Understanding Investment Concepts

How to Do Financial Due Diligence Before Selecting Stocks? Stock picking isn’t just about looking at charts and following trends—it’s about understanding the financial health of a company. Before investing, a structured Financial Due Diligence (FDD) process can help you avoid bad bets and spot strong opportunities. Here’s a framework to follow: 1. Understand the Business Model & Industry - What does the company do? - Who are its competitors? - Is it in a growing or declining industry? 2. Analyze the Financial Statements - Income Statement (Profit & Loss) – Revenue growth, profitability (Gross, Operating, Net Margins), EPS trends - Balance Sheet – Debt levels, cash reserves, working capital position - Cash Flow Statement – Operating cash flow vs. net income, free cash flow trends 3. Check Key Financial Ratios - Profitability: ROE, ROA, Gross & Operating Margins - Liquidity: Current Ratio, Quick Ratio - Leverage: Debt-to-Equity, Interest Coverage - Valuation: P/E Ratio, P/B Ratio, EV/EBITDA 4. Assess Management & Governance - Background & track record of leadership - Insider buying/selling trends - Transparency in disclosures & corporate governance 5. Review Competitive Position & Moat - Does the company have a sustainable competitive advantage (brand, network effect, patents, cost advantage)? 6. Industry Trends & Macroeconomic Factors - Economic cycles, inflation, interest rates - Global supply chain, geopolitical risks - Market trends affecting revenue streams 7. Cross-Check with Analyst Reports & News - Read Equity Research Reports, Investor Presentations, Credit Reports - Stay updated on company news, regulatory changes 8. Look at Historical Performance & Future Guidance - Compare past financials vs. projections - Evaluate management’s growth expectations 9. Risk Assessment & Downside Protection - What’s the worst-case scenario? - How resilient is the business in a downturn? 10. Compare with Peers & Make an Informed Decision No company operates in isolation—compare financials and valuations with competitors before buying. Smart investing is about discipline, not hype. By doing thorough due diligence, you increase your chances of picking winners while avoiding pitfalls. What’s your go-to method for analyzing stocks? Let’s discuss.

The Case for Evergreen Funds: Traditional closed-end private funds (7 years for Private Credit; 10-12 years for PE) have fixed investment period (3-5 years, respectively), harvest period (3-5 years), and termination date (~2-years extension). Evergreen Funds are structured to invest continuously without an established terminal date. Evergreen periodically accepts new investments, reinvesting capital while allowing flexibility for investor redemptions. Evergreen is an open-ended structure for private markets. Traditionally, investors preferred closed-end fund structures when investing in PE, Venture, CRE/Real Assets, and Private Credit funds. Evergreen’s key advantage is the ability to remain invested, minimize cash drag and allow for greater potential compounding. PE investors despise the J-curve, which can be diminished when investing into a ramped portfolio. When investors deploy capital in a seasoned evergreen fund, it’s immediately invested. Evergreen can be less administratively burdensome as it lessens legal-paperwork associated with re-upping for subsequent funds, while eliminating capital calls plus accounting for distributions (e.g., 8 capital calls & 8 distributions for closed-end fund). LPs have flexibility to redeem/rebalance at certain intervals, +add capital to the fund periodically (may reduce the need to sell to secondary funds). Investment managers will probably spend less time fund raising for multiple funds over time with evergreen. PE & CRE funds with longer-term investment horizons probably prefer evergreen as managers can hold for longer duration, thus reducing the need for PE to request a continuation fund. Evergreen funds typically have lower investment minimum requirements allowing for a wider cross-section of investors to be eligible. The large publicly listed fund managers are leading the evergreen capital raise charge. Private Credit managers like Marathon have traditionally raised closed-end fund structures; however, as evergreen has become more widely accepted, it presents a viable option for managers and investment allocators, alike. Complicating factors for evergreen funds are: 1) Periodic valuations for subscriptions and redemptions (mitigated by third-party expert valuation agents). I believe Evergreen funds are more suitable for Private Credit as investments mature at par as opposed to PE/Growth/VC, which may have a bigger variation in reported valuations. 2) Liquidity of assets v. permissible redemptions (mitigated with exit accounts, capital returned 5% quarterly/20% annually). Of the $14T committed to Private Markets Alternatives Funds, the table below shows 92% is allocated to closed-end funds v. 8% allocated to Evergreen. I expect Evergreen will capture more market share in the years to come.

