This webinar series is a starting point, introducing important concepts that entrepreneurs can delve into on their own through online research or local experts.
This webinar introduces entrepreneurs to the capital structure ahead of the fundraising stage, insisting on the importance of understanding what debt vs equity investors prioritise. We discussed how creating a company is risky and its success is tied to the ability to be financed, so financial preparedness is essential. We then covered at a high level the capital structure being composed of debt and equity, and went on to discuss the following points on debt and equity:
- Debt limits risks for investors, is cheaper for founders, but increases “bad times” risks for founders;
- Equity maximises returns for investors, is more expensive for founders, but limits “bad times” risks for founders;
- Venture funding combines many debt features in an equity form;
Cap tables and distribution waterfalls are an essential element of the fundraising process.
This webinar goes over a VC multiple on cash valuation calculation and a simple cap table. Venture capitalists say it is about the team, so make sure you look good by being prepared. In their valuation maths, VCs will look at the forecast, risk, likelihood of success, dilution and comparables. The cap table is a simple and essential tool to keep track of ownership through dilution. Spend time checking your valuation is in line with market practices, so that your fundraising is fast and does not take over from selling your products to clients.
Key concepts discussed:
(i) How to look at the scalability story;
(ii) How fundraising can serve scalability;
(iii) Main business concepts and financial implications to focus on.
The webinar also discusses clients and market potential; price and economic value proposition; product, quality and cost; staff, execution and operational leverage; and impact, materiality and correlation with business activities. The main point of this webinar is that scaling is about growing clients and margins, and growth depends on repeatability by way of pressure from the growth of your economic value proposition, your sales pipeline and effectiveness, and your product quality.
Key concepts discussed in the webinar: cash is your company’s most valuable resource – understand it and make it count!
We highlighted two financial metrics to focus on: working capital and customer acquisition cost. These can be used to drive big strategic decisions, such as adjusting your distribution channels/customer segments to lower your cash burn.