENT, 2015
(Figures in $ Thousands)
Revenue
$
3,850
Cost of goods sold
3,465
EBIT
$
385
Interest
70
Earnings before taxes
$
315
State and federal tax
126
Net income
$
189
Dividends
126
Additions to retained earnings
$
63
PRO FORMA BALANCE SHEET (Year-End, 2015)
(Figures in $ Thousands)
Assets
Net working capital
$
385
Fixed assets
1,540
Total assets
$
1,925
Liabilities and shareholders' equity
Long-term debt
$
700
Shareholders' equity
1,113
Total liabilities and shareholders' equity
$
1,813
Required external financing
$
112
Second stage pro forma balance sheet:
PRO FORMA BALANCE SHEET (Year-End, 2015)
(Figures in $ Thousands)
Assets
Net working capital
$
385
Fixed assets
1,540
Total assets
$
1,925
Liabilities and shareholders' equity
Long-term debt
$
812
Shareholders' equity
1,113
Total liabilities and shareholders' equity
$
1,925
How would Executive Fruit’s financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)
Dividends fall by $ . Therefore, the requirement for external financing falls from $ to $ . On the other hand, shareholders' equity will be increased by $ .
The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):
Long-term debt
$
Shareholders' equity
Total
$
Chapter 18, Question 2- Find the sustainable and internal growth rates for a firm with the following ratios: asset turnover = 1.60; profit margin = 6%; payout ratio = 30%; equity/assets = .50. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Sustainable growth rate
%
Internal growth rat ...
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EIA2016 Turin - Rick Rasmussen. P&L Statements
1. This presentation is made possible by the support of the American People through the United States Agency
for International Development (USAID). The contents of this presentation are the sole responsibility of Rick
Rasmussen and do not necessarily reflect the views of USAID or the United States Government.
Building a Financial Model
1
2. The Financial Model
Investors don’t put their money into ideas.
They put their money into businesses…
Your financial model is your ‘real’ business plan
Revenues
Profits
Cash needs
Hiring plans
Runway
Plus a sensitivity analysis
2
3. Philosophy
Build your models to answer questions such as:
Is this a real business?
Can it make money?
Will it scale?
Proof Points. Show evidence and traction
Your results to date
Comparable companies in the market
Investors will test every line item
Revenues
Margins
Expenses
Cash flow
5. Revenue timeline varies by market type…
Existing
Market
Re-Segmented
Market
New
Market
Year
1
Year
2
Year 3 Year 4
Year 5
Year 6
Year 7
6. Basic Financial Statements
Income Statement:
Also referred to as a profit and loss statement (P&L)
Revenues – expenses = profits
Stated over a series of reporting periods
Balance Sheet:
A "snapshot of company's financial condition”
Assets = liabilities + owner's equity
Cash Flow Statement:
Shows how changes in balance sheet accounts affect cash
Operations, Investment and Financing activities
7. Investors expect:
5-year Income Statement
CEO should build first Income Statement
Get to know the format and numbers intimately
Yearly in the presentation
Detailed breakdown for due diligence
Year 1-2 are Quarterly (or even monthly)
Year 3-5 are annual
8. Income Statement: Basic Structure
Revenue
- Cost of Goods Sold (Variable costs)
= Gross Profit (Rev – COGS)
Gross Profit
- Expenses (Fixed Costs)
R&D
Sales and Mktg
General and Administrative (G&A)
= Net Profit [Gross Profit - Expenses]
+/- Other Income (expense)
= Net Income
9. Building your financials bottom-up
Begin with things that are easy for you, fill in the rest as you go
i.e. if you know your headcount or expenses best, start there
List out your key assumptions
Revenues by product line
Cost of goods sold
Headcount (Salaries)
Overhead (Rent, Legal…)
10. Revenues
Work from your time line
Break out every one of your products or services
List assumptions
Units sold per period
Estimate ASP (avg selling price)
Length of sales cycle
Channels and commissions
Churn, Returns, etc.
