Business Modeling and Financing for Startups

Workshop: Business Modelling & Finance

Berlin Startup Academy, 10.07.2014 - Jana Scharfschwerdt

[email protected] 2 JScharfschwerdt

A good financial model

Fundraising – when and where?

Alternatives of investments


Proof-of-Concept

Business Angels

Financing options

Accelerator / Crowdfunding

Venture Capital

Crowdinvesting

Incubator

Bank loan

Idea Proof of Concept Realisation Scaling

Product develop.

Finding/Testing a business model

1st customers

Product improve-ments

Product / Market

Fit

Brainstorming and team building

Realize revenues

Roll out model

Install processes, standards and projects

Optimize processes

Expansion

Internationalisation

Startup/Early Stage Later Stage

Analysis

Seed Pre-seed

...is a great start for fundraising


How do Angel investors click

VC investors

§  Will want some control (voting, board, veto)

§  Invests usually start at 500K, can provide Series A/B

§  Will want to own 20-30%

§  Very actively engaged

§  Can add tremendous value an be great business partners

§  Can take a lot longer until signing

§  Typically rational actors, commercially driven, but if inexperienced, he can be a total mess

Angel investors

§  Contribution over control

§  Usually engaged (often a hobby, sometimes a personal mission)

§  Can be great experienced mentors with a valuable network

§  Quick in decisions, on a personal level

§  Typically rational, but if unexperienced: Naive irrational

§  Investment 200 – 300 K max.

§  Will want to own 1-20%

© Franck Boston - Fotolia.com


Investment criteria Intangible things investors like to see:

§  An ability to recruit and retain a great team, partners

§  Interpersonal chemistry

§  Good sustainable story: its a movie, not a snapshot

§  Somebody else committed?

Tangible things investors like to see

§ Very big market (> $500m)

§ Unfair advantage (why you? why now?)

§  Attractive business model (recurring, high gross margin)

§ Unique technology or business model approach

Investment criteria

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Which investor would be best for you

§  How much money do I need?

§  Where do I need network?

§  Synergies with existing investments?

§  Industry or product experience?

§  Will I expand internationally rather early?

§  Reputation and brand support

§  How many rounds do I think will be necessary?

§  What would be the paths to exit?

§  Strategic partner – Corporate VC

§  Experience with IPO

§  Relevant industry contacts (trade sales)

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Scoping out the firm - Which documents to provide?

1st things first §  Financial planning

§  Assumptions

§  P+L §  Cash-flow statement §  Time Span: Monthly until break even (at least 1st year) , ideally 5 years projections

§  Current Cap Table showing pre and post money holdings

§  Investor‘s Deck

§  10 page slide deck (a complete doc usually only for banks) §  Well designed and free of mistakes §  Keep it simple: they’re meant to be presented, so don’t include all text §  Support info with charts and graphs §  Imaging your own attantion span §  Make the audience nod on every slide

§  Tell a story that is clear and exciting © Rudie – Fotolia


Investment criteria §  YOUR business model

§  Subscription, listings, market places, do you pile up physical stock?

§  Cashflow = earnings ?

§  Where does the money come from and where do you invest

§ Metrics to watch

§ Different sources of financing and is tailored to receiver

§ Who and how will you be using it internally ?

A clean and clear model shows....


Please avoid to be kicked out, so don‘t ...

§ Build it too complex and confusing §  5+ sheets §  Linking cells can not be followed

§  Forget to mirror the business model

§ Make it static, so the investor can‘t play with assumptions

§  Content that conveys the wrong message: §  Liablibities that drag cash out of the firm §  High founder‘s salary

§  Sending it as PDF or only on NDA


Investment criteria Other alternative investments

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Convertible loan: A loan today will be converted into stocks later

Crowdinvesting: Mostly patriarchic subordinate loan

Advisory shares

Business Modeling and Financing for Startups

Investor Relations

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