1. Valuation and forecasting

2. Before we start
3
Exit Analysis Nordic VCs
Decreasing valuations
8
Financial Fundamentals
Learning the income statement, balance sheet etc
18
Financial Performance
Key ratios and actual performance vs. plans
27
Financial Planning
Combine top-down and bottom-up approach and ensure link between plan and budget
34
Valuation
Relative and absolute methods. DCF is an absolute method that discounts future cash flows
48
The VC Method
He value of a company is a matter of discussion over a cup of coffee
62
3. Before We Start
4. .. I need three volunteers?
Before We Start
5. Tweet key learnings
Before We Start
MCF10
Control10
Password:
6. Give a hand to the tweeters!
Before We Start
7. Reminder - Assignment for every study group!
Deadline - the lecture on Options
Every study-group should find 10 tweets that:
You find interesting / funny
That can serve as a either a summary of the lectures or that explores an important topic
Upload the Powerpoints at Slideshare and tweet the link in Twitter in MCF10 account
Two groups will present randomly chosen
Before We Start
8. Exit Analysis Nordic VCs
9. Trade sales are most common and the crises has reduced # exits and closed IPOwindow
Exit Analysis Nordic VCs
Source: VentureXpert
10. As well as having reduced the values IPOs are typically larger than trade sales
Exit Analysis Nordic VCs
Source: VentureXpert
11. Decreasing exit value and increased general risk leads to lower valuation for early-stage
Exit Analysis Nordic VCs
Source: VentureXpert
12. Know your value inflection points...
Exit Analysis Nordic VCs
Market Share
Exit Value
Proof-of-scale
Proof-of-business
Proof-of-concept
Capital Need
Pre-venture
Venture
13. Have the end in mind
Exit Analysis Nordic VCs
IPO
Competitor
Start-up
Strategic Supplier
Strategic Customer
New entrant
14. Approach the exit differently
Exit Analysis Nordic VCs
Business strategy to fit exit
Trade Sale
Identify buyers
Position the company
Create bid wars
Asses timing capital need and market
Business strategy to fit exit
Prepare organisation setup
Create exposure
IPO
15. US exits have higher values for several reasons
Exit Analysis Nordic VCs
Source: Vkstfonden
16. US VCs participate in the most attractive exits of Nordic companies
Exit Analysis Nordic VCs
Vkstfonden
17. Why do you think that the exit values are higher for the Nordic companies who has a US VC investor on board?
Exit Analysis Nordic VCs
18. Financial Fundamentals
19. Standard P&L (Income Statement)
Financial Fundamentals
20. Bill of Material a nice reality check
Financial Fundamentals
21. The Balance Sheet - Assets
Financial Fundamentals
22. The Balance Sheet Liabilities and Equity
Financial Fundamentals
23. Cash Flow Statement
Financial Fundamentals
24. Operational Breakeven
Financial Fundamentals
NOPAT
EVA = Net Operating Profit AfterTaxes (NOPAT) After-Tax Dollar Cost of Financial CapitalUsed
Seperates a firms operating from itsfinancing
NOPAT = EBIT-Tax
NOPAT Breakevenrevenues (NR) = TOFC/(1-VCRR)
TOFC = Total Operating FixedCost
VCRR = Ratio of Variable cost to revenue
EBDAT
EBDAT = Earnings before Depriciation, amortization and taxes
EBDAT Breakeven = Amount of revenues to cover cash OPERATING expenses
Breakeven: EBDAT = 0
25. Real Break Even
Financial Fundamentals
Real Breakeven
Whenthereexist Positive FreeCash Flow
FCF = Net Income+ (Depriciation/Armortization) - WorkingCapital-CAPEX
Cash Burn = OPEX + Interest+ Tax + IncreaseInventory- payables and accruedliabilities + CAPEX
Cash Build = Net Sales Increase in Recievables
Net Cash Burn = Cash Burn Cash Build
26. As an entrepreneur you must know
Burn Rate: Avg. monthly cash burn
Runway: Remaining liquidity / Burn Rate
Financial Fundamentals
27. Financial Performance
28. Ratios using common sense and industry benchmarks
Financial Performance
29. The use of ratios relates to life cycle
Financial Performance
Maturity
Public & Seasoned
Rapid
Growth
B,C-round
A-round
Survival
Startup Financing
Startup
Seed Financing
Focus on cash & cost
Broad Focus on ratios
Focus on cash & profitability
30. I look at traction in Sales
Financial Performance
31. and traction in healthy operations
Financial Performance
32. as well as CASH
Financial Performance
33. Critical Success Factors
Financial Performance
34. Financial Planning
35. The progress for successful venture
Financial Planning
Market Share
Exit Value
Proof-of-scale
Proof-of-business
Proof-of-concept
Capital Need
Pre-venture
Venture
36. and the cash balance
Financial Planning
High
Cash Balance
Low
Founder and FFF
Seed
Exit
National Venture
Int. Venture
37. Time fundraising with value inflection points and before cash balance is too low
Market Share
Exit Value
Proof-of-scale
Proof-of-business
Proof-of-concept
Capital Need
Pre-venture
Venture
High
Cash Balance
Low
Founder and FFF
Seed
National Venture
Int. Venture
38. Tools for financial planning in a growth company
Financial Planning
39. Key Problem Missing link between business plan and financial plan
Financial Planning
40. If my company is expecting to have this much revenue then what is my plan to get there?
Financial Planning
If my plan is this then what is the likely revenue, cost and capital requirement
41. How to workwith a business plan / budget /anything in life
Financial Planning
42. Top Down starting with the potential
Financial Planning
43. Buttom Up Building it up from today
Financial Planning
44. Financial Planning
...clarify to yourself and potential investors what the assumptions for the budgetare in relation to revenue drivers, cost drivers, investments etc.
It is always better to make informed and reasonable assumptionsthan claiming it is difficult to predict the future
45. Think contingent scenarios
Financial Planning

Best case

46. Base line 47. Worst Case