This was a presentation I delivered to the Gdynia Business Week program in August 2012. GBW teaches high school students critical business, teamwork and leadership skills at an early age.

1. GLOBAL
GROUP
V E N T U R E S
Venture Consulting / Private Equity Services
Understanding Financials
Show Me the Money!!!
Presentation to Gdynia Business Week
August 23, 2012
http://www.youtube.com/watch?v=ZTFJocQBLyE

2. Gdynia Business Week 2011
Company B-Better!
2

3. Presentation Will be Available on
Slideshare.com
3

4. Introduction
Ken Globerman
4

5. Show Me the MONEY!
Raising the MONEY
Makin’ mo’ MONEY
Measuring the MONEY
Time Value of MONEY
5

6. Raising the MONEY!
6

7. Debt Capital
Public Equity
Institutional
Follow-on
7
Investors
§ Income /
Dividend
Typical Investment Continuum
producing
§ Mature / Stable
Private Equity
§ Conservative
Public Exit
Buyout
(IPO)
§ Growth slowing
& maturing
§ Cash Flow
(EBITDA) positive
§ May be Profitable
Venture Cap
Early Private
B/C Round
Equity
§ Rev. generating
§ More rocket fuel
required !!!
§ Often still not
Profitable
A Round
Venture
Capital
§ Usually Revenue
Producing
§ Typically Cash
Flow Negative
§ Not Profitable
Seed Fund § Company/
Angel
or Prototype formed
§ Maybe Revenue
Producing
Friends & Family
“Bootstrapping”
Incubators
§ Projects and
“Ideas” Stage

8. Raising The MONEY
The Investment Cycle
Money Fund
Raised from Managed by
LP GP Fund
Investors Manager
Invest:
Exit: Sale/
Portfolio
IPO, Fund
Companies
Liquidated
Acquired
8

9. The Investor vs. The Entrepreneur
Summary Points
Takeaways, from the Standpoint of Takeaways, from the Standpoint of
the Investor the Entrepreneur
} Are we prepared to give up
part of our Company?
} Do we need financing? How
much? What for?
} Do we need help with our
project?
} Are we Committed?
} Time horizon: (usually) Infinite
9

10. Makin’ mo’ MONEY!
10

11. Makin’ mo’ MONEY!
(A) TAHITI! (B) RELAX! (C) EXECUTE!
11

12. Makin’ mo’ MONEY!
“Cash is King!”
• RE-INVESTMENT • Investment in People • Market Share
• Owner Contributions • New Projects • Brand Awareness
• Investors/Lenders • Raw Materials • Reputation
• Grants/Subsidies • R&D / Product Dev. • Sales Revenue/Profit
• Donations • Value Creation • CASH CASH CASH
12

13. “A good business is one that can turn $1.00 into
(at least) $1.01” - Ronald Globerman
13

14. Measuring the MONEY!
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15. Measuring the MONEY!
Accounting Isn’t Simply Bean Counting
u Accounting vocabulary is used to communicate a firm’s
financial status and performance to all constituents
Financial Tax
Markets Authorities
Lenders Consumers
Regulators Firm Suppliers
Chief Executive Officer & Management Board
Managers Managers Managers Managers
15

16. The Fundamental Accounting Identity
} Business Activities can be classified into three broad
categories: Assets, Liabilities and Owners Equity
Assets Liabilities
Owners Equity
16

17. Fundamental Accounting Identity
Illustration
“Situation: I just bought a house for 1 million zl, using 300,000 zl
of my own money and borrowing 700,000 zl from the bank”
Assets Liabilities
Owners Equity
17

18. 3 Financial Statements
Balance Sheet
u
Income Statement
u
Statement of Cash Flows
u
18

19. “But Ken, Why Should We Care???”
19

20. Time Value of MONEY!
20

21. Cash now vs. Cash later
Global Group – All Rights Reserved 21

22. How do we apply the Time Value of MONEY
concept in life & business?
u Choosing banks, retirement
funds, stocks, mutual funds, etc.
u Assessing one investment
opportunity versus another
u Business planning and
capital budgeting
Global Group – All Rights Reserved 22

23. Time Value of MONEY!
Positive!
Cash Dividend Dividend Sale / Divest
Flows!
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Negative!
Invest Invest
1 st Round 2 nd Round Cash
Flows!
23

24. Cash Flow Projection
Typical Pattern in Start-ups
Company.pl Projected Cash Flow
1200
1000
800
600
400
200
0
-200
-400
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 ……
24

25. And What About Stock Price?
(A) PAST (B) CURRENT (C) FUTURE
PERFORMANCE PERFORMANCE PERFORMANCE
Company Value is calculated from FUTURE EXPECTED
CASH FLOWS
Stock Price is calculated from the estimated Company
Value, MINUS all future liabilities the Company is
OBLIGED to pay
25

26. Investment Case Study
Łukasz Foltyn Portable Version Naspers tenders
writes code for of the 100% of equity
communicator Communicator and Gadu Gadu
is de-listed
Warsaw Equity Gadu Gadu first
Holdings buys lists on Warsaw
45% stake Stock Exchange
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
WEH increases
equity stake
Naspers begins
Gadu Gadu from 45 to 80% to buy shares of
Premieres
Gadu Gadu
Source: Publically available data
26

27. Recommended Literature
u http://theleanstartup.com/
u Also Author of “Good To Great”
u http://www.amazon.com/Great-Choice-
Uncertainty-Luck-Why-Despite/dp/0062120999
27

28. Final Thoughts
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29. Bardzo Dziękuję!
For More Information:
(e) ken.globerman@globalgroupventures.com
www.facebook.com/ken.globerman
LinkedIn: Ken Globerman