valuation 2010 final

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Slide 1

Valuation and forecasting

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Before we start

3

Financial Fundamentals

Learning the income statement, balance sheet etc

18

Exit Analysis Nordic VCs

Decreasing valuations

8

Financial Performance

Key ratios and actual performance vs. plans

27

Valuation

Relative and absolute methods. DCF is an absolute method that discounts future cash flows

48

Financial Planning

Combine top-down and bottom-up approach and ensure link between plan and budget

34

The VC Method

He value of a company is a matter of discussion over a cup of coffee

62

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When will there be a break

2

Before We Start

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.. I need three volunteers?

Before We Start

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Tweet key learnings

Before We Start

Control10

Password:

MCF10

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Give a hand to the tweeters!

Before We Start

#

Reminder - Assignment for every study group!

Deadline - the lecture on OptionsEvery study-group should find 10 tweets that:You find interesting / funnyThat can serve as a either a summary of the lectures or that explores an important topicUpload the Powerpoints at Slideshare and tweet the link in Twitter in MCF10 accountTwo groups will present randomly chosen

Before We Start

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Exit Analysis Nordic VCs

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Trade sales are most common and the crises has reduced # exits and closed IPO window

Exit Analysis Nordic VCs

Source: VentureXpert

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As well as having reduced the values IPOs are typically larger than trade sales

Exit Analysis Nordic VCs

Source: VentureXpert

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Decreasing exit value and increased general risk leads to lower valuation for early-stage

Exit Analysis Nordic VCs

Source: VentureXpert

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Know your value inflection points...

Exit Analysis Nordic VCs

Pre-venture

Venture

Capital Need

Exit Value

Proof-of-concept

Proof-of-business

Proof-of-scale

Market Share

#

Have the end in mind

Exit Analysis Nordic VCs

Start-up

Strategic Customer

Competitor

New entrant

Strategic Supplier

IPO

#

Approach the exit differently

Exit Analysis Nordic VCs

Trade Sale

Business strategy to fit exit

Identify buyers

Position the company

Create bid wars

IPO

Business strategy to fit exit

Asses timing capital need and market

Prepare organisation setup

Create exposure

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US exits have higher values for several reasons

Exit Analysis Nordic VCs

Source: Vkstfonden

#

US VCs participate in the most attractive exits of Nordic companies

Exit Analysis Nordic VCs

Vkstfonden

#

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

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Financial Fundamentals

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Standard P&L (Income Statement)

Financial Fundamentals

StandardFunctionalP&L

AKA

Net Sales

100

Revenue or Turnover

-CostofGoodsSold

50

COGS, Variable Cost, OPEX

=GrossEarnings

50

Gross Profit

- MarketingExpenses

10

Fixed Cost, OPEX

- AdministrativeExpenses

10

Ibid.

- BuildingRental

10

Ibid.

=EarningsbeforeInterest,Taxes,DepreciationandAppreciation

20

EBITDA

- Depreciation expenses

5

+ Appreciation

3

=EarningsbeforeInterestandTaxes

18

EBIT or Operating Income

-Interest

5

Financial expenses

=EarningsbeforeTaxes

13

- Taxes (@ 25% tax)

3,25

= NetIncome

9,75

Net Profit

#

Bill of Material a nice reality check

Financial Fundamentals

Bill ofMaterial- Relevant for COGS

Components

Unit

Total units

Total Costs

Electronic

40

1.200

48.000

Plastic

5

1.200

6.000

Connectors

5

1.200

6.000

Direct labor

15

1.200

18.000

Total

65

1.200

78.000

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The Balance Sheet - Assets

Financial Fundamentals

The Balance Sheet - Assets

AKA

Cash and Marketable Securities

100

Recievables

50

Debtors

Inventories

50

work-in progress, raw mat.

Total Current Assets

200

Short term assets

Equipment

500

Less: Accumelated Appreciation and Depreciation

10

SUM: Reduction of increas in value

Net Equipment

490

Building

400

Other Long Term Assets

20

E.g. IPR or Goodwill

Long Term Assets

910

Fixed Assets (+1 Year)

Total Assets

1110

#

The Balance Sheet Liabilities and Equity

Financial Fundamentals

The Balance Sheet - Liabilities and Equity

AKA

Payables

100

Debt to suppliers

Accrued wages

50

Debt to employees

Bank Loans

50

Other Current Liabilities

10

Cathall short term debt

Total Current Liabilities

210

Short Term Debt (1 Year)

