By Fedrianto Ramadhan in summary — Jan 10, 2022

Entire MBA in 1 course Notes

https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/

Passion - Don't see work as a job otherwise you're doing the wrong thing.
"Find an occupation you love and you will never work a day in your life" - confusious
Optimism - Positive attitude is very important in business.
The most successful politician or business people in the world are the one that can speak effectively in front of groups of people and sell an idea, sell a concept to change the world.
Networking is key as relationships are more important than product knowledge
TAM (Total addressable market)
Venture capitalist don't invest less than TAM or at least $20B
Good entrepreneurs are great salespeople

Proprietorship

(+) cheap, quick setup, no politics, (-) personal liability, tough to sell
When : early stage, don't have product yet, if get sued can get your house.

General Partnership

(+) cheap, quick setup, 2+ members, (-) personal liability, tough to sel

Limited Partnership

(+) cheap, limited liability, 2 + members, (-) passive investor, tough to sell, partner with authority is limited

Corporation

(+) Access to capital, easy to sell, corporate governance, (-) board meeting, expensive to setup
has a board of directors and has the ability to protect shareholders and investors.

S corporation <100 individual investors, no corporate tax

LLC (limited liability company)

(+) cheaper than corp, limited liability, if lose $, helps my taxes (-) expensive vs gp, hard to raise money
usually costs 100 bucks or less per year to setup.

Intellectual Property

How to protect
1. file patents / copyrights / TM
2. NDAs
3. Employee Contract
Patent - Product 'protected' once filed
Patent Pending - Usually going to be issued within a year
TM - name / brand / slogan registered @ state / patent
if not used for 3 years u lose it
R - federal level trademark for all state
C - Copyright - its tough to patent software or media, the solution is C
trade secret - not filed for a reason ( it's a secret)
Unicorn are companies that have a billion dollar plus valuation
Relationship are more important than product knowledge
"be a contrarian and watch your career and your net worth take off"

Presentations

U need to be incredibly engaging and entertaining when you present.
Rules :

The less is more
keep it simple
the medium is often more important then the message
inspire, be passionate
deliver an experience
tell a story, 3 words or 3 items on each slide works well
Create a passion statement
show the product early or lose interest in first 30/60 second

Inform, educate, entertain
present with passion right from the heart
don't read scripts
One you understand where pain is, you can define solution.
try less than 10 min
have a break using video
repeat your message a lot
use you hands
make eye contact
dramatic pauses
be honest and sincere
10000 hours practice rules

Very important sales technique

Most successful ceo do : They stop talking once they sense the sale is done.
Keep talking until you're convinced that they're not interested

How VC Makes money

Charge 2% annual fee on the money you invest
They make most of their money on what's called canary which is 20% in entire that they get

How do you harvest an investment? The company / startup, You'll either go public or sold to another company that's called harvesting.
Venture capital is everything between IPO and seed stage ABC rounds
VC capital raising and terms they typically look for 5 by 5 500% by 5 years

How to pitch to a VC

Prepare 3 pitches : 30 sec, 5 minutes, 30 minutes
Sell yourself : nothing is more important.
Discuss what is different about the product
Show the product
keep it simple, be passionate, be interesting
less is more

What VC should you target?

know their stage focus, sector focus, reputation, target return date
are they founder friendly
are they growth or value?
do you enjoy their company?
do you trust them?

How do VC firms make money?

2% management fee
carried interest of 20%
2 & 20
similar to a hedge fund

VC legal paperwork

accredited investors
offering memorandum

How does investing in VC work?

Capital calls
20% left over to avoid dilution

How do VC firms get deals?

networks
past investments
other vc introduce firms to vc
why am i so lucky to see this
University ( goog example )

Who do VC's back ?

Strong management team
huge tam
strong syndicate
disruptive business model

Common stock

the lowest of the low
the last claim on the company
usually can be sold
if firm buys then

Preferred shares

senior claim to common shares
liquidation preference
get divivdens before common
vc firms get preferred
employees get common

Convertible preferred

at IPO preferred shares convert to common shares
when you buy stocks in US markets they are common shares
sometimes convert = 2

Down round?

if you price the series a too high
price of new shares (b) is lower
everyone is angry at the anti dilution clause

Convertible debt

this is a debt instrument & hence has senior debt claims over preferred shareholder
if the firm can't pay the debt then the convertible debt take your stuff.

Warrants

a startup can incentivice investors when they invest by giving them warrants ( an option to get new shares later for free )

Options

call options, the right to buy shares at a specific price in the future
"The biggest risk is not taking any risk... in a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risk" Mark Z.
You can really accomplish anything in life if you're confident
confidence leads to perceived competence
don't memorize accounting or finance, understand it

Balance sheet

assets - stuff you own
liabilities - debt that you owe
equety - people who own your stuff
assets - current assets and longterm assets
liabilities - current liabilities and longterm liability
current assets = cash or bonds
long term assets = factory
current liabilities = credit cards, payroll
long term liabilities = banks

Income Statements

A total stuff we sold
B Amount it took us to sell
net income = A - B

Cashflow

You always want to payback your debt as late as you can as long as you don't incur penalties or pay interest expence

Financial ratio why?

so equity investors can decide to invest or they can assess investment performance.
So lenders can decide to lend or they can decide to lend or the can assess loan performance
So business owners can track performance.

