Good morning,
Last week I started with “I hope you have your umbrellas handy”. That seems apropos (appropriate) again today, but I hope that won’t stop you from venturing out (note the double meaning: “venture companies” and to “venture out” and challenge the situation) to enjoy the Sakura / Cherry Trees and have Ohanami parties.
Balance Sheet (BS) Refresher
- The P&L / Income Statement shows us only a company’s recent performance in revenues and costs.
- However, only with the BS can we understand a company’s true financial health. Here’s an overview from March 4.
- Left side of the BS. Assets. What a company owns. We won’t look at Assets in this series.
- Right Side of the BS. Liabilities and Equity. What the company owes. In this series, we’ve looked mostly at the Equity half. What’s left (double meaning: “what’s left can mean “what remains” or “what’s on the left” side)are Liabilities & Debts.
- Debt is just as important and interesting for many reasons. Most big deals, be they PE or Corporate M&A, are highly leveraged (securing debt to reduce the amount of investors’ cash required)
- I recently out an email about this week’s Private Equity buyout of Toshiba – 2/3 financed by bank debt.
There are Pros and Cons of Borrowing and Debt.
- Article. Types Of Corporate Lending. These are the basics…
- Article. Advantages and Disadvantages of Debt Financing. A short and simple comparison.
- Article. Fewest Japanese Bankruptcies Since 1966 Raises Fears of Zombies. Here was the BS situation at the start of 2022.
- Article. Rapid Rise in Japanese Bankruptcies Despite COVID Support. By the start of 2023, however, things had changed dramatically
What About the Lending Side (Credit)? – Is there a banking Crisis? Recent news of many bank failures has been sobering (double meaning: after the fun of being drunk we “sober” up and face reality, sobering or serious news is like that).
- Article. Two Huge Foreign Bank Failures Impact Asian Stock markets.
- Article. Japanese banks Hit Hard By Foreign Bank Failures. An interesting insight into Japanese banks’ own BS risks.
- Article & Videos. US Bank Failures ‘Very Different’ From 2008 Crisis. Watch the first video first.
Don’t forget, people have Balance Sheets too. Like companies, we all have to keep our personal Balance Sheets healthy.
Enjoy.
Best,
Eric Cole
EDC Business Strategies———————————Part 3. The Balance Sheet. Venture Capital
On Mar 18, 2023, at 10:25, Eric Cole <eric@edcbenchstrength.com> wrote:
Good morning, I hope you have your umbrella handy today in Tokyo!
Venture Capital (VC) is one type of Private Equity (PE), which we studied last week.
In Canada, I met and worked with many funders and founders of Start-Ups. I was so fascinated by it, and the very personal challenges that founders face, for 10 years I was the volunteer Chair of a non-profit to help founders find funders, and vice versa. I learned so much about business, funding, and more. I hope reading today’s material will be good learning for you too.
VC companies (VCs), and Angel Investors provide funds critical to start-ups.
I love the term “Angel” as a metaphor: the young founders “wish” for money, and without the Angels’ money, the dream and the company would die.
Article & Short Video. As this Investopedia piece explains, the risks are huge, but so are the potential returns.
A Day In The Life of VC Investors
Article. “Finding Needles in Haystacks.” A perfect metaphor for the difficulty in finding winners
Article. What VCs Look For. The odds are low, Founders’ personal characteristics are key.
A Day In The Life of Venture Companies
Life is tough, and exciting for VC companies and founders. They need all the help they can get.
Article. A South Korean / Japan Start-Up. Typical personal story about the fears of Start-Up funding.
Blog Piece*.Ideas about Cash and Banking Principles. Start-Ups must think differently than other companies
VC Profile*. 20 Angels Fund Candian Cancer Start-up. The importance of Angels, and how they work together
Bonus Material
*Blog Site. Lots of daily stories that European VCs and Start-Ups look at. Check a few out.
*Angel Success Series. Angel Investors Ontario. Lots of actual Canadian VC funding stories
Best,
Eric Cole
EDC Business Strategies
———————————Part 2. The Balance Sheet. Private Equity
On Mar 11, 2023, at 7:37, Eric Cole <eric@edcbenchstrength.com> wrote:
Good morning,
- In January we looked at stock markets: where public (listed) companies raise funds from the public.
