Managing startup finances
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The document presents an agenda focused on bootstrapping startups, discussing sources of finance, financial management, surviving tough times, and fundraising trends. It provides practical tips for founders, including leveraging personal connections for resources and managing finances efficiently. Additionally, it addresses common fundraising questions and outlines important financial management principles.
Managing startup finances
- 2. Agenda • Bootstrapping – How to bootstrap your start-up • Sources of Finance- Various sources of finances • Managing your Company’s finances • How to survive tough times • Fundraising Trends • Conclusion- Q&A
- 4. How to Bootstrap? • Stick to a business domain you know and love. • Start from own Home/Friends or relatives Home • Try & manage as much work as possible amongst founding team • Find cost effective resources/interns • Look for freebies , deals , free trials etc • Plan and track your finances, avoid unnecessary expenses • Don’t waste time & money at conferences, seminars unless your product is ready
- 5. How to Bootstrap? (2) • Find team members to work for equity rather than cash. • Build a plan around your budget, rather than around your wishes. • Defer your urge to find office space until you have customers. • Ask for advance on royalties and vendor deferred payments. • Choose a business model to optimize your revenue flow and timing • Moonlighting; and keep quiet about side project
- 8. Start-up: Typical Financing Cycle
- 9. Equity Debt Barter(exchange) Others VentureFunds CreditCards PartneratVC's,CorporateHeads PersonalLoans SaasinsteadofProduct AngelFunds&Networks VentureDebt(PEfundedCo) GetSeniorpeopletowork AngelSyndicatePlatforms SMELoansbyNBFC's CustomerAdvances MediaBarters Factoring Licenseyourproductsin mkt HNI's Leasing GovernmentGrants&Incentives Incubator/Accelerator LoanagainstCollaterals Barter-ConsignmentBiz WinPrizesincontests CrowdFunding CGTMSE Backofficesupport Managingwithownrevenues Friends&Family OfficeSpacevsproduct/equity Moonlightingonjob Bootstrapping Exchangeresources GetFreeresources Costoffund Sources of Finance Higher Lower
- 10. Debt Financing: Lessor known Sources • Banking Surrogacy • CGTSME Loans • MUDRA Loans • Factoring • Venture Debt
- 12. Basic Financial Terms • Profit & Loss A/c • Balance Sheet • Cash Flow Statement • Business Plan • Budgeting • Accounts Payable • Accounts Receivable • Direct Costs • Indirect Costs • Operating Margins • Net profit • Cash Burn Rate • Debt Equity Ratio • Current Ratio • Debt Service Coverage • Interest Coverage • IRR/ROCE
- 13. Golden Financial Management Rules • Never Invest your money without ensuring that assets you acquire can generate a return which is at least equal to the cost of your capital • Invest your money in such a way that the assets will generate an inflow of funds before liabilities demand an outflow (*source: Romancing The Balance Sheet by Anil Lamba)
- 15. Go Back to Basics • Generate Profit & not Sales • Cut unnecessary expenses • Pay minute attention to cash flows • Manage Working Capital efficiently • Don’t use short term funds for long term purposes • Be wary of unsecured & high cost debts
- 16. Further Survival • Negotiate credit terms with Vendors and Customers • Look for Hidden sources of cash (especially for slightly mature business) in your books • Sell off unwanted assets to generate cash • Explore advances from Customers • Lay off people (if unavoidable) on best possible terms
- 18. Hottest Sectors (Q1 FY 17) • Fintech ($18.5 mn ) • Food Tech ($11.5 Mn) • Real Estate Tech ($10 Mn) • Health tech ($8.43 Mn)
- 20. Fund raise Questions • How much funding should I raise? • When should I raise money? At what stage should I not? • How much equity should I give? At what terms? • How should I value my company? • How should I give equity when I am unable to value my company?
- 21. Fund raise Questions (2) • How should I reach out to investors? • How many investors would I have to reach to find one? • How long will this process take ? • Should I appoint anyone for the process ? • How much will the fund raising process cost • What is the right structure/instrument
- 22. To Conclude • Define your round – amount, tranche, dilution • Structure a process – Project Plan and CRM • Seeking advice – entrepreneurs, investors, mentors, industry guys – ask for advice, you get money; ask money, get advice • Selecting a VC – Terms, Follow On, Strategic Support, Brand Name, Time to money, Integrity/Competition, Dilution • Finding a good CA/lawyer
Editor's Notes
- #7: https://www.asia.finance/knowledge-vault/venture-capital-entrepreneur/why-do-startups-fail/
- #20: http://economictimes.indiatimes.com/small-biz/startups/state-of-startups-indias-top-funded-companies-for-2017/articleshow/59877942.cms
- #24: https://www.fastcompany.com/3003827/why-most-venture-backed-companies-fail