Abhishek Gurele’s Post

A very insightful one, when startups are placed to be the most promising investment avenue nowadays. 

3. Startup jargon series - What is? Discounted Cash Flow (DCF) - How much is 10% of a unicorn? Why? To assess whether a company or project is a good investment today by predicting its future value. How? The DCF formula discounts the projected future cash flows of a business or investment back to their present value. Who? So how much would an investor invest in 2024 to own 10% of a 2034 unicorn? How? The investor would need to invest $38.55 million today to own 10% of the company's future $1 billion valuation in 2034. This amount represents the present value of that future $100 million, discounted at a 10% rate over 10 years. Present Value=(10% of 1 Bn $)/ (1+0.10 - rate of discount)(to the power of 10 - for 10 years) which is equal to 38.55 Mn$

Understanding the discount rate is crucial for startups aiming to accurately assess their value. It can significantly impact investment decisions and growth strategies. One notable point made in a recent article emphasizes that a well-defined discount rate reflects both quantitative data and qualitative insights. This balance fosters transparency and enhances the overall valuation process. For entrepreneurs and investors alike, grasping these concepts can lead to more informed choices and better financial planning. Remember, achieving high-quality valuations is an ongoing journey that benefits from clarity and collaboration. Do you have any experiences or insights on how discount rates have influenced your valuation process? Share your stories with us – we’d love to hear from you! https://lnkd.in/g33zKPv6

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Due diligence is a critical process for investors considering funding a startup. It involves an analysis of various aspects of the business. Here are some key parameters and considerations for investors to include in their due diligence 1) Understand the Market: Before investing in a startup, know the market it operates in. Is it growing? Who are the competitors? Understanding the market helps you gauge the startup's potential success. 2) Check the Financial Health: Look at the startup's financial situation. Are they making money? What are their expenses? This helps you see if they can sustain and grow their business. 3) Know the Team: The people running the startup matter. Check their experience and skills. A strong and capable team increases the chances of success. 4) Protect Intellectual Property: Make sure the startup has legal rights to its inventions or creations. This protects their unique ideas from being copied by others. Test the Product or Service: 5) Try out what the startup offers. Is it useful? Does it work well? Understanding the product helps you see if there's a market demand for it. 6) Consider Risks: Every investment carries risks. Identify what could go wrong with the startup and how they plan to handle it. Being aware of risks helps you make a balanced decision. 7) Have an Exit Plan: Think about how you'll get your money back and potentially make a profit. Whether it's selling your shares or the startup going public, having an exit strategy is important. Remember, investing in startups involves risk, but thorough research and understanding can help you make smarter investment decisions. Want to understand how can you successfully do a Due Diligence of Business? DM now! #duediligence #startupfunding #riskmanagement #startupecosystem

What is your opinion ☀️☀️ Should we take risk to get #investors on board or should we simply apply formula like ✅#ZOHO, which doesn’t include investors to regulate n streamline the founders vision & mission We have another business like ✅#mamaearth with investment they are getting exponential growth. The #startup needs to assess why the funding is required, and the right amount to be raised. ✅The startup should develop a milestone-based plan with clear timelines regarding what the startup wishes to do in the next 2, 4, and 10 years. ✅A financial forecast is a carefully constructed projection of company development over a given time period, taking into consideration projected sales data, as well as market and economic indicators. ✅The cost of Production, Prototype Development, Research, Manufacturing, etc should be planned well. Basis this, the startup can decide what the next round of investment will be for. A true suggestion & Guidance will be helpful to the entrepreneurs seeking fundings. Please write your comments

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Financing Series (Part-II) 📰 CONVERTIBLE NOTES A convertible note is an #investment vehicle used by investors to provide funding to pre-revenue start-ups generally. These notes are essentially a loan for founders, but instead of receiving #principal amount in return, the investor will receive an #equity portion in the invested start-ups. ▶ To understand how a convertible note works, it's important to first grasp the following terms: 🔸 Interest Rate: Essentially, these notes act as loans to founders. For investors, they won't receive regular #interest payments, but rather interest will accumulate alongside the principal and convert into equity in startups. 🔸 Valuation Cap: This sets a maximum price for #conversion in a future event, granting ownership rights to the investors.  🔸 Discount Rate:  When conducting valuation for #equity issuance for current and new #investors. The current investors will receive discounted equity i.e. they will get more shares in the start-ups. 🔸 Maturity Date: This determines when the conversion will occur, usually in the next round of #valuation and is decided at the issuance of the convertible note. ▶ Pros of Convertible Notes ▪  Convertible notes do not have voting rights until they are converted. ▪ The paperwork for convertible notes is easy because there is no need of valuation of  the startup on the issue date. ▪ Convertible notes can act as fixed income for investors if the note agreement mentions paying interest at a fixed period. Otherwise, interest can be accumulated and conversion can be done later. This interest accumulation can also be helpful for the founder as they can use it in their startup. ▪  Convertible notes do not sell actual share ownership on the issue date. This helps the founder to maintain control and make decisions accordingly.   ▶ Cons of Convertible Notes ▪ No ownership of investor in startups until conversion of convertible notes. ▪ There is a high risk of uncertainty because these notes are mainly for non-revenue startups, and the future is uncertain.     ◽ Like this post if you found it insightful ◽ Repost this on your timeline to spread awareness ◽ Comment your thoughts! ◽ Follow us for more such contents.

The Reality of Revenue Forecasting in Startups: Why Accuracy Matters to Potential Investors For startups, accurate revenue forecasting is crucial for attracting investors. It shows that the startup understands its market and business model. Here’s why this accuracy is important: 🔸 Building Investor Confidence Investors seek startups with solid financial projections. Accurate forecasts indicate realistic planning and a solid grasp of operational metrics, boosting investor confidence in the startup’s management and growth potential. 🔸 Risk Assessment Investors use revenue forecasts to assess the risk of investing in a startup. Accurate forecasts help evaluate if the projected returns justify the risks, whereas overly optimistic or inaccurate forecasts can cause mistrust and hesitation. 🔸 Resource Allocation Accurate forecasting ensures optimal resource allocation, showing investors that the startup can effectively manage its finances. 🔸 Strategic Planning Accurate forecasting aids in setting realistic goals, developing contingency plans, and adjusting strategies as needed. This proactive approach reduces perceived investment risks. 🔸 Performance Tracking Consistently meeting or exceeding forecasts signals strong management and operational efficiency. ✔ Best Practices for Accurate Revenue Forecasting → Market Research: Understand demand, competition, and pricing dynamics. → Historical Data Analysis: Use past performance data for future projections, adjusting for market or business changes. → Conservative Estimates: Base forecasts on conservative assumptions to account for uncertainties. → Regular Updates: Continuously update forecasts to reflect actual performance and changing market conditions. How would you like to raise faster? Find out here: https://lnkd.in/gTnPSDYj #business #economy #entrepreneurship #familyoffice #fundraising #hedgefunds #investing #investment #innovation #markets #privateequity #startups #technology #venturecapital #wealthmanagement