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Reading FinancialsThe non-traditional perspective
Jim Cunningham, Triannic LLCOctober 4, 2014
Traditional Uses
Measure the viability of the business
Assess the going-concern value of the business
Legal/regulatory assessments and valuations
Traditional Financial Statements
The GAAP Statements:
Balance Sheet
Income Statement
Statement of Cash Flows
Non-Traditional Perspective
Venture Capitalists
Organized Groups of Angel Investors
Sophisticated Startup Investors
Mega-Acquirers (Google, Amazon, etc.)
Non-Traditional Goals
Evaluate the Competency of Management Especially the Financial Literacy of
the CEO
Understand the Controllable Costs
Learn the Use of Funds
Assess the Potential of the Business
Financial Competency:The Pitch Session
It is critical that the CEO understand the Financials “The CFO will answer the financial questions” is
failure
Action: memorize the key numbers
Action: absorb the Assumptions behind those numbers
Action: assess the risk factors to each number and have answers
Tieing the Plan Together
1. •Bizplan Text
2. •Quantified Assumption
3 •Financial Projection
The Key Financials
Projections (cash-basis if appropriate) Five years is preferable –investors have 5 year
horizon Conservative vs aggressive? Monthly for first 2 years, quarterly for last 3 is best
Uses of Funds is important
Clear Assumptions tied to the Projections
You must Justify the Amount Requested
The Key Financials, cont.
Valuation –The Final Number
Investors expect the company to propose a valuation
Investors are looking for a 35% - 25% annual return (IRR)
Valuation methods: www.fundersandfounders.com/how-startup-valuation-works/ is a clever short summary
Beyond the Statements
The Management Dashboard
Key financial-statement numbers
Key non-financial numbers
Key early-warning information
Breaking News
www.queencitycrowdfunding.com is launching
It publicizes local Crowdfunding Campaigns to Cincinnati
It helps Local Boosters find Local Campaigns It helps Local Campaigns raise more money It is FREE to campaigners and contributors
Jim Cunningham
Principal, Triannic LLC
www.triannic.com