- Last week I ended by saying that Private Equity (PE) is well established globally, growing in Japan, and an interesting aspect of equity financing.
- It’s Private, so there are many advantages for both the PE funds and for the companies that receive such funding… but, it is sometimes controversial.
- Finally, believe it or not, some of the biggest PE funds are quasi-private, and actually publicly traded on the stock markets! How confusing is that?!
What is PE? These first two articles are a bit academic, so skip them if you’re already well-versed (knowledgeable) in PE. Mind you, a little review never hurt!
Article and Video. Private Equity Explained.A good basic overview.
Article.SixPrivate Equity Investment Strategies. PE includes various well-known equity types
An Issue About PE.
Article. Private Equity Is Not What It Seems. How they make money is often “not aligned with investor interests”
Video: Buffet and Munger (the world’s most famous investors) say PE is dishonest. From last week – in case you missed it. Note: these guys are very tough to follow – but try it for fun!
What’s Happening In Japan
Article. Private Equity Funds Increasing in Japan. Also from last week – in case you missed it.
Article. US PE Activity In Japan Surges. See what the biggest deals have been.
Bonus Material
Article. A detailed breakdown of PE’s recent history in Japan.
Article. The Big Japanese PE Players. You can check their websites to see what
Article: Private Equity, or Public? It can be both!!
Enjoy…
Best,
Eric Cole
EDC Business Strategies———————————Part 1. The Balance Sheet
On Mar 4, 2023, at 11:13, Eric Cole <eric@edcbenchstrength.com> wrote:
Good morning,
There is a winter storm warning with a 100% chance of heavy snow today and tomorrow – in my hometown of Toronto!
Here in Tokyo, though, spring has clearly sprung with another sunny warm day ahead. Get out there!!
I signed off last week saying…”The stock markets are only a piece of the financing puzzle. Companies can raise funds using Debt (long & short-term, borrowing & bonds, Equity (private equity, venture capital, crowdfunding), and even Grants. It’s all found on a company’s Balance Sheet.“
Accounting Jokes – because accounting is boring to many people…
- Q: Why did the accountant fall off his bed? A: They didn’t have a balance sheet.
- When do accountants fall over? When they lose their balance. This is a “pun”, a reference to the balance sheet.
- Accountants can always spot a company’s reporting “BS”. [In this case, BS means “bullshit” (lies) not Balance Sheet. Forgive the bad word, but in this context, it’s kind of funny.]
- Please listen to this video by Warren Buffet and Charlie Munger.
- Charlie Munger tells a funny joke at 5:15. Funny! So skip to 5:15 for just the joke
- Warren Buffet talks about Private Equity until 5:15. He’s a terrible speaker, but it’s important about Private Equity.
**Warning for financial experts. The concepts here will be simple and well-known to you… but the English is worth reading/listening to.
**Warning for everyone. There is a lot of detail here. As always, take in as much or as little as you like – but be sure to learn something new!
Balance Sheet Basics
- The BS is a key financial statement, showing a company’s financial value, strength & health
- The left side is total assets – what it owns. The right side is total liabilities – what it owes. (Some BSs show assets at the top and liabilities at the bottom.)
- The two sides will always be equal, or in balance. A magical thing!
Article. The Balance Sheet & its Components Explained. The example is Amazon. Good simple jargon and explanations
Article and Video. A Visual Explanation of the Balance Sheet… and how it changes over time.
The Right Side. Liabilities include Debt and Equity. A company’s building blocks. It’s sources of funds.
Let’s look at some of the types of sources.
Debt
Article. Types of Debt Financing. Pros and Cons.
Article. US Companies Rushing to Issue Corporate Debt. From this Mar. 1: interest rates in the USA are still expected to rise!
Equity
Article. Types of Investments Companies Use, and Why.
Article. 2023’s Most Anticipated IPOs. You’ll recognize some of the previously private companies.
———
Hint about next week
Private Equity, well established globally is starting to grow in Japan. I think it’s a particularly interesting aspect of equity financing, so next week will be devoted to it.
Article. Private Equity Funds Increasing in Japan.
Video. Warren Buffett: Private Equity Firms Are Typically Very Dishonest. This is the same video I shared above in “jokes”.
Enjoy….
Best,
Eric Cole
EDC Business Strategies