In 2006, we sold Mobile365 for $425M. However, as founders, we walked away with far less than one might expect. We raised a total of $70M before selling the company. At the time, investors pushed us to invest aggressively, and we made the costly mistake of burning through a lot of cash, often without enough efficiency. When it came time to raise funds again, the telecom bubble burst, and we found ourselves in a down round. A down round occurs when a company raises funds at a lower valuation than in the previous round, with one major consequence for founders: dilution. Since the valuation is lower, the company must issue more shares to raise the same amount of capital, reducing the founders' ownership percentage. This is exactly what happened to us, and when we sold the company, we had been significantly diluted. From this experience, I learned 2 key lessons: - Burn cash efficiently, to avoid raising funds in a desperate situation. Raising in unfavourable conditions can lead to significant dilution. - Avoid raising at an inflated valuation, and always have a solid plan to ensure your next valuation doesn’t decline. The liquidation preference could have impacted us too, but fortunately, we sold the company for a good price. And I won’t even get into the taxes—luckily, I was already in Singapore at the time.

How to Analyse a Company (Like a Real Financial Analyst) Most people look at the stock price. Analysts look beneath it. Because the secret to smart investing isn’t predicting it’s understanding. Here’s how professionals break down a company: [1]. Understand the Business Before the balance sheet, comes clarity. What does the company actually do? Where does its money come from? Is it cyclical, defensive, or growth-oriented? Does it have an edge: brand, patents, or market share? If you don’t understand how it makes money, you can’t value what it’s worth. [2]. Analyse the Financials Numbers tell a story, if you know how to read them. Income Statement: Revenue growth (YoY) → Is it expanding or stagnating? Gross & Net Margins → Are profits growing with sales? EPS trend → Consistency builds trust. Balance Sheet: Current Ratio = Liquidity Debt-to-Equity < 0.35 → Stability ROE > 15% → Efficiency Cash Flow Statement: OCF > Net Income → Real cash, not accounting profits. Interest Coverage > 2.5 → Comfort with debt. Free Cash Flow = OCF – CapEx Healthy cash flow means survival. Healthy margins mean growth. [3]. Evaluate Valuation Now the question — is it worth it? P/E → Are you overpaying for growth? PEG → Growth-adjusted pricing (lower is better) EV/EBITDA → Compare across peers DCF → Find intrinsic value Because price is what you pay. Value is what you get. [4]. Assess Management & Risk A company is only as strong as its leadership. Transparent governance → Trust Consistent strategy → Vision Red flags → Sudden accounting shifts, share dilution, or rising debt. Good management compounds value faster than numbers do. [5]. Decide with Logic, Not Emotion Ask yourself: Is it undervalued? Is it growth, value, or dividend play? What’s my exit plan? You don’t need to be smarter than everyone just more disciplined than most. In investing, clarity is your greatest edge. The deeper you understand the business, the lesser you’ll depend on luck. ----- Jeetain Kumar, FMVA® Founder, FCP Consulting Helping students break into finance and consulting PS: If you want to start your career in finance, check the link in the comments to book a 1:1 session with me #finance #cfa #investment #interviews #consultation

🎬 How Film Investors Get Their Money Back One of the biggest misconceptions in filmmaking is that film investment is a gamble with no clear route to return. The truth is, smart film finance is built on structure, strategy, and multiple revenue streams. Here’s a quick look at how investors typically make their money back 👇 💰 1. Recoupment Waterfall After the film is sold or licensed, income flows through a “waterfall.” Investors are repaid first often with a premium (10–20%) before profits are shared with producers, sales agents, and talent. 🎟️ 2. Distribution Deals Films generate revenue from various platforms: theatrical releases, streaming (Netflix, Amazon, Apple), TV networks, airlines, and digital sales. Each territory or platform contributes to the investor’s recoupment pool. 🌍 3. Tax Incentives & Rebates Depending on the location, production rebates or tax credits can return 20–40% of qualified spend, effectively reducing the investor’s exposure right from day one. 📀 4. Ancillary & Merchandising Revenue Soundtracks, merchandise, product placement, and remake or format rights can all add to the revenue stack. 🎥 5. Long-Term Library Value A good film doesn’t stop earning once it’s released library sales, streaming royalties, and international syndication can continue generating income for years. 💼 Rough Example Breakdown — £5 Million Film Investment Total Budget: £5,000,000 1. Government Rebates (UK + EU): Approx. 30% return → £1,500,000 back within 6–12 months. 2. Pre-Sales & Distribution Advances: Agreements secured pre-release (domestic + international) → £2,000,000 returned during or soon after production. 3. Post-Release Revenue (Streaming, TV, etc.): Within 2 years of release, additional returns from: SVOD & TV licensing: £1,000,000 Ancillary rights & merchandise: £250,000 Library/royalty income (years 3–5): £500,000 Total Revenue: £5,250,000 ✅ Investor Recoups 100% + 5% premium (£5.25M) ✅ Ongoing profit participation on future library sales Film investment isn’t a lottery ticket it’s an asset-backed opportunity when structured correctly. The key is transparency, experienced producers, and a realistic route to market. When creative vision meets financial discipline, both art and investment thrive. #FilmFinance #Investing #FilmProduction #EntertainmentBusiness #Producers #CreativeInvestment

