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DVAb0 Knowledge Sharing: “Financial Queries for Startups and Source of Funds” by PeerPower (2/2)

DIGITAL VENTURES March 16, 2017 7:20 AM

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These are the common, essential information that startups need to address, assess and prepare to answer investors.

  1. Cash Burn is cash gained or spent per month. This information helps investors finalize decisions.

  2. Revenue Run Rate is the month’s revenue.

  3. Revenue per Employee in an average amount worth preparing. This detail is particularly significant for startups in the software business where the main expenditure is labor cost.

  4. Sales Growth is the growth of sales in a certain period.

  5. Gross Margin is the first level of profitability which is very significant for the hardware business.

  6. EBITDA Margin (Earnings Before Interest, Taxes, Depreciation, and Amortization) reflects the capabilities of the management team as the figures have deducted details not relating to the management aspect. In the software business, the amount will be similar to the Gross Margin.

Know How to Plan your Cash Flow

Every entrepreneur dreams of a positive cash flow. Therefore, estimating and planning is crucial. In cash flow management, do not only focus on accrual but also emphasize on the cash flow as well as stabilizing the cash balance.

Build Up the Valuation

The keyword for startups is Valuation, a qualitative factor unmeasurable by science and has variability in individual assessment. Therefore, a mathematical approach is used to define Sentiments that investors have towards the stocks or overall market which derives from the market movement. Moreover, assumptions can be self-defined and used to acquire confidence. However, investors have various ways to assess Valuation in every aspect to ensure their most efficient investment. Thus, it is necessary to build up confidence regarding this matter.

Source of Funding and Where to Find Them

  1. Equity – Startups search for equity financing from bootstraps, friends and family, angel investors, VCs as well as IPOs.

  2. Debt – Debt financing has its advantages, unlike equity financing, it can be fully used with no interference. Loans involve secured loans, policy loans, convertible debts, unsecured debts, and venture debts.

Big thanks to PeerPower for this useful information

PeerPower  is an online credit loan system. It connects individuals who want to invest and gain monthly income to those who seek loans yet are not prepared for collaterals and search for competitive interest rates as an alternative from existing financial outlets.