Each company’s business model will differ
Benchmark vs. Competition
Make sure that it passes the “common sense” test
11. Company Timeline
Q3Q1 Q2 Q7Q6 Q8
Cash
Flow Positive
Series B $7M
Started
company
MVP
Full
Production
Q9
Series A $2M
Second
prototype
Closed
Beta
1st alliance
signed
Seed $100K
Q4 Q5
Employees: 4 6 9 10 11 14 18 22
24
Q10
1M
Users
12. Our example business: NewCo
Two product lines with a services component
First Product Line:
Fast growing “existing product”
Sales starting month 2
Lower margins à high COGS
Second Product Line:
Slower growing “new product”
7 month design cycle to MVP
Slow to get traction but high growth. high profit
Services business:
Scales with headcount
13. NewCo Short-Term Revenue Assumptions
Yr 1 Q1 Yr 1 Q2 Yr 1 Q3 Yr 1 Q4 Yr 2 Q1
Product 1 Units Sold 150 600 2400 9600 12000
ASP $15 $20 $25 $25 $25
Total $K $2.25 $12 $60 $240 $300
Product 2 Units Sold 25 75 100
ASP $0 $50 $75
Total $K $0 $3.75 $7.5
Services and
Maintenance
Total $K
$5 $10 $20 $40
14. NewCo 5 year Revenue Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Product 1 K Units 12.75 50 200 500 750
ASP $24.65 $25 $20 $16 $14
$K $314 $1250 $4000 $8000 $10500
Product 2 K Units 0.1 5 25 100 1000
ASP $62 $75 $60 $50 $40
Total
$K
$3.75 $375 $1500 $5000 $40000
Services and
Maintenance $35 $750 $2250 $3500 $5500
Total $K $353 $2375 $7750 $16500 $56000
15. Cost of Goods Sold (COGS):
Unit economics
Variable costs change if you produce more or fewer units
Physical products: Cost of manufacture, shipping, …
Service based: Cost of services (hours)
Virtual based: customer acquisition costs
Gross Margin = Revenue – COGS
Gross margin % =
(Revenue – COGS) / Revenue
16. Product 1: 5 year Costs and Margins
Year 1 Year 2 Year 3 Year 4 Year 5
Product 1 K Units 12.75 50 200 500 750
ASP $24.65 $25 $20 $16 $14
$K $314 $1250 $4000 $8000 $10,500
Unit Cost $20 $18 $15 $12 $10
COGS $255 $900 $3000 $6000 $7500
Gross
Margin
$59 $350 $1000 $2000 $3000
% 9.8% 28.0% 25% 25% 28.6%
17. Product 2: 5 year Costs and Margins
Year 1 Year 2 Year 3 Year 4 Year 5
Product 2 K Units 0.1 5 20 100 1000
ASP $62 $75 $60 $50 $40
Total $K $3.75 $375 $1200 $5000 $40000
Unit Cost $55 $40 $30 $22 $18
COGS $K $5.5 $200 $600 $2200 $18000
Gross
Margin $K ($1.75) $175 $600 $2800 $22000
% (46.7%) 53.3% 50% 44% 45%
18. Services: 5 year Costs and Margins
Year 1 Year 2 Year 3 Year 4 Year 5
Services and
Maintenance
Gross
Income $35 $750 $2250 $3500 $5500
COGS
$5 $25 $100 $150 $200
Gross
Margin $30 $725 $2150 $3350 $5300
Margin % 85.7% 96.7% 95.6% 95.7% 96.4%
19. Expenses: Where to start
• Fixed Cost expenses occur independent of units produced
• Salaries
• Start with a hiring chart by dept.
• Whom do you need & when
• State expected salary
• In the US add ~22% for payroll taxes, benefits, overhead
• Major line items are listed by “department”
– Research & Development (R&D)
• Engineering and development
– Sales & Marketing
• Salaries, commissions, expenses
– General & Administrative
• Management, finance, overhead, rent
24. Building out Salaries
Q1 Q2 Q3 Q4 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
R & D 97 222 250 337 906 1860 2080 2300 2740
Sales &
Mktg
50 50 130 194 524 1360 1420 1320 1510
G & A 55 80 98 133 366 1350 1590 1800 1870
Overhead X 1.22
R & D 119 271 305 411 1105 2269 2538 2806 3443
Sales &
Mktg
61 61 195 237 639 1659 1732 1610 1842
G & A 67 98 120 162 446 1647 1940 2196 2281
Salaries 247 430 620 810 2190 5575 6210 6612 7566
25. Non-Salary Expenses
R&D
Subcontractors and outsourced engineering
Non-depreciated tools, servers
Marketing and Sales
Trade shows
Mktg campaigns
G&A
List IP, legal, accounting expenses
Large expenses like rent, legal, travel
Either put into G&A or divide among departments as a % overhead
27. NewCo Profit & Loss
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 5%
Revenues Product Line 1 $314 $1250 $4000 $8000 $10500 18.8%
Product Line 2 $4 $375 $1500 $5000 $40000 71.4%
Srvcs & Maint $35 $750 $2250 $3500 $5500 9.8%
Total Revenue $353 $2375 $7750 $16500 $56000 100%
Cost of Sales $265 $1125 $3700 $8350 $25700 45.9%
Gross Income $88 $1250 $4050 $8150 $30300 54.1%
Expenses R&D $411 2269 2538 2806 3443 6.1%
S&M $237 1659 1732 1610 1842 3.3%
G&A $162 1647 1940 2196 2281 4.1%
Other $65 360 485 600 765 1.4%
Net Income (787) (4685) (2645) 938 21969 39.2%
28. Questions:
Is this a venture fundable business?
What is the likelihood of an exit?
Was it reasonable to run three separate product lines?
29. Later on:
For Due Diligence:
Business Plan Balance Sheet
Business Plan Cash Flow statement
Growth assumptions and monies projected
for next round(s)
30. Financial Traps
• Underestimating marketing and sales expenditures
– Especially while “Crossing the Chasm”
– Engineers: I’m speaking to you
• Underestimating time to:
– Raise money
– Hire key personnel
– Collect Accounts Receivable
• Underestimating cash burn
31. Financial Team Timing
Bootstrap Revenues/seed Series A/B exit
CPA
setup
You or
part-time
bookkeeper
CPA and
Attorney
Review
Full-time
Bookkeeper
or Controller
Controller
and
Part-Time
CFO
Hire
CFO
32. A Word of Caution
This material is not sufficient to
run your day-to-day operations
If you haven’t already…
It’s worth taking a basic accounting
course
Focus on Financial Statements,
Reporting, Auditing
Be Smart. Money is
Important..!