EF Flashcards
Maturation Phase
develop and idea concept to functional demonstration model (idea grows up)
takes 3 months to 2 years
Incubation Phase
build on demonstration model to prove that their idea can be financially viable. Requires drafting of a business plan. Culminates in the formation of a company.
(before the seed hatches you have to incubate and keep it warm)
9-18 months
Seed Phase
commercial launch
12-36 months
Consolidation Phase
achieve first sales and break even point
24-48 months
Development Phase
profits are achieved
Tag Along Rights
AKA co-sale rights
clauses that protect minority shareholders if majority shareholders or other shareholders sell to a 3rd party
the minority shareholders can join the transaction
minority can tag along
Drag Along Rights
prevents minority shareholders from refusing to sell their shares to get a higher price or any other reason
drags them along
IPO
going public
being listed on a stock market
new equity for company from capital increase
liquidity for shareholders
Trade Sale
selling equity to a 3rd party
industrial or financial buyer
Internal Growth
use available cash to grow current products and with innovations developed by company’s team
External Growth
acquire competitors or complementary business
New Equity + Debt
new equity from a private equity fund or a corporate fund
bank loan is easier since company is profitable
Break Even Point BP
FC/CM%
Cash Flow =
Net Profit + Depreciation
depreciation is a non cash expense
Balance Sheet
Assets and Liabilities
at a specific point in time
net assets inventory WIP customer receivables cash and market securities share capital net profit loss earning after dividends loans and financial debt supplier payables social and tax debts other payables and accruals account payables
Profit =
revenue - VC - FC
CM =
sales - VC
CM% = CM / Sales
CLV
average total profit from each customer/ lifetime as customer of company
CAC
sales and marketing expense / orders
Financial return =
net profit / total equity
new shares =
n / n+ existing shares
pre money valuation =
(exit value / money multiple) - new equity
post money valuation =
share price * total shares
share price =
pre money valuation / # of existing shares
Cash flow definition
explains how much cash comes in an out during a year. (TUB)
3 types of cash flow
operation
investing
financial cash flows
Sensitivity Analysis
helps you measure the impact of changes in some key parameters on your break even point
PNL
provides information on your company’s ability to generate profit (leaky bathtub)
sales and direct costs staff and payroll expenses capex and amortization external expenses gross margin added value EBITDA operating income pre-tax earnings net profit cash flow (cash flow makes the link between PNL and financing plan) other income that doesn't come from company's main business
discount rate
used to estimate present value of future cash flows
compensation for time value of money and risk
varies based on company’s development stage and risk aversion
pv = fv / (1+r)^n
Main financial requirements
CAPEX WCR changes Cash Flow (negative) Repayments of debt Payment of Dividends
User break even ratio
CLV/CAC >1
if CAC is > cm then they will go bankrupt
Internal Growth
use available cash to grow current products and innovations developed by company’s team
External Growth
acquire competitors or complementary businesses
IPO going public
be listed on a stock market, new equity for company from capital increase, liquidity for shareholders
New Equity and Debt
new equity from a PE fund or corporate fund
Trade Sale
selling equity to a third party, industrial or financial buyer
Ratchet Clauses
allows for an investor to adjust her % of ownership after an additional round of financing with a lower share price (down round)
investors try to protect their interests in case of a down round
compensate in case of a down round
Net Profit =
revenue - expenses