Ratio are less important untuk round B
Liquidity ratio - measure our ability to pay short term debt, if you can yurn something into cash that's called liquidity.
Current ratio - current asset divided liabilities, if > 1 then bank think's you can pay your bills
quick ratio is like current ratio except it ignores inventory if needed
quick ratio - ( current assets - inventory) / current liability

leverage ratio

debt to total assets = debt / assets
interest coverage = ebitda / interest
ROA = net income / assets
ROE = net income / equity
You always want to praise in public and criticize in private
You'll never get promoted unless you ask to be promoted you'll never get a raise unless you ask get a raise

Management cashflow

all forecast are based on % of sales.
cash conversion period ratio measure how long it takes for assets and liabilities to turn into cash
inventory to sale conversion period - avg inventories / COGS /365
Sale to cash conversion period - avg receivables / sales / 365

Financial Capital and ethics

Accounting is more focused on accrued revs and expenses
Finance is more focused on cash revs and expenses, cost capital, cost of equity.
Risk free rate = real rate of interest + inflation premium.
Senior debt - debt is secured via access to asset upon default
measure risk and return - standard deviation / expected return
expected public equity returns risk free rate ( includes inflation) + the validity of the company vs market (b)x expect stock to cut perform goverments bonds.

Security Laws

prospective investors must receive all relevant info before investing (s1)
if you have been defrauded, you should receive compensation ( class action lawsuits )
Insider info - for publicity traded is illegal and result prison. ( no excuse )

most important thing to assess for a potential invest in startup ?
Management team, is the TAM big enough ?

How to value Private companies

Sustainable growth - (ending equity - beginning equity) / beginning equity
Sustainable growth = net income / beginning equity * retention rate

Due diligence and data sources

In business, confidence != competence. don't let others influence your opinion in finance.
Question the financial data & form your own opinion, don't let other form opinion for you

Foundation Toolbox

Qualitative and quantitative
Tech model income statement drivers
subscribers or license revenues
bookings
operating and gross margin trends

Tech model balance sheet

Usually low debt if any
cash rich
analyze deferred revenue

Tech model cash flow

Usually tracks net income
important for subs companies
some companies are seasonable

What about valuation?

value investors sucks at tech
smartmoney model 5+ years out
use revenue, cps and cf

What about non tech valuation?

Dcf - smart money model 5 year
use revenue, cps and cf

"Small customers are just as much work as large customer"

Shor term valuation drivers

consumer tech = subs
enterprise tech = revenue
semi tech = earnings
hotel = rev par
industrial = earning and volume
telco = arpu
retail = earning and SSS
biotech = FDA Approved

When we hire Goldman sach, Investment banker "underwrite" the IPO( legal documents, excel valuation etc)

Equity capital market (ECM) write for 20 page "Sales memo" for goldman sales people.
ECM teaches salespeople on the trading floor, how to market the deal to investors.
Sales people call their client ( Fidelity citadel and other mutual fund/ hedge fund)
Once all order are submitted ECM decide how many shares client gts
Traders the distribute the shares to their mutual fund and hedge fund clients.

Management Consulting

Consultant usually use framework and suggest solutions.
Why? Because their client cannot solve complex problem.

Type of consulting firm

Management / strategy
financial
it
hr / staffing

Positive working in consulting

intellectual stimulating
opportunity to travel
excellent compensation
negatives
brutal hours
some client hates u
long path to partner

BCG Matrix framework

high growth
lomarket share — | – high market
low market

Why you might not get debt financing

Don't have 2+ years financials
if you have few tangible assets
if you have low revenue
1-2 employee are to valiable

Credit cards

50% of startups use credit card
don't get romanced by teaser rates
if you're credit rating suck, you can't raise debt again.

Foreign investor funding sources

Us Gov. lets you buy lawful permanent resident status if you invest 1 million in startup and create or preserve 10+ jobs.
Minimum drops to 500k if it is in a rural or high unemployment region
Even easier for foreign if invest in turn around

Additional gov. loans

For native americans
for hawaians, women, veterans

Harvesting an investment

assets can be transferred to investors
company can be sold and cash is distributed to investors
company goes public and shares distributed 6 months post IPO

Planning exit strategy

Need to explain liquidity targets to investors when you are raising capital
otherwise trauma occurs as investors have their own personal liquidity needs
easy way to value them is using relative multiples

Buyouts

leverage buyout (LBO)
financed using debt
must have great cashflow to loads.

ESOP

Employee stock ownership plan
employee buy the company using leverage
owned by all employee and management

Troubled ventured

It is important not to be emotional about dying companies and realize when it is walking dead then liquidate it or sell it and move on.
reason venture fail, cash is king and run out of cash
Financial distress - when cash on hand is insufficient to pay for current liabilities
load default - miss one payment and its over.
acceleration provision - when a firm defaults on just one payment then all future payments are due immediately
cross default provision one late payments on one loan causes all loans to go into default
Foreclosure - the legal process where lenders collect and takestuff from you
insolvent - negative book equity
operation restructuring increase revenue or cut expenses.
asset restructuring - selling assets or improving ratios like debt divide equity
" Don't expect to realize your dreams in life unless you help others achieve their first"
Term sheet is non binding 10 page doc. that lists basic terms and you have to agree to it and your investors do as well
Free source - wilson sonsini term sheet maker

Invest in yourself

Don't be cheap
sleep 7/8 hour
exercise everyday

A company is only as good as its customer service
3 reason to be longterm greedy
think long term like a founder unjustified critism is a disguised compliment
wealth = health + happiness + gratitude
turn around don't owrk in tech
success = apple's simplicity + intel's paranoia
Superb marketing beats great product
less is more in business
timing is crucial in business
frustration is a good thing in business. it leads to breakthrough
When a company founder resign, investors should head for the exit too.
You need yoda in order to succeed in business and life
Debt holder have the highest claim on a acompany ( meaning they get paid forst or they get their money back first).
Pro rata rights, often vc firms often invest in future round so that they don't want to get diluted
Mark cuban : only morons start a business on a loan.