Key Startup Financial Terms – Creating The Killer Business Plan


Complete Video Transcript

0:04one last thing about the of financial modeling and just the whole financial
0:08is really addition terms are used in started world and investing world that i
0:12think it’s important you understand
0:14one of them is burn
0:16burn is how much cash free burning a month you know that’s confidential
0:21how much is burn and stop your here income statement this is a true cash
0:25from which is going out every month
0:28next part of her to relieve runway
0:30which is based on your burn
0:32how much money do you have but how long will ask that your runway
0:36so if you’re burn is fifty thousand mafia five hundred thousand the bank
0:40you have a ten-month runway ok very simple numbers and very good but you
0:45wanna make sure the stems terminology sts
0:47some other terms these are kind of role i’ll be a spiritually coverup are the
0:51types of esters
0:52you have vcs are venture capitalists
0:55these are entities their institutional investors which means they are based on
0:59structures of
1:01they’ve raised money
1:03they’re jamming tenure funds that
1:06managing partners
1:07are true infested different companies and get some sort of return on it for
1:11the limited partnerships with people put their money in the funds
1:14you have the angel investors angel masters really anyone i could write a
1:17check to them they write a check for five thousand
1:20than any other write a check for a million dollars sometimes we call them
1:23super angela’s
1:24torture ones right marcia actually over a hundred thousand dollars individual
1:28there’s also usergroups come together and get a job last night’s
1:31uh… but these are people help you in the early stage sea bass with getting
1:35off the ground deals
1:36before you get to the institutional investors
1:39some of the other institutional masters or private equity guys these are get
1:43fund managers much like feces
1:45with their phones are really focused on buyouts and really more strategic into
1:50different types of investments
1:51not early stage venture investments but they can easily doing a play and real
1:55estate startups
1:57and the last one is a strategic investor
1:59strategic investors are generally companies
2:02who have some interest in your business or your technology and are willing to
2:06invest in it now
2:08to see how the company involves with intentionally either to build a leverage
2:11in their own business later on or even a choir you
2:14your time so
2:15strategic investors can be very good but just one caution if you take wanda on as
2:20an investor it may you know
2:22push away other investors that our strategic here so
2:25let’s say you’ve created that amazing e-commerce piece of software
2:29and google wants to invest in it
2:31animals on the one invests in in the next round of senate will pass because
2:37google’s accordion and their competitors
2:39alas way to get funding or gets really popular way right now skulk out funding
2:43and this is where you post on some citing the go-go or kick starter and
2:48there’s many other alternatives out there
2:50he picture idea your product to put it online
2:53and the crowd the internet crowd whoever may be if they’re going to shit idea
2:58put money in your company in germany very small amounts
3:01and they get something out of it may be for shot of the product they get a
3:04prototype may get full access to your website
3:08what have you on a different variations for at so that’s kind of a at your video
3:13now if you don’t have to take money from anyone start in general that’s the best
3:17is keep your startup
3:18as lean as possible financial in the beginning to be really prove something
3:22can increase your value
3:24this is called the strapless trappings will use your own money
3:27to get the coming off the ground and take it however long it can be
3:32now another term gets thrown around i think it’s important understands the
3:35term of da money
3:36uh… bcs like to use the state he sees like the console smart money which is
3:40their real advance investors they make intelligent choices of what they’re
3:45doing in there but hopefully bring
3:47skills and tools and advice to a startup or connections with the startup in years
3:52del monte is generally
3:54sometimes strategic mine but often dangerous who’d like an idea through the
3:58money and or friends and family uh… for it
4:01don’t really considered on money money is money investors important but the
4:05term does get thrown around a lot
4:07another keypad terminology is investment grounds and what you’ll hear seed
4:12series a series dcc
4:15of growth rounds these are all this round of capital the different stages
4:19seat is just that is your first around money may be the first to little bit of
4:23money to
4:24to get your first product out there your first or going
4:27what have you
4:28uh… your series days series b adjust that the sequential levels that gently
4:32come through institutional rounds are often prefer chairs but their
4:35destructive changes a lot and and that’s all you know is that investments come
4:39around santa given different names
4:41and there’s no real sakarov what you have to do i’ve been with countries that
4:45had series in a series is serious triple-a
4:48for certain reasons and every need to that company
4:51so the most important river knowledge you know something call liquidity about
4:54uh… but sometimes that makes some you know
4:57new entrepreneurs a little nervous but
4:59liquidity events are when something happens to give liquidity bhakti
5:03investors and musical founder our investor mikoni on shares
5:07it may be an i_p_o_ where you go public radio on stock market
5:11and maybe an name which stands for mergers acquisitions this means someone
5:16uh… for it
5:17either one of these can be called a exit strategy
5:20now the every startup julie has an exit strategy we hope to go i peel we hope to
5:25go and i
5:26release up to the market what your exit strategy is
5:29a good example recently is group on group one how do you really sweet
5:33rumored of a big offer from google to buy them
5:36which have been in a minute
5:37they declined because they thought they could get more money
5:39by going public which they did
5:42uh… and they did go public they didn’t make much more money than new
5:46the offer
5:47uh… because it will not be well-received uh… i kill
5:50but then the stock has crashed down so that now facing their own issues but
5:53it’s amazing about exit strategy
5:56uh… when you’re thinking about your business plan
5:58and the last two terms i think you need to understand a return on investment and
6:02i are are
6:03i’ll are stands for internal rate of return they return on investments just
6:06that if someone puts
6:08five million company of the sea
6:10them and they get ten million back when the liquidity event
6:13they’ve had a two-time return on investment
6:16uh… to exclusive friends
6:17now most pcs one ten x return on investment
6:20so if you’re gonna take five million
6:22from the you’ve got it
6:24would be pretty confident you can grow the company
6:26and get it to you worth more than fifty million because prolly have other
6:30investors in your own share of the component
6:32on access to give them a ten x
6:34now i r r
6:35is a term she’s more for those who have funds are managing its of the season
6:40previn equity
6:40it is the average return on all there
6:43their investments in their fund that’s when you know too much is and on as an
6:48entrepreneur but it is something does come up with the seas because they may
6:51looking to invest in a really big risky deal they may be doing a couple
6:55is smaller ones that they know we’re gonna give ’em well you know any
7:00more stable are

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