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Entrepreneurial Finance: Planning my Financial Strategy Itxaso del-Palacio

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Presentation on theme: "Entrepreneurial Finance: Planning my Financial Strategy Itxaso del-Palacio"— Presentation transcript:

1 Entrepreneurial Finance: Planning my Financial Strategy Itxaso del-Palacio

2 What do we know… What are the financial statements in the BP? Accounting vs Entrepreneurial Finance Actual vs Pro Forma Cash vs Profit Acquisition vs IPO Burn Rate Im looking for two-fifths of the post-, and for that Ill put up to the two

3 Entrepreneurial Finance is not Accounting

4 Entrepreneurial Finance -Income Statement (P&L) -Cash-Flow Statement -Balance Sheet

5 Income Statement or Profit & Loss (P&L) Revenue/Income£100 Cost of Goods Sold (CGS)50 Gross Profit£50 Expenses30 Taxes5 NET PROFIT£15 Variable costs Operating Exp. -HR -Training -Outsourcing -Marketing -Infrastructure (Depreciation) Non-cash Expense Accumulated Net Profit goes to Balance Sheet Year 1Year 2Year 3…..

6 Balance Sheet: Assets and Liabilities (dividends) P/L = Assets - Liabilities Tangible Intangible (Accumulated Depreciation)

7 Cash-Flow Statement Cash From/Used in Operating Activities -Paying customers -Salaries -Vendors -Landlord -… Cash From/Used in Investing Activities -Purchase or sale of assets -…. Cash From/Used in Financing Activities -Borrowing and paying loans -Equity transactions with investors -Dividends -…. From Profit & Loss Statement Accumulated Cash-Flow goes to Balance Sheet (liquidity)

8 Break-Even Point… and the Valley of Death Number of units sold in which Total Costs = Total Revenues

9 Then – What are our financial hypotheses? Define your assumptions (4)

10 Workout your Financial Plan Start from Assumptions: -Revenue -Operating Costs -Investment Assets -Timing of Events Preliminary Financial Statement: -Income Statement -Balance Sheet -Cash-Flow Statement Net Working Capital Need External Financing needed? Risk and Sensitivity Analysis

11 Investment Milestones Sources Stages of Capital Complete the team, Customer development, formalize the plan. Product development, prototype, ready for launch. Launch and growth phase. Mature firm in a competitive context. Seed or start-up Development (Series A) Growth (Series B, C, D…) Competitive or maturity Angels, grants, 3 Fs (love $) Accelerators VCs Corporate VC Banks, Public equity market


13 Dealing with Investors How would you approach investors? 1.Develop a relationship with the investors –Investment is a marriage –Its a very small world –Show them your milestones 2.Learn a new language 3.NDA – run away!

14 Dealing with Investors 4.Keep expectations low 5.Keep working on your start-up 6.Dont believe it until… 7.Rejection is not personal 8.Avoid inexperienced investors – go for smart money! 9.How much money? – not too much, not too little 10.Rule of valuation: £x=25%

15 Remember to… Keep your burn rate low Make realistic assumptions Do you really need external money? –Get married only if you are in love

16 Thanks! Q&A Itxaso del Palacio

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