The Value of Finance (for Startups)

XNode创极无限

2020/09/10 发布于 商业 分类

With his own experience and the long practice in the financial areas, Berry Schrijen (MFin MSc CMA | Group CFO | China | INSEAD) joined the conversation with XNode's Acceleration Manager Jade Hsiao, and shared his insights on: * What finance is and how can it contribute to your strategy? * How to transfer your startup into a higher (financial) value-proposition? * How do you view Profit, Growth and Risk at your organization?

财务  Finance  初创企业  startup 

文字内容
2. The Value of Finance [For Startups] Berry Schrijen MFin MSc CMA Group CFO China INSEAD Organizer Partner An experienced China-based CFO, with a Master in Accounting and Finance from Maastricht University, an Executive Master in Finance from world renowned business school INSEAD and a Certified Management Accounting degree. Passionate about demystifying corporate finance, by stripping complex concepts down to their 'bare-bone' elements, in order to subsequently piece them back together into a practical value-proposition.
3. The Value of Finance [For Startups] Berry Schrijen MFin MSc CMA Group CFO China INSEAD Organizer Partner An experienced China-based CFO, with a Master in Accounting and Finance from Maastricht University, an Executive Master in Finance from world renowned business school INSEAD and a Certified Management Accounting degree. Passionate about demystifying corporate finance, by stripping complex concepts down to their 'bare-bone' elements, in order to subsequently piece them back together into a practical value-proposition.
4. What is Finance? © The Value of Finance – Berry Schrijen - 20200818
5. NATURAL PHENOMENA FROM A DISTANCE Finance Relativity E=MC² Power & Mass Value = Profit & Growth Risk = Trust 𝑃𝑟𝑜𝑓𝑖𝑡 ∗ (1 − © The Value of Finance – Berry Schrijen - 20200818 𝐺𝑟𝑜𝑤𝑡ℎ ) 𝑅𝑂𝐼𝐶 * Note: The actual formula for 𝑉𝑎𝑙𝑢𝑒 = 𝑊𝐴𝐶𝐶 −𝐺𝑟𝑜𝑤𝑡ℎ The details of this formula go beyond the scope of this presentation, and therefore I choose to simplify its representation.
6. TRUST, RISK AND FINANCE Trust is built on promises. Risk is the uncertainty surrounding these promises. Finance quantifies this Risk and translates it into “Value” © The Value of Finance – Berry Schrijen - 20200818 “Company” = A myriad of (Paper) Promises
7. ACCOUNTING & INVENTIONS 500 years ago… Year:'>Year: 1500 Year:'>Year: 1800 Luca Pacioli Leonardo DaVinci Now Mathematician & “Father of Accounting” Mathematician, Inventor, Painter & friend of Luca Pacioli © The Value of Finance – Berry Schrijen - 20200818
8. ACCOUNTING (≠ FINANCE) Balance Sheet Assets + Inventory Liabilities + Bank Loans + Software + Factory + (Patents) Sales? Profit & Loss Statement (P&L) Budget? Margin? Equity + Shares Profit? + Profits The Assets used to develop ‘Profit’ and ‘Growth’ The funding obtained to finance the Assets. = CREDIT (Trust) © The Value of Finance – Berry Schrijen - 20200818 Value = Profit & Growth Risk
9. THE WORLD OF FINANCE Corporate Finance Liabilities + Bank Loans Equity + Equity + Profits © The Value of Finance – Berry Schrijen - 20200818 Capital Markets
10. SO... Let’s go shopping! On the capital market Where can I get the best deal? - What can you offer? - What do you want? - What’s for sale? - What should I buy? Seed Capital © The Value of Finance – Berry Schrijen - 20200818 Private Equity IPO Bank Loan
11. WHAT CAN YOU OFFER? Lifecycle Model Low + Market Growth High BCG Matrix Promises Uncertainty Paper Promises Certainty © The Value of Finance – Berry Schrijen - 20200818 High Low Market Share
12. WHAT DO YOU WANT? Business Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook: Promising What? Room for Growth Business Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook: Uncertain What? Flexibility and willing to take a risk. Business Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook: Certain What? Cheap and long-term Business Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook:'>Outlook: Certain (but Negative) What? Cheap and walk-away © The Value of Finance – Berry Schrijen - 20200818
13. WHAT’S ON OFFER? Paper Promises No Negotiable Yes © The Value of Finance – Berry Schrijen - 20200818 Recurring Payments No Negotiable Yes Required Return (= costs of capital) >50% ~20% ~5% Flexibility and willing to take a risk. (But against high price). Room for Growth. (But against medium price) Cheap (But many restrictions on what you can do with your cash)
14. SO... WHAT SHOULD I BUY? Business Outlook:'>Outlook:'>Outlook:'>Outlook: Promising What? Room for Growth IPO Business Risk: Medium What? Cheap and support Paper Promise: Profit = Cash OR… a super convincing (NonPaper) Promise! © The Value of Finance – Berry Schrijen - 20200818 Business Outlook:'>Outlook:'>Outlook:'>Outlook: Uncertain What? Flexibility and risk sharing. Business Outlook:'>Outlook:'>Outlook:'>Outlook: Certain (Negative) What? Cheap and walk-away
15. THE VALUE OF FINANCE 100 50% Value= Profit & Growth Risk (= cost of capital) 100 20% = 200 = 500 Conclusion: Even if Profit & Growth remain the same, reduced risk does significantly increase the Value. Finance helps us quantify this risk. Note:'>Note: There are many other factors beyond finance that influence ‘Risk’, including HR policies, competition, technology etc. The point therefore is not to say that the stage of the life stage is the only factor that decides ‘Risk’, but merely to translate (any) risk into an important component of Value. In a broader sense, it is up to “Finance” to quantify all these risks. Note:'>Note: NOT The actual formula for Value. Highly simplified See page 2. © The Value of Finance – Berry Schrijen - 20200818 100 5% = 2000 And that is … The VALUE of Finance
16. Let’s put our knowledge to practice... © The Value of Finance – Berry Schrijen - 20200818
17. If you were an investor... Example 1: Two identical companies, same product, same market, same PROFIT, same GROWTH... Value = Company A Company B • Promises • Paper Promises Lesson 1: Don’t ignore paperizing your promises, right from the start. © The Value of Finance – Berry Schrijen - 20200818 Profit & Growth Risk Company A: High Risk (= lower Value) Company B: Low Risk (= higher Value) If company A want to convince Investor to buy his/her company, need to give discount compared to Company B.
18. If you were an investor... Example 2: Two identical companies, same product, same market, same PROFIT, same GROWTH... Value = Company A Company B • Profit:'>Profit: 1000 • # Employees:'>Employees: 100 • # Managers:'>Managers: 0 • Profit:'>Profit: 5000 • # Employees:'>Employees: 450 • # Managers:'>Managers: 50 Lesson 2: Think of your HR policies early before it’s • Profit peron Staff:'>Staff: 1000/100=10 too late. • Profit per Staff:'>Staff: 5000/500=10 © The Value of Finance – Berry Schrijen - 20200818 Profit & Growth Risk Company A: High Risk (= lower Value) Company B: Low Risk (= higher Value) If company A want to convince Investor to buy his/her company, need to ‘promise’ it can grow to 5000 with same amount as people as B. If not, discount.
19. Q&A
20. The Value of Finance [For Startups] Berry Schrijen MFin MSc CMA Group CFO China INSEAD Organizer Partner https://www.linkedin.com/in/berryschrijen/