This document provides an overview of key financial concepts for startups, including customer acquisition cost (CAC), lifetime value (LTV), the importance of showing CAC is less than LTV, how CAC and LTV depend on each other, what a profit and loss statement shows, how to calculate cash burn rate, how to determine how much money is needed to be raised, and what investors want to know. Key performance indicators discussed include CAC, LTV, and EBITDA.

1. European Innovation Accademy
Financial Basics

2. Customer Unit Economics
CAC = Customer Acquisition Cost
How much does it cost to get a paying customer” – On average across all
your channels

3. Customer Unit Economics
LTV = Lifetime Value (of a customer)
How much does a customer spend with you… over a reasonable amount
of time
Depends on how long they usually stay, attrition rate, etc. but often <=3-5 years max

4. Fundamental business measurement
Show that CAC < LTV proof of business
Show that you can reproduce this [at scale] and the money will flow
(customers, investors, etc)

5. Fundamental business measurement
CAC & LTV depend on each other
Know how much a customer is worth to you know the max you can afford
to pay for them

6. P& L
What is a Profit and Loss Statement (P&L)?
The profit and loss (P&L) statement is a financial statement that
summarizes the revenues, costs and expenses.These records provide
information about a company's ability or inability to generate profit by
increasing revenue, reducing costs or both.

7. BURN RATE
Cash burn rate is the rate at which a company uses up its cash reserves
or cash balance.
How fast are you burning through your cash reserves? That’s what this
metric is designed to show you.

8. Burn Rate
Find the difference between the starting and ending cash balances for the
period. Did you lose or gain cash?
Then divide that total by the number of months in the selected period.
The result is a monthly value.

9. How much money you need to raise?
● Choose a business model
● Analyze the startup costs of other companies in the same business
● Decide whether you could get started with the same or lower startup
costs
● P&L
One thing I think is worth doing is to add a contingency amount- just in case something unexpected happens.
The earlier the stage → bigger contingency amount
.

10. What investors want to Know
● Value Proposition and what problem you are solving
● Background experience in the industry
● Large market size
● Traction
● Expected IRR
● Pre_Money Valution

11. KPI
● CAC
● LTV
● EBITDA