5 Financing Flashcards
RECAP
- business model def=
- financial plan def=
- = implemented business strategy
- = translation of business plan into numbers
Total risk, 2 components:
Business Risk + Financial Risk
(where financial risk is seen as negative, in a balance-sheet assets-liabilities view)
mezzanine level
- def=
- benefit
- convertible loans, with conditions
- adds flexibility for investors & company
Financial Planning:
wrong & right approach
+ key ingredient
- wrong approach:
- only* top-down, long-term planning, focused on profits, based on draft business model
- right approach:
- also* bottom-up, shorter-term planning, focused on revenues, based on detail business model
=> include a translation of the “hockey stick” exponential growth graph… which must be there to inspire hope, but must be also made somewhat credible
Funding sources: the 3 to 7 Fs
+ later sources
- General
- Family
- Friends
- Fools
- Typically Swiss:
- Founder –> expected to invest in CH
- Faculty
- Foundations –> cheap source
- Family offices –> very good source
Later sources:
- Crowdsourcing
- Government Programs like the Commission for Technology Innovation
- Venture capital & private equity
new shares issuance: exam Qs & As
- valuation? –> last transaction (virtual price)
- dilution? –> calculate % of ownership rights based on total issuance… LOL
equity crowdfunding def=
big advantage:
for who/what?
crowdfunding where equity, rather than products, are offered; not available in all jurisdictions
=> it lets you test your idea
for SW
- key to success…
- key to it…
- selling (ideas, etc.)
- what to sell? sell passion! –> esp. to investors, who professionally must be passionless
ideas VS implementation
ideas are cheap => share them to get help
value is in implementation
3 key financial statements
- cashflow statement –> cash = oxygen
- income statement –> profit = medium-term food
- balance sheet –> assets = substance
equity vs debt: defs & tradeoff as financing sources
co-ownership & borrowing, w interest, against guarantee
debt does not dilute but requires guarantees & drains cash through interests & can be called at worst time
equity does not protect & dilutes –> loss of control, but interests are aligned
Cash Burn and Run Rate
run rate = cash available / cash burn = all expenses, w/o considering any payments from customers
dilution exercise: 4 aggregate + 2 unitary values to track
invested capital CHF / # shares / ownership % / (post)value CHF
+ nominal & “traded” value of 1 share
