The document provides information on funding and financials for startups. It discusses three stages of funding - incubation, follow-up, and venture. Each stage has a target number of companies/founders, typical investment amounts, and objectives like developing an MVP or expanding distribution. Financial statements like the income statement and balance sheet are also covered, along with basic startup financial models and key elements to consider.

1. Funding & Financials
Funding
for
startups
Financials
for
startups

2. Funding
for
startups
• Development
Stages
• The
Lean
Investor
Model
• Financing
terms
&
issues

3. Funding
for
startups
• Development
Stages
Growth/
Incuba@on
Follow-­‐up
Early
Exit
• Important:
product
and
service
businesses
are
very
different!

4. Funding
for
startups
• Development
Stages
–
Funding
&
objec;ves
by
stage
Growth/
Incuba@on
Follow-­‐up
Early
Exit
• 20-­‐25
startups
• 5-­‐10
companies
• 3-­‐5
companies
• $15k
per
startup
• $150k
per
company
• Early
exit
or
• Develop
v1.0
of
• Complete
addi@onal
growth
at
product
product
features
scale
through
• Get
first
orders
• Expand
distribu@on
tradi@onal
VC/
• Validate
market
• Complete
team
PE
model

5. Funding
for
startups
• “Lean
Investor”
Model
– Method:
Invest
in
startups
using
incremental
investment,
itera@ve
development.
Start
with
lots
of
small
experiments,
filter
out
failure,
and
expand
investment
upon
success.
– Incuba@on:
$10k-­‐50k
(“Product
&
Market
Viability”)
– Follow-­‐up:
$100k-­‐$500k
(“Expand
Distribu@on”)
– Venture:
$1M-­‐$5M
(“Maximize
Revenue”)
Source:
Dave
McClure

6. Funding
for
startups
• Investment
#1:
Incuba;on
(“Product
&
Market”)
– Structure
• 1-­‐3
founders
• $10k-­‐$50k
investment
• Incubator
environment:
mul@ple
peers,
mentors/advisors
– Build
“Minimum
Viable
Product”
(MVP)
&
Test
Market:
• 3-­‐6
months
• Develop
Minimal
Cri@cal
Feature
Set
• Instrument
Basic
Dashboard,
Conversion
Metrics
• Test
Customer
Adop@on
(10-­‐1000
users)
– Demonstrate
Concept,
Reduce
Product
&
Market
Risk,
Test
Func@onal
Use
– Develop
Metrics
&
Filter
for
Follow-­‐on
Investment
Source:
Dave
McClure

7. Funding
for
startups
• Investment
#2:
Follow-­‐up
(“Distribu;on”)
– Structure
• 2-­‐5
person
team
• $100k-­‐$500k
investment
• Syndicate
of
Angel
Investors
/
Small
VC
Funds
– Improve
Product,
Expand
Market,
Test
Revenue
• 6-­‐12
months
• Test
Marke@ng
Campaigns
&
Mul@ple
Customer
Acquisi@on
Channels
• Setup
A/B
Tes@ng
Framework,
Op@mize
Conversion
– Prove
Solu@on/Benefit
with
a
larger
customer
base
– Test
Channel
Costs,
Revenue
Opportunity
– Determine
Organiza@onal
Structure,
Key
Hires
Source:
Dave
McClure

8. Funding
for
startups
• Investment
#3:
Venture
(“Revenue”)
– Structure
• 5-­‐10
person
team
• $1M-­‐$5M
investment
• VC
Investors
– Make
Money,
Get
to
Sustainability:
• 12-­‐18
months
• Marke@ng
Plan
-­‐
Predictable
Channels,
Campaigns
&
Budget
• Scale
&
Infrastructure,
Customer
Service
&
Opera@ons
• Connect
with
Distribu@on
Partners
– Expand
Market
&
Revenue,
Opera@onalize
Business
– Future
Milestones:
Profitable/Sustainable,
Exit
Op@ons
Source:
Dave
McClure

9. Funding
for
startups
• Financing
terms
&
issues
– Valua@on
– Stock
ves@ng
– Employee
Stock
Op@on
Plan
– Stock
types
– Conver@ble
Debt
– P/E
ra@o
– Dividends
vs.
re-­‐investment
Source:
Venture
Hacks

10. Funding
for
startups
• Learn
more
– Dave
McClure,
Lean
Investor
Model
– Venture
Hacks

11. Financials
for
startups
• Financial
statements
• Basic
Financial
Models
• Key
Elements
of
Financial
Statements
• Issues
to
keep
in
mind

12. Financials
for
startups
• Financial
Statements
– Income
Statement
(profitability)
– Balance
Sheet
(investment
targets
&
sources)
– Statements
of
Cash
Flows
(mee@ng
obliga@ons)
• CFIMITYM!
Source:
McKinsey
&
Co.

13. Financials
for
startups
• Basic
Financial
Models
– Online
Soeware
Subscrip@on
• Salesforce.com,
37
Signals
– Soeware
development
&
licensing
• Microsoe,
Oracle,
Mobile
apps,
– Marketplace
• eBay,
Expedia
– User
&
demand
aggrega@on
• Mint.com

14. Financials
for
startups
• Key
Elements
of
Financial
Statements
Revenues
• Product
• Services
=Total
Revenue
Cost
of
Sales
• Infrastructure
• Support
• Cost
of
Services
=Gross
Income

15. Financials
for
startups
• Key
Elements
of
Financial
Statements
Other
costs
• Research
&
Development
• Sales
&
Marke@ng
• General
&
Administra@ve
=EBITDA
Taxes,
Deprecia@on
&
Amor@za@on
=Net
Income

16. Financials
for
startups
• Issues
to
keep
in
mind
– Assump@ons
–
overall
&
per
unit
• Validate
assump@ons
on
a
small
scale
• Use
a
bojom-­‐up
approach
– Changes
over
@me
• For
example,
marke@ng
costs
per
user
can
go
down
due
to
network
effects
and/or
branding

17. Financials
for
startups
• Learn
more
– Morgan
Stanley,
How
to
read
financial
statements
– McKinsey
&
Company,
Business
Plans
– Microsoe,
Oracle,
Salesforce.com,
eBay,
Expedia
Financial
Statements