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Tetuan Valley Startup School IV - Spring 2011 - Week 3
The document discusses key financial concepts for entrepreneurs starting a business. It covers two sessions that introduce students to concepts like time value of money, diversification, price of risk, and how to read financial statements like balance sheets, cash flow statements, and income statements. The sessions provide examples and graphs to illustrate these concepts and help entrepreneurs understand financial projections and valuations when presenting to investors.
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Tetuan Valley Startup School IV - Spring 2011 - Week 3
- 1. Spring 2011 Week 3 Tetuan Valley, April 2011
- 2. In Collaboration with Participating Organizations
- 3. Finance for Entrepreneurs 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 21/04/2011
- 4. TIME VALUE OFMONEY Effect of compound interest “A bird in the hand is worth two in the bush” 21/04/2011 = 4
- 5. DIVERSIFICATION Market vs. Company Risk “Don´t put all your eggs in one basket” 21/04/2011 5
- 6. PRICE OF RISK Correlation of Risk & Return “There´s no such thing as a free lunch” 21/04/2011 6
- 7. IN GRAPHS Effect of compound Time value of money interest “A bird in the hand is worth two in the bush” Market vs. Company Risk Diversification “Don´t put all your eggs in one basket” Correlation of risk & return Price of risk “There´s no such thing as a free (Sharpe ratio) lunch” 21/04/2011
- 8. STATEMENTS OF ANYCOMPANY BALANCE SHEET 21/04/2011
- 9. RELATIONSHIP BETWEEN ACCOUNTS 21/04/2011
- 10. Company with increasingprofits 21/04/2011 10
- 11. But if thesame 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 21/04/2011 11
- 12. PROFIT AND LOSS Earnings - COGS Contribution Margin - Overhead Expenses EBITDA - Depreciations and amortizations EBIT + Financial result EBT - Taxes Net Result 4/21/2011
- 13. 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 Balance 4/21/2011 13
- 14. BALANCE SHEET Active 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 21/04/2011
- 15. 1 M Tshirt+ 94M EUR 1st liga VS Price is what you pay. Value is what you get Warren Buffett 21/04/2011
- 16. FCF: what isit? 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 expenditures Earnings Expenses EBITDA Amort. EBIT T in EBIT Amort. NOPLAT Variation CAPEX FCF WC 21/04/2011 16
- 17. WHO IS WHO SICAVs Family offices Insurance & Brokers Pension Funds Endowments ¿? Private Banking Hedge Funds Grants and Subsidies Angel Funds CVC Funds of Comercial Funds Banks Investment Banking Sovereign Funds 21/04/2011
- 18. HOW PLAYERS INVEST Friends and Venture Funds Origin family 3 1 Family Office Capital Involvement Own Money Others Money Business Angels Industrialists 2 Financial Purity Source: Perennius
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- 21. INVESTMENT CRITERIA Why they Invest What they Measure Decision Time Family, Friends and Personal Confidence Fast Fools Commitment Subsidies and Policy Compliance Slow Public Assistence alignments merits Business Angels Personal affinity Profitability Fast Investment Venture Capitalists Profitability Slow criteria Contribution to Industrial Partners Strategic criteria Slow business Source: HighGrowth; Elaboración Okuri Ventures
- 22. 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+ 21/04/2011
- 23. ORIGIN OF MULTIPLIERS-LEVERS Shareholder Return PE 25 Investment Multiplier 20 15 VC 10 5 0 Source: Cifras orientativas Sales Margin Debt Arbitration Total 21/04/2011
- 24. CONCLUSION 1 / (1-n) Source: http://www.paulgraham.com/equity.html 21/04/2011