Tetuan Valley is the first non-for-profit pre-accelerator program in Europe. Our goal is to promote local Entrepreneurship and regional development towards technology. Twice a year we host a 6 week startup school, with focus on training and working on the implementation of a business idea. We have a portfolio of more than 70 top-notch mentors, participating to give the students a unique and valuable experience. All graduates of the startup school get exclusive access to the Tetuan Valley Alumni Network. For further info please check tetuanvalley.com

1. Tetuan VAlley
Startup School Spring 2012
Week4
#StartSpain
In the end, a Sp art an's true
st reng is the warrior next t
th o
him. So give respect and honor t o
him, and it will be returned
Tetuan Valley, March 2012

2. #startspain
Sponsors Collaborators

3. STARTUP FINANCE 101 – Session 3
Objective Session 1
• Concepts
Introduce students with tehcnological • Principals
backgrounds to key financial concepts • Equations
that are esential at the hour of starting a
business • Investors; Objectives and restrictions, stages, “Venture Capital” and
Value Levers
• Conclusions for the entpreneur
Result
•Comprehension of key financial
indicators Session 2
•Ability to parameterize the models • Business Plan
given the face value of a startup and to • Price
make financial projections to investors • Business Model
• Other tools
Duration
2 sessions, 4hr
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4. TIME VALUE OF MONEY
Effect of compound interest
“A bird in the hand is worth two in the bush”
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= 4

5. DIVERSIFICATION
Market vs. Company Risk
“Don´t put all your eggs in one basket”
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6. PRICE OF RISK
Correlation of Risk & Return
“There´s no such thing as a free lunch”
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7. IN GRAPHS
Effect of compound
Time value of money interest
“A bird in the hand is worth
two in the bush”
Market vs. Company Risk
Diversification
“Don´t put all your eggs in one
basket”
Correlation of risk & return
Price of risk “There´s no such thing as a free
(Sharpe ratio) lunch”
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8. STATEMENTS OF ANY COMPANY
BALANCE SHEET
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9. RELATIONSHIP BETWEEN
ACCOUNTS
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10. Company with increasing profits
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11. But if the same company sells with a difference of payments above 5 months
the company can go bankrupt
700
600
500
400 Margin
Margen
300 Collections
Cobros
200 Pagos
Payments
Caja
Cash balance
100
0
-100
Year 1 Year 2 Year 3 Year 4
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12. PROFIT AND LOSS
Earnings
- COGS
Contribution Margin
- Overhead Expenses
EBITDA
- Depreciations and amortizations
EBIT
+ Financial result
EBT
- Taxes
Net Result
3/28/2012

13. CASH FLOW STATEMENT
Collectibles
- Payments (Direct / Overhead)
Operating Cash
Capital Subscriptions
+ New Debt
- Principal of debt
- Dividends
Financial Cash
- Investments
+ Temporary financial earnings
Investment Cash
Annual Cash Balance
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14. BALANCE SHEET
Active  where is my money Passive  where does it come from
Long-Term Assets Tangible Equity
Social Capital
Investments
Net Results
Depreciations
Earnings
Long-Term Outside
Capital
Banks
Short-Term Assets Working Capital
Debt
Treasury Short-Term Outside
Inventory Capital
Creditors
Short-term bank
VAT
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15. 1 M Tshirt+
94 M EUR 1st liga
VS
Price is what you pay. Value is what you get
Warren Buffett
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16. FCF: what is it?
 CAPM: r% = α + βp = Rf +(β*MRP)
 WACC= Ke * (E / (D+E)) + Kd (D / (D+E))
 FCF = Net income + depreciation – changes in working capital
– Capital expenditures
Earnings Expenses EBITDA Amort. EBIT T in EBIT Amort. NOPLAT Variation CAPEX FCF
WC
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17. CAPM
r% = Rf +(MRP*β)

18. CAPM
r% = Rf +(MRP*β)
Price of Risk
EQUALS
Market Risk
Non Risky How much it
Stuff that matters

19. WACC
WACC= Ke * (%e) + Kd (%d)

20. WACC
WACC= Ke * (%e) + Kd * (%d)
Money
COSTS
How much
You use
Equity Costs Debt Costs

21. FCF: what is it?
 CAPM: r% = α + βp = Rf +(β*MRP)
 WACC= Ke * (E / (D+E)) + Kd (D / (D+E))
 FCF = Net income + depreciation – changes in working capital
– Capital expenditures
Earnings Expenses EBITDA Amort. EBIT T in EBIT Amort. NOPLAT Variation CAPEX FCF
WC
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22. WHO IS WHO
SICAVs Family offices
Insurance &
Brokers Pension
Funds
Endowments
¿?
Private
Banking
Hedge Funds
Grants and
Subsidies
Angel Funds
CVC
Funds of Comercial
Funds Banks
Investment
Banking
Sovereign
Funds
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23. HOW PLAYERS INVEST
Friends
and Venture Funds Origin
family 3
1 Family Office Capital
Involvement Own Money
Others Money
Business Angels
Industrialists
2 Financial Purity
Source: Perennius

24. INVESTMENT STAGES
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25. THE CHASM

26. INVESTMENT CRITERIA
Why they Invest What they Measure Decision Time
Family, Friends and Personal
Confidence Fast
Fools Commitment
Subsidies and Policy Compliance
Slow
Public Assistence alignments merits
Business Angels Personal affinity Profitability Fast
Investment
Venture Capitalists Profitability Slow
criteria
Contribution to
Industrial Partners Strategic criteria Slow
business
Source: HighGrowth; Elaboración Okuri Ventures

27. DESIRED RETURN
Target yearly Holding period Investment Entry/exit
return (years) death rate multiplier
PE 25%+ 3-5 <20% x3,5
VC 25%+ 3-5 >60% x10+
BA 15%+ 4-7 >80% x20+
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28. ORIGIN OF MULTIPLIERS-LEVERS
Shareholder Return
PE
25
Investment
Multiplier 20
15
VC 10
5
0
Source: Cifras orientativas Sales Margin Debt Arbitration Total
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29. CONCLUSION
1 / (1-n)
Source: http://www.paulgraham.com/equity.html
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