MICHAL GROMEK PONTUS ENGSTRÖM1320 ENTREPRENEURSHIP ANDOPPORTUNITY , 20TH OF JANUARY 2017

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BEGINNERS GUIDETO FINANCIAL VOODOO

FOR STARTUPS

ENTREPRENEURSPERSPECTIVE

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HOW IS IT POSSIBLE THAT A TECH STARTUP IS WORTHBILLIONS OF EURO AND SOME STILL DOESN'T MAKE ANYMONEY? - EXAMPLE OF UBER.

ROAD MAP FOR OUR 45 MIN TODAY:

DIFFERENT STAGES OF FUNDING, PREMONEYVALUATION, POST MONEY VALUATION, SERIES A, B, C,BRIDGE FUNDING, DILUTION OF SHARES.

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ZOOM IN TO UBER VALUATION > 2015

51 bn USD

7.4 bn USD

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ZOOM IN TO UBER VALUATION > 2016

68 bn USD

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ZOOM IN TO UBER VALUATION > 2016

VALUATION NEARLY

EQUAL TO VW (!)

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GET A PIECE OF

PAPER READY

AND A PEN OR THE ELECTRONIC VERSION OF IT :)

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WHICH ASSETS DOES IT REALLY OWN?

WHY DO YOU THINK THEIR VALUATION ISSO HIGH?

HOW UBER MAKES MONEY?

TAKE ONE MINUTE TO WRITE DOWN:

HOW OLD IS THE TAXI BUSINESS? HOW MANY INT. COMPANIES DID WE HAVE BEFOREUBER?

WHAT ARE VALUATIONS ACTUALLY REALLYNEEDED FOR?

TO INFORM INVESTORS WHO WOULDLIKE TO ACQUIRE A STAKE IN A COMPANY ABOUT ITS VALUE. ENTREPRENEUR ISTRADING CASH FOR A % OF OWNERSHIP.

THEORY:

THE COMPANY IS WORTH WHATEVERINVESTOR AND ENTREPRENEUR AGREESTHAT THE COMPANY IS WORTH.

PRAXIS FOR STARTUPS AND EQUITY INVESTMENTS

HOW TO UNDERSTAND THEENTREPRENEURS?

WE ARE RAISING 200K FOR 20% OF OURCOMPANY.

WHAT YOU WILL HEAR:

IMPLIED POST MONEY VALUATION OF THISSTARTUP IS 1M. PRE-MONEY VALUATION IS800K.

WHAT YOU SHOULD UNDERSTAND:

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MARKET SIZE

FIELDS OF INVESTIGATION - PART 1

FOUNDERS AND TEAM

REVENUE PROJECTION 3Y / 5Y INTELLECTUAL PROPERTY (IP) - PATTERNS, APPLICATION

PRODUCT, SERVICE AND TECHNOLOGY

TRACTION

FOR YOUR E-VALUATION PROJECT

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ALREADY INVESTED CAPITAL

FIELDS OF INVESTIGATION - PART 2

STAGE OF THE STARTUP - PRODUCT / SERVICE / TECH.

COMPETITIONS NEED FOR ADDITIONAL INVESTMENTS

REPUTATION OF THE COMPANY

CLAIMS AGAINST THE COMPANY

FINANCIAL PERFORMANCE UNTIL TODAY

FOR YOUR E-VALUATION PROJECT

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PRE MONEY VALUATION POST MONEY VALUATION

DILUTION OF SHARES

"YES, WE HAVE A VALUATION PROJECTIONTHAT YOU CAN USE..."

DURING YOUR FIRST MEETING WITH THE STARTUP...

FOCUS ON:

10 mSEK + 2mSEK = 12m SEK

PREMONEY

VALUATION

WIFI PIE AB EXAMPLE

INVESTMENT

AMOUNT

POSTMONEY

VALUATION

THE NEGOTATED

VALUED OF THE

COMPANY BEFORE

THE INVESTMENT

THE VALUE OF THE

STARTUP AFTER

THE INVESTMENT

FOUNDER MENTIONS TO YOU:

WIFI PIE AB EXAMPLE - DILUTION

"I WOULD LIKE TO RAISE MONEY BUT, DON'T WANT TODILUTE MY OWNERSHIP TO STRONGLY"

THIS IS WHAT IT USUALLY MEANS IN THE REALITY

PLEASE ESTIMATE THE HIGHEST VALUATION POSSIBLESO THAT NEW STAKEHOLDERSHIP WILL RESULT INSMALL SHARE DILUTION.

