Lessons Learned – Session 10

Lessons learned, session 10.

As usual we started the session with team presentations. We were first up and the presentation is available through slideshare or further down on this page. Our presentation went well and we got some constructive feedback which we can use to improve until next time, for instance we should make our organization chart contain fewer positions. A venture capitalist wants to know if the knowledge is in the team and one way to accomplish that is to present the organizational chart with team members and qualities only.

Theme of the lecture: cost structure and financial statements

What is the cost structure of our startup? This is a question which is challenging to answer. There is several assumptions which needs to be made after having identified the cost drivers in the company.

There are several types of costs where variable and fixed makes up the total. As we can see in the diagram, fixed will stay the same and variable costs varies with production volume.

One important feature for a startup is not having too much fixed costs. With a heavy load of fixed costs the business becomes more risky as fixed costs are much more difficult to do something about if needed.

–> We are going to out-contract most of our business and will not have large fixed costs. Our degree of variable costs will be higher.

Financial statements

To get funded, to gain profits and to be able to measure and monetize plans there is a need to develop a financial plan and forecast.

Financial decisions result from many different actions and choices. To get a future positive income there is a need to invest in assets, inventory, human resources etc. These investments will all influence the financial plan. The financial plan is an instrument to assist. Meaning that it will guide and assist the entrepreneurs to make decisions based on achieving the plan.

GOOD NEWS! The worst part is already done through planning for and making the business model. We can use information we already have researched and tested. Based on our findings we can build FORECASTS based on valid results rather than gut feeling.

Main components:

–          Income statement

–          Balance Sheet

–          Cash Flow  Statement

Capital needs

The first source of financing will be our saved capital or capital from family and friends. These amounts are often not sufficient and we need to get Venture Capital. For startups a business angels which is an investor in the near area interested in startup investments.

Angel investors base their investment decision on several criteria, but the MAIN CRITERIA IS THE TEAM and the size of opportunity. Judgment about people is a huge factor and it is made up in seconds à Make a good FIRST IMPRESSION!

This week we are working on our financial statements and pitch, we are improving our internet based tools, and perfecting the business model 2.0.