You took a $50K pay cut for startup equity. The VCs are counting on that. Here's what they know that you don't: Last year, a friend called excited: - Head of Product role - $2M ARR startup - $120K salary - "Generous equity package" I asked one question: "What's the preference stack?" Silence. Here's what that 1% actually means: - Investors put in $10M - They get paid back 2x first - Then they get their pro-rata - Then you get... what's left The real math: $20M exit = $0 for you $30M exit = $0 for you $40M exit = maybe lunch money But it gets worse: Your 1% isn't even 1%: - Series A cuts it to 0.5% - Series B drops it to 0.25% - Series C? Keep dividing - Down rounds? Start crying The cruel truth: 95% of startup employees never see a dollar from equity. But 100% took pay cuts to get it. Before you take that "dream offer": Red flags to watch for: - "Industry standard vesting" - "Standard preferences" - "Standard dilution protection" - "Standard liquidation rights" Translation: Standard = You lose Questions that save you: 1. "What's the current preference stack?" 2. "Show me dilution scenarios" 3. "What's the exit waterfall?" 4. "How many shares outstanding?" Because here's what VCs know: Hope is expensive. Math is free. Choose math.

FILM FINANCING AS AN ALTERNATIVE ASSET CLASS For family offices and private investors, independent film and television projects represent a sophisticated asset segment that combines intellectual property creation with structured recoupment models. The opportunity lies in understanding how capital moves through the financing stack and how risk and liquidity are managed at each stage. ⸻ EQUITY PARTICIPATION Equity represents ownership. Investors exchange capital for a share of the film’s revenue through theatrical sales, streaming, licensing, and catalog value. Capital remains at risk until recouped, but successful distribution can deliver outsized returns. Seasoned investors structure equity positions with first-position recoupment, executive producer credit, and defined backend participation to protect their upside. ⸻ DEBT FINANCING Debt provides a collateralized, income-based approach to film investment. Lenders underwrite loans against secured receivables such as pre-sales, distribution minimum guarantees, or transferable state tax credits. Interest and fees are repaid from contracted revenue streams, reducing exposure and positioning the loan as a form of asset-backed lending. Completion bonds further mitigate delivery risk and enhance capital security. ⸻ BRIDGE AND GAP FINANCING Bridge and gap facilities maintain production continuity between funding milestones. Bridge loans cover timing gaps before contracted funds clear, while gap loans secure the final portion of a budget not yet backed by confirmed collateral. These short-duration instruments are typically supported by unsold territories, pending tax incentives, or distribution receivables and offer premium yields reflecting execution sensitivity. ⸻ TAX CREDITS AND INCENTIVES Government-backed incentives act as soft-money equity. Credits can be monetized or factored upfront to provide immediate liquidity. Leading U.S. jurisdictions—Georgia, New Mexico, Louisiana, Ohio, and New York—remain competitive because of transparent, transferable credit programs and strong local-spend multipliers. ⸻ STRATEGIC PARTNERSHIPS AND BRAND INTEGRATION Corporate partnerships and product placement supply non-dilutive capital and marketing exposure. These relationships can offset production costs through co-branded campaigns, hospitality support, or in-kind value that enhances both the film’s visibility and investor return profile. ⸻ WHY IT MATTERS Film assets behave more like structured credit than speculative art. When professionally packaged—with bonded budgets, collateralized incentives, and diversified recoupment streams—they offer investors an alternative asset class capable of producing asymmetric upside within a disciplined, risk-managed framework.

During my career, I’ve secured tens of millions in funding. But looking back there are some things I wish I’d known before I started. Here are four tips I’ve learned the hard way about approaching potential investors with your business idea: 1️⃣ Know your numbers inside out Investors want to see not just passion but also a deep understanding of your business model. It doesn’t matter if you’re not a “numbers person”. Frankly neither am I. I just work hard to master them. Be prepared to discuss your financials in detail: multi-year revenue projections, cost of sales, fixed expenses, and break-even points. Comfort with your numbers demonstrates that you’ve done your homework and are serious about your venture. 2️⃣ Tailor your pitch to the specific investor Not all investors are created equal. Research who you're pitching to and adjust your message accordingly. What do they value? What sectors do they invest in? Who else have they backed and why? Use part of your pitch meeting to ask them about their history and motivations. This is absolutely not about changing your business plan or finances, but thinking about what you emphasise to align your narrative with their interests. 3️⃣ Have a clear exit strategy Investors will back enterprises for all sorts of reasons: a passion for the sector, enthusiasm for the founder, or market potential. But the number one reason they’ll back you is to yield an attractive rate of return. Be ready to discuss how and when they’ll make money from investing in you. Whether it’s through acquisition, IPO, or another exit strategy, showing that you have a plan to return a multiple of their initial investment will instil confidence. It’s not just about the immediate future; it’s about how you envision the long-term growth of your business. 4️⃣ Practice your storytelling People connect with stories, not just facts and data - important as those are. Use storytelling to convey your vision, the problem your business solves, and why you’re the right person to tackle it. A compelling narrative that links to the forecast performance of your business will engage investors emotionally, making them more likely to remember you and your pitch long after the meeting is over. What’s your experience of pitching for funding? What are you still wary of with investors? Share your tips or questions in the comments below!