CLICK HERE FOR MORE SOPHISTICATEDVIDEO EXAMPLES OF SHARE DILUTION

DILUTION IS THE REDUCTION OF OWNERSHIP PERCENTAGES

IN A BUSINESS AS AN EFFECT OF THE ISSUANCE OF NEW SHARE.

SHARE DILUTION

DEFINITION:

EXAMPLE: A COMPANY IS OWNED BY ONE FOUNDER 100%. IT RECEIVES AN INVESTMENT OF

10%. WHAT IS THE DILUTION OF SHARES?

POST MONEY

DILUTION:

< FOUNDER

INVESTOR >

WE ARE RAISING 500K ON A

PREVALUATION OF 1M

WIFI PIE AB EXAMPLE

HOW BIG IS POST-

MONEY VALUATION?

MENTI.COM

CODE: 607616

CLICK HERE FOR A VIDEO EXPLANATIONABOUT STARTUP FUNDING

WE ARE NOW IN OUR C-SERIES SHARE ISSUE PROCESS AND CONSIDER 20M

INVESTMENT.

STAGES OF INVESTMENTS

WHAT DOES THE FOUNDER SAY TO YOU:

WHAT DOES THIS MEAN

THE COMPANY HAS AN SUCCESSFUL PROOF OF

CONCEPT, TEAM, EXPERIENCE IN RISING

FUNDING, SIGNIFICANT INVESTMENT AND

POTENTIAL SOME INT. EXPANSION

CLICK HERE FOR VIDEO EXPLANATIONABOUT PRESEED FUNDING

FRIENDS, FAMILLY (AND "FOOLS"), BUSINESS ANGELS, PUBLIC FUNDING LIKE ALMI,

REWARDS BASED CROWDFUNDING, STING

PRE - SEED FUNDING - I HAVE AN IDEA

WHO IS PROVIDING PRE-SEED FUNDING?

WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE

EARLIEST STAGE, DESIGN OF THE PRODUCT, PROVISION OF MARKET FIT, CREATION

OF THE COMPANY.

CLICK HERE FOR VIDEO EXPLANATION ABOUT SEED FUNDING

BUSINESS ANGELS, EQUITY CROWDFUNDING, REWARD CROWDFUNDING,

PUBLIC FUNDING

SEED FUNDING - I HAVE A COMPANY

WHO IS PROVING SEED FUNDING?

WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE

SIZE AROUND 230K EURO UP TO 2M EURO IN ORDER TO BRING THE PRODUCT TO

MARKET, SIGN FIRST BIG CONTRACTS, ADVERTISE TO THE PUBLIC

CLICK HERE FOR VIDEO EXPLANATION ABOUT SERIES A FUNDING

BUSINESS ANGEL, EQUITY CROWDFUNDING, VENTURE CAPITAL (LATELY VC ARE

LESS LIKELY TO PROVIDE SERIES A FUNDING)

SERIES A - OPTIMISE PRODUCT & USER BASE

WHO IS PROVIDING SERIES A FUNDING

WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE

SCALING THE PRODUCT, EXPLORING THE TRUE MARKET FIT, INTRODUCTION OF

NEW FEATURES. IN THE PAST THE MEDIAN HAS BEEN AROUND 7M EURO. IT WENT

UP SIGNIFICANT IN RECENT YEARS TO 6.5 M-14M EURO

> INTERESTING CASE: AGGREGATE MEDIA - EQUITY FOR ADVERTISEMENT SPACE.

EXAMPLE OF AN VENTURE THAT RAISED SERIES B

VENTURE CAPITAL, (THAT SPECIALISE IN LATER STAGE FUNDING) INSTITUTIONAL

INVESTORS, HEDGE FUNDS FUND REPRESENTATIVES

SERIES B - "B" IS FOR BUILD

WHO IS PROVIDING SERIES B FUNDING?

WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE

THE STARTUP HAS A WORKING BUSINESS MODEL AND WOULD LIKE TO EXPEND ITS

REACH. IT RECEIVES SIGNIFICANT TRACTION AND HAS A TRACK OF RECORD. THE

COMPANY RAISES FUNDING FOR NEW TEAM MEMBERS, FURTHER EXPANSION.

