Business Angel and Temporary CFO on startups evaluation

Startup evaluation with a Business Angel and Management Consultant

We ask Fabio Scognamiglio, Business Angel and Management consultant how to evaluate a startup and maximize its value.

Let’s meet Fabio Scognamiglio, Business Angel and CEO of Value4You!

Interview with Fabio Scognamiglio, Founder & CEO Value4You, Management Consultant, Temporary CFO, Business Angel and Professor of Finance, Management and Strategy.

Fabio has over 20 years of experience in management and finance, business model design and implementation; business planning and strategy; management control; project & program management; company turnaround and M&A.

He has a consolidated experience in multinational companies (FMCG) and management consultancy industries, both in Italy and abroad.

Hi Fabio, can you tell us about your professional career to date and how did you land in the startup world?

I spent more than 20 years working in multinational corporations and, at a certain point, I decided to start an entrepreneurial career. 7 years ago, I started this new chapter of my life and supported several SMEs passing down the knowledge acquired in over 20 years in multinational corporations. This experience has brought me to found Value4You, in 2020, during the pandemic. Working closely with Italian entrepreneurs, I understood the real potential they have. Many lack a managerial mindset, which is the key to grow from a SME to a big corporation. This typical issue is even stronger among startups, and, in fact, many fail within 5 years. Hence, I thought that the managerial mindset should be imprinted from the beginning, to avoid failures. For this reason, I founded Value4You to begin this process. 

Today you are Founder of Value4You, when was the idea born and why? What activities do you do with this company?

Value4You came up to my mind in 2019 and I worked with my team to be ready for Q1 2020. However, the pandemic situation requested changes and adjustments to cope with the new issue. A newly born company could not survive such a period, where countless well-established companies were on the verge of default. We needed to re-assess the situation, manage the new risk, re-allocate funds, and re-design our products and services. For instance, Vaue4You Advisory has developed dedicated assessment and recovery plans for SMEs, Business Plans for startups, and project financing, while Value4You Academy has implemented online classes for educational purposes. Having managed these changes, in a relatively short period, I decided that Value4You should start its operations at the end of summer 2020, to help companies face the following COVID-19 waves.

Value4You consists of three main pillars: the Advisory, the Academy, and the Club. The Advisory supports companies through Temporary CFO services focused on the management control system and financial planning; then, Project Manager activities and coaching sessions. The Academy offers dedicated courses that can be taken both online and face to face. We want to share our experience with those young students or entrepreneurs who want to learn new skills to apply in their daily working life. Lastly, the Club is our network of professionals, companies, and former students ready to share their knowledge during events or support us in partnerships, either commercial or industrial.

You are also a temporary CFO; can you explain what this means? Can you also explain us what fractional management is and why startups and SMEs may need this type of professional service?

A temporary CFO is a professional who serves as a CFO for companies who need this role but do not have the structure or funds to support a long-term contract. The temporary CFO covers the function and works on an ongoing basis as if it were a company’s employee. He works to implement the structures and processes needed in a financial department. The temporary CFO works similarly to a fractional executive. A fractional executive works on objectives and dedicates less time than a temporary CFO. For instance, the fractional CFO could help an internal employee to implement a process, like the management control system. 

SMEs and startups need this kind of service because it is flexible and does not weigh on the company’s P&L like an employee. Moreover, fractional executives or temporary CFOs bring knowledge and experience into the company, at a competitive price.

As a Management Consultant and Business Angel, speaking of high vertical skills, for your experience, how much do Italian startups really need it? How much finance skills are lacking compared to others? In which areas there is the greatest need for external skills support for an average startup?

We can read multiple reports on the Italian finance skills and, compared to our European peers, we are far from having the same knowledge. Italian startups need a finance expert to plan and manage all the risks related to implement activities within a company. In addition, many startups need funding, and having a team of experienced finance managers, would help to deal with banks or funds. For instance, I have seen countless Business Plan and many of these, if presented to a bank or an equity investor, would have been rejected. A startup needs to implement basic processes, but the experienced manager can build them to make them adaptable for growth.

Fabio, you also collaborate with Grownnectia as a business plan expert, what does your business consist of?

Grownnectia is a company with terrific experience in the startup world. I mainly support founders to assess the risks of their businesses and implement the financial plan to be presented to equity or debt investors. I look at the business plan with an objective view, as a bank director or a business angel would do!

As a professor you collaborate or have collaborated with John Cabot University, Luiss Business School, Bologna Business School, Sole 24 Ore Formazione, Elis Corporate School, Borsa Italiana, Marconi University, Parthenope University, Federico II University and other universities and business schools, what do you teach to your students?

Thank you for this question, teaching is an activity I am proud of! I mainly teach corporate finance and Management Control Systems courses. However, I try to teach them more than just finance-related topics, I want to teach them how to be good managers in the future! During classes, we do many activities that professionals may encounter during their long careers, and many of these activities are based on my personal experience.

Finally, you are a Non-Executive Director and shareholder in various companies and startups, contributing to strategy definition and implementation, why did you decide to invest as a business angel in some startups?

The decision to invest in a startup is easy: I contribute to develop their business plan. If I am not ready to invest in something I have given time and effort to develop, why would I even start working on the project?

Then, of course, I cannot invest in all the projects I work for, but I mostly take companies in which I know I can add value as a non-executive director or business angel.

Speaking of business angels, we would like to ask you why Italian startups need this figure in the initial phase and what is smart money?

We need this figure because VC funds are difficult to approach at early stages. They have their processes and have to respond to others, while business angels answer to themselves. In addition, the business angel’s role is to bring value through strategic commercial and industrial partnerships.

If you had to give some advice to our startup founders, how would you suggest finding the best business angel for them? How to approach it? How to prepare to grab his attention?

I would suggest looking for someone who has experience in the field they are working in. A business angel that only provides money might not be useful for growth unless founders are only looking for financing.

A business angel needs a proper investor pitch. He wants you to show the business idea and how you develop it within the market. He wants to understand if you are a daydreamer or a businessman.

Speaking of pre-money evaluation of a startup, which methods to adopt in the different pre-seed, seed, and early-stage phases?

I mostly adopt multiple methods to evaluate a company. Mostly the venture capital and multiple stage funding. I also use the DCF to have an idea of the startup cashflow values although it is not mostly used in this environment.

As an evaluation method we often hear about comparable, what is it, when is it appropriate to apply it and why?

A comparable analysis is a method to evaluate a company through a set of peer’s standards. For instance, we can take the peer’s companies EV/EBITDA multiple and then multiply by our EBITDA, to see the company’s EV.

It is mostly suitable for companies that have a solid business, like those of peers. For startups, we mostly use previous sector deals as comparable analysis.

Going deeper into practice, how can you find multiples of similar transactions of companies in different sectors? Can you leave some tips to our founders to be able to do these searches independently? What are the most suitable professionals to turn to understand what is the right pre-money evaluation for your startup?

Today, we can find available data online. The most used website is Damodaran, but when talking about startups metrics for evaluation, we need to buy those data. Pitchbook and similar companies offer this kind of support, but they are expensive, so I suggest having an idea with the available website and then turn to a professional like us or Grownnectia that have the competencies to evaluate your company.

If you are interested in knowing more about Grownnectia, read also: Incubator founded by Massimo Ciaglia with an exit in America , Incubator of Massimo Ciaglia: becoming a Leader in Europe and Incubator helps startup founders for investor day

If you are interested in Business Angel, please read more on: Business Angel Networks: the main ones in Italy