709 companies on Carta raised a down round in 2023. Contrarian view - seeing nearly 2 down rounds per day is a good thing. I'll unpack that in a moment, but first some more headline data: • Down rounds represented 19.7% of all rounds on Carta this year (excluding the first priced round for any companies).    • That 19.7% is the highest share for down rounds in Carta history - in a typical year it averages about 10% of all rounds.    • Bridge rounds were more likely than new primary rounds to be down. 23% of bridges were down rounds, but only 15% of primaries. This doesn't include convertible financings.    • Essentially every industry with sufficient round volume saw their highest year of down rounds this past year - the macro changes spared nobody.    As you can see in the graphic, Crypto companies were the most likely to have a down round, followed by Consumer and Education startups. So - why is this a good thing? Don't down rounds suck? Yes! They do. But they suck a lot less than going out of business. I think it's imperative that private tech shed the stigma around down rounds. Public companies are devalued every day, valuations fluctuate due to a whole host of factors - it's a little silly to assume private valuations would be up and to the right all the time. Also - a clean down round can preserve the cap table in a way a messy, structure-filled flat round does not. If the alternative to a down round is a nominal increase that comes with high liquidation preference and other terms, it is often more beneficial for the founder (and employees) to take the down round and keep building. I don't want to minimize the impact. It's a tough moment to admit valuation expectations got out of hand. And the founders have to explain the reasoning multiple times - to employees, to current investors, to prospective investors, to themselves. But I'm hopeful many of these startups will be able to grow again into a reasonable valuation that doesn't crush the future with the weight of unrealistic expectations. Kudos to the founders and investors willing to admit 2021 was a sugar high. More data like this every Thursday in our Data Minute newsletter - subscribe at the link in graphic. #cartadata #downround #startups #founders #fundraising  

You know investors now definitely see sports as an asset class when J.P. Morgan, Goldman Sachs, and Morgan Stanley all decide to allocate time and resources to launching sports-focused teams / reports / indexes. 📈 ➡️ J.P. Morgan   6 months ago, J.P. Morgan launched a new "sports investment banking coverage group" to cover investments in sports franchises for their clients around the globe.   Fred Turpin, J.P. Morgan’s Global Head of Media and Communications Investment Banking declared then: “With top sports franchises in the US and Europe now valued at more than $400 billion in total, sports have become an increasingly large asset class, attracting more and more institutional investors.”   ➡️ Goldman Sachs   Last month, GS released a report called "Changing the Game: Unlocking new opportunities in sports" in which they picture sports as an "outperforming asset class generating opportunities for corporates and investors to diversify their assets and unlock value."   Here's a quote from Dave Dase, Global Co-Head of Sports Franchise:   "The days of just selling tickets and concessions are over; sports are rapidly expanding into 24/7 data management platforms that bring best-in-class customization - helping teams grow and increase the monetization of their fan base across all business verticals.”   Trends quoted in the report include:   📱 Evolving media landscape shaping a new era for sports rights   🤝 Minority stakeholders becoming an essential part of the capital structure in parallel with soaring sports teams’ valuations 🎮 Expanding range of sports-adjacent businesses 🥅 Modern-day stadiums generating new avenues for monetization   ➡️ Morgan Stanley And now, Morgan Stanley’s wealth management division is launching an investment index tied to sports leagues.   Name of the index?   The "Parametric Custom Core Sports League" strategy.   The portfolio's holdings will consist of 250 to 400 securities from companies that have sponsorship, media, advertising deals, and other associations with major sports leagues, including the NBA, WNBA, NFL, NWSL, MLS, MLB, LPGA, PGA, NHL, US Open Tennis, F1, Nascar, and college basketball.   The portfolio is aimed at high net worth sports fans with a $250k investment minimum.   It will allow them to invest in a curated index of companies with strong sponsorship, media and advertisement ties to the most prominent sports leagues.   Sandra Richards, Managing Director and Head of Morgan Stanley’s Global Sports and Entertainment Division, stated:   “We see the demand from our clients that are asking about ways to invest in sports. And it’s going to continue.”   To be noted that they'll use Nielsen Sports as its data source to track the activity, spending and visibility of the companies with exposure to professional sports leagues.