SIZE: USUALLY 7M+ EURO

EXAMPLE OF AN VENTURE THAT RAISED SERIES C200M USD

VENTURE CAPITAL, INSTITUTIONAL INVESTORS, HEDGE FUNDS

FUND REPRESENTATIVES

SERIES C (D, E, F... )

HOW IS PROVIDING SEED FUNDING

WHICH STAGE OF DEVELOPMENT, SIZE AND PURPOSE

ACCELERATION BEYOND SERIES B, ACQUISITION OF COMPETITORS

OR PARTNERS, INTERNATIONALISATION. INVESTOR INJECT MONEY INTO

SUCCESSFUL BUSINESSES WITH THE

GOAL TO AT LEAST RECEIVE THE DOUBLE AMOUNT BACK.

KEYWORDS:

COMPETETIVE ADVANTAGE, MERGER

AND SYNERGISTIC PARTNERSHIP

WATCH A VIDEO ON MEZANINE FUNDING

IS A TERM WHEN A COMPANY DECIDES TO "GO PUBLIC" AND TO OFFER

THEIR SHARE ON A STOCK EXCHANGE- CLICK HERE FOR A VIDEO

EXPLANATION.

POSSIBLE SCENARIOS FOR YOUR STARTUP

PROJECT (BUT LESS LIKELY:))

IPO - INITIAL PUBLIC OFFERING

MEZANINE FUNDING

FUNDER IS OBTAINING A LOAN WITHOUT A COLLATERAL (AN

MOVABLE OR NONE MOVABLE ASSET THAT BACKS UP THE LOAN.

IN CASE OF A DEFAULT THE LENDER CONVERTS HIS DEBT INTO

SHARES. - CLICK HERE FOR A VIDEO EXPLANATION.

USUALLY USED WITH A TRACK RECORD AND REPUTATION USED

OFTEN TO PERFORM AN IPO. TYPICAL INTREST IS SOMEWHERE

BETWEEN 10% AND 22%

COMPREHENSIVE VIDEO EXPLENATIONALOF CONVIRTABLE LOAN

A COMPANY ISSUES A LOAN TO LENDERS AND AT A SPECIFIC DATE THE

INVESTORS CAN DECIDE IF THEY WOULD LIKE TO RECEIVE THEIR DEBT

REPAID OR CONVERT IT TO OWNERSHIP IN THE COMPANY.

LENDERS USUALLY RECEIVES A DISCOUNT RATE TO CONVERT INTO

VALUATION AT A LATER STAGE.

POSSIBLE SCENARIOS FOR YOUR STARTUP

PROJECT (BUT LESS LIKELY:))

COVERTABLE LOANS: (DEBT)

BRIDGE FINANCING (FORM OF CONVERTABLE DEBT)

IS A LOAN THAT CONVERTS TO EQUITY

THE INVESTOR CAN DECIDE ON THE TRIGGER POINT IF THE

LOAN WITH THE DISCOUNT SHOULD BE CONVERTED

ACCORDING TO AN OLD POST MONEY VALUE OR A NEW

PREMONEY VALUATION FOR NEXT ROUND.

WATCH A VIDEO ON BRIDGE FINANCING

FOCUS WHILE WORKING ONYOUR PROJECT

WHERE ISTHE STARTUP REALLY

WHERE THEVALUATION IS

WHEREYOU ARE

EXPECTED TO BE

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WHAT MIGHT EXPLAIN UBER VALUATION

THE COMPANY OPERATES IN A GLOBALMARKET, IS A MARKET LEADER WITH ASCALABLE BUSINESS MODEL, GROWTH TRACK RECORD, CAN ADAPT TO CHANGES, HAS FEW EMPLOYEES, DISRUPTS THE MARKET HAS A POTENTIAL TO GENERATE SIGNIFICANTREVENUE VERY QUICKLY IN A SHORT FUTURETAKING A 15-25% FROM EACH RIDE.

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NEXT STEPS

JOHN SJOLUND LECTURE ON -FOUNDER GOES VALUATION

DIVISION OF GROUPS OF THREE +/-

PLEASE WATCH THE VIDEO, THAT YOU CAN ACCESSAS HYPERLINKS IN THIS PRESENTATION BEFOREYOUR FIRST MEETING WITH YOUR PARTNER STARTUP

PONTUS'S LECTURE ON DIFFERENT VALUATION METHODS FOR DIFFERENT STARTUP NEEDS

1320 ENTREPRENEURSHIP ANDOPPORTUNITY , 20TH OF JANUARY 2017

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SLIDES ARE ONLINE ON: SLIDESHARE.COM/

MICHALGROMEK

CC LICENSE FOR DISTRIBUTION

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BREAK

UNTIL 10:15