Owner's equity

390

Residual (capital stock, trans. Income)

TotalLiabilitiesandEquity

1110

#

Cash Flow Statement

Financial Fundamentals

Cash Flow Statement

AKA / Explanation

Net Income

9,75

+Depreciation

10

Non-cashout-flaw(anadjustment)

Working Capital:

-Increase in Recievables

10

Youfundcustomers

-Increase in Inventories

5

+Increase in payables

2

takingtrade credit reduces capital need

+Increase in accrued wages

3

borrowingfromemployees

Net cash flow from operations

9,75

Cash flow from investing activities(CAPEX)

- Investments In long-term assets

80

Free Cash Flow

-70,25

CashGenerating (>0) / Cash Burning (=100>=10524524686871471484849191102102(Tom)130Hovedtotal2741) US investors en forudstning for US exit (kryds evt. med brancher og porteflje land)2) US investors lig strre exitvrdi(kryds evt. med brancher og porteflje land)3) Exit-sandsynligheden topper efter 4-5 r (kryds evt. med brancher og porteflje land)4) Exitvrdien topper efter 4-5 r (kryds evt. med brancher og porteflje land)Antal af PortefljevirksomhederBrancheAntal r?AndetCleantechICTLife scienceLife sciencesvrige(Tom)HovedtotalICTLife sciencesvrigeICTLife sciencesvrigeAlle0213003000%5%0%2%1217321161752111%9%11%11%21114442421185217%14%28%17%3187622438133312%22%17%17%4115442441194417%16%22%17%51145222451472522%12%11%17%6538653068%5%0%6%77322147752711%9%11%10%8134813082%5%0%3%911901090%2%0%1%1011210110102%2%0%1%(Tom)1603381711130(Tom)655818Hovedtotal31312533663211274Nationalitet(Flere elementer)Antal af PortefljevirksomhederUSA-investorerUS investor?Exit-land01?N.A.HovedtotalExit landNejJaDanmark325Danmark32England3115England32Finland11Finland10Frankrig22Frankrig20Holland11Holland10Norge64111Norge65Schweiz325Schweiz32Sverige66Sverige60Tyskland22Tyskland20UK325UK32USA12416USA1240.75strig11strig10Hovedtotal431511605) Exit horisont fordelt p r og brancherMiddel af Antal rExit rBranche200020012002200320042005200620072008HovedtotalCleantech222ICT2.14285714292.833333333314.33333333333.66666666673.754.75.42857142864.66666666674.109375Life science243.82.53.333333333368.53.6Life sciences2.7533.33333333335.66666666674.71428571436.666666666794.4074074074vrige24.543.54.33333333333.666666666723.6666666667Hovedtotal2.28571428572.71428571433.16666666673.74.13333333333.59259259264.30769230775.09090909095.08333333333.964028777200020012002200320042005200620072008ICT2.14285714292.83333333334.33333333333.66666666673.754.75.42857142864.6666666667Life sciences2.428571428633.42857142864.53.53333333334.166666666778.5vrige24.543.53.7532Alle2.28571428572.71428571433.16666666673.74.13333333333.59259259264.30769230775.09090909095.0833333333Middel af Antal rExit rBranche200020012002200320042005200620072008HovedtotalLife science243.82.53.333333333368.53.6Life sciences2.7533.33333333335.66666666674.71428571436.666666666794.4074074074Hovedtotal2.428571428633.42857142864.53.53333333334.166666666778.53.9824561404Middel af Antal rExit rBranche200020012002200320042005200620072008HovedtotalICT2.14285714292.833333333314.33333333333.66666666673.754.75.42857142864.66666666674.109375Hovedtotal2.14285714292.833333333314.33333333333.66666666673.754.75.42857142864.66666666674.109375Middel af Antal rExit rBranche200020012002200320042005200620072008HovedtotalCleantech222vrige24.543.54.33333333333.666666666723.6666666667Hovedtotal24.543.53.75323.3888888889DanmarkFinlandNorgeSverigeI altExits i alt293302587Exits til USA6131222US-exits andel0.20689655170.33333333330.10.480.2528735632DanmarkNorgeSverigeI altUS-exits andel0.20689655170.10.480.2528735632Antal af PortefljevirksomhederNationalitetExit-landCanadaDanmarkFinlandFrankrigNorgeSchweizSverigeTysklandUKHovedtotalDanmark718Danmark0Danmark0England426England0Finland0Finland11Finland0Frankrig0Antal af PortefljevirksomhederNationalitetFrankrig112Frankrig