Difference between revisions of "M3-S7 - Session notes"
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(Replaced content with "M3-S7 - Session notes Category:mbi") Tag: Replaced |
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| − | + | Risk / Return triangle | |
| + | * Probability of loss | ||
| + | * Expected return | ||
| + | * Investor(s), Entrepreneur(s), Combination, Fit, Agreement | ||
| + | |||
| + | [[Debt financing|Debt financing]]: | ||
| + | Debts (& factoring) | ||
| + | * Repayment plus interest income | ||
| + | * Provider's upside return | ||
| + | ** Usually agreed upon percentage | ||
| + | * Provider's downside risk | ||
| + | ** Everything | ||
| + | |||
| + | Positives: | ||
| + | * Retain control | ||
| + | * Greater ange of flexibility | ||
| + | * Lower cost than [[Equity financing|Equity financing]] | ||
| + | * Simpler for both parties to exit | ||
| + | Negatives | ||
| + | * Interest payment | ||
| + | * Cash flow implications | ||
| + | * Assets encumbered | ||
| + | * Personal surety | ||
| + | * Potential personal liquidation | ||
| + | |||
| + | [[Equity financing|Equity financing]]: | ||
| + | * Value of equity stake plus divident income | ||
| + | * Provider's upside return | ||
| + | * Provider's downside risk | ||
| + | * Multiple solutions possible: | ||
| + | ** Combination of debt + equity | ||
| + | ** Possibilities to convert it later | ||
| + | |||
| + | Positives: | ||
| + | * Low/no cash flow implications | ||
| + | * Lower personal risk | ||
| + | * Potential non-financial contribution of investors | ||
| + | Negatives: | ||
| + | * Loss of control | ||
| + | * Costly in long term | ||
| + | * Difficult / costly to exit | ||
| + | * M&A risks | ||
| + | |||
| + | Finance and business stage: | ||
| + | |||
| + | The American way (no debt financing) | ||
| + | <html> | ||
| + | <img src="http://upload.wikimedia.org/wikipedia/commons/thumb/8/8e/Startup_financing_cycle.svg/700px-Startup_financing_cycle.svg.png" "Width=400px"/> | ||
| + | </html> | ||
| + | |||
| + | VC Rates of return | ||
| + | * In the 25% range over 5-8 years | ||
| + | |||
| + | Split of the spoils: | ||
| + | * 80% to limited partners, 20% ROI | ||
| + | * 20% to general partners - <math>6M over 5 years</math> | ||
| + | |||
| + | |||
| + | Evaluation process: | ||
| + | * Universal independent market analysis, Opportunities evaluation | ||
| + | * Technical due diligence | ||
| + | * Team due diligence | ||
| + | |||
| + | What characteristics desired in the team? | ||
| + | * Strong technologist, engineering vision & execution, attention to the minutae | ||
| + | * Seperate person to drive sales, finance, recruitmet | ||
| + | * Ware of individuals wedded to a particular role | ||
| + | * Willingness to step aside for a new CEO, professinoal managers | ||
| + | * A CEO to take it to glory | ||
| + | * The quality of people the CEO can attract | ||
[[Category:mbi]] | [[Category:mbi]] | ||
Latest revision as of 19:58, 27 August 2020
Risk / Return triangle
- Probability of loss
- Expected return
- Investor(s), Entrepreneur(s), Combination, Fit, Agreement
Debt financing: Debts (& factoring)
- Repayment plus interest income
- Provider's upside return
- Usually agreed upon percentage
- Provider's downside risk
- Everything
Positives:
- Retain control
- Greater ange of flexibility
- Lower cost than Equity financing
- Simpler for both parties to exit
Negatives
- Interest payment
- Cash flow implications
- Assets encumbered
- Personal surety
- Potential personal liquidation
- Value of equity stake plus divident income
- Provider's upside return
- Provider's downside risk
- Multiple solutions possible:
- Combination of debt + equity
- Possibilities to convert it later
Positives:
- Low/no cash flow implications
- Lower personal risk
- Potential non-financial contribution of investors
Negatives:
- Loss of control
- Costly in long term
- Difficult / costly to exit
- M&A risks
Finance and business stage:
The American way (no debt financing)
VC Rates of return
- In the 25% range over 5-8 years
Split of the spoils:
- 80% to limited partners, 20% ROI
- 20% to general partners -
Evaluation process:
- Universal independent market analysis, Opportunities evaluation
- Technical due diligence
- Team due diligence
What characteristics desired in the team?
- Strong technologist, engineering vision & execution, attention to the minutae
- Seperate person to drive sales, finance, recruitmet
- Ware of individuals wedded to a particular role
- Willingness to step aside for a new CEO, professinoal managers
- A CEO to take it to glory
- The quality of people the CEO can attract
