Florin Ilie is an angel investor and the Head of Wholesale Banking at ING Romania. In this masterclass, Florin highlighted everything investors need to know about the market they invest in, how these are changing over time, and other business tips and tricks for a successful portfolio.

What better person to talk to about the strategies behind investments than someone who knows the market inside out? Florin is one of the former Top 3 CEE Equity Analysts but also a lecturer in strategy, finance, microeconomics, and communication. His professional background in education includes different graduate and postgraduate roles at the Bucharest Academy of Economic Studies, Harvard University, and the Bucharest International School of Management.

Since joining ING, he worked in several roles: Head of Financial Markets Corporate Sales for Central and Eastern Europe, CFO of Retail Banking, and Head of Equity Markets.

During the masterclass, Florin addressed different questions coming from the public and pointed out a few elements about:

• Why investors should analyze macroeconomic trends as part of the evaluation process for a company.
• What is hidden between the lines during the recession, inflation, and uncertain times?
• How bank interest rates have a strong influence over startup investments.

Investing is for the long haul

The best way to measure the success of an investment is not whether you beat the market but whether you put in place a financial plan and behavioural discipline that can get you where you want to go.

Florin helped our community navigate the nuances of how the plan should be approached by keeping in mind the volatile dynamics of the current uncertain markets.

In today’s uncertain markets, the safest investments you can make financially are state titles in the local currency. The particular state from where you are buying it is the one issuing them, so those have a low tendency for bankruptcy. The problem with this type of investment is in case of inflation, their initial price might not have the same value when you are getting them back.

If we look at where we are today, from the point of view of inflation, we see it has a high level due to the large amount of money placed in the market during the two pandemic years. To support the economy and not let companies go bankrupt, states have been printing more money than ever before. However, this comes with both advantages and disadvantages, which will also indirectly influence companies' valuations.

Further down, during the masterclass, Florin helped our community of investors look at the company valuation from a different perspective.

Evaluate a company and understand the cost of capital

If you are considering evaluating a company based on industry and development stage, consider that the one evaluation method for a company.

Value of the company = cash flow/cost of capital

The value of a company is derived from its capability to produce cash flow in the present and in the future. As investors, we often look at what the company is generating today because the future is always an untold story, no matter if backed up by data. Things can change, and we can only predict up to a certain point.

Who could guess COVID-19 would come?

Who could guess we’ll face a global uncertain time due to a war in 2022?

Our job as investors is to predict as better as we can. It’s better to almost get it than fail to approximate it. Take the results and transform them into the value for today, and find out how much time it will take for the investment to generate ROI. That is your cost of capital/cost of equity.

The downside is that cost of capital also depends on how much money is available on the market. The cost of capital is generated from how much production exists in that particular industry and how much money the financial system generates as a monetary mass. The money someone receives for an hour of work is a variable in time that is constantly changing.

The monetary mass influences it, and today we have a massive amount of printed money placed by states in their local markets during the pandemic. Since there is a lot of money in the market, the value of money has decreased. If you look at any industry with many products, you’ll notice a low price. Where there is scarcity, there are expensive elements.

Building a successful portfolio in today’s uncertain times

Florin advised looking at the macroeconomic trends when investing in a startup. Quite often, this is the most overlooked part of the evaluation process of a startup, and this is why investors usually miss 50% of their chances.

If you are looking at the cash flow potential of a company, this indicates exponential growth. The further the point in time when the company has a good cash flow generation, the more impactful the investment will be over the value of that startup.

“Either you want it or not, as investors, you are highly dependent on the evolution of bank interest rates. So far, the rates have been low, but due to the high inflation, banks need to adjust bank rates too.

The report between these two dynamics greatly influences the evaluation of startups. The further the company's cash flow is placed in time, the more sensitive it is to the cost of capital and bank interest rates. The evolution of the company is volatile.”

The report between these elements is not positive or negative and should be treated as a fact. Depending on its dynamic, it will have a good or bad impact on the company's value.

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Don’t forget to stay tuned for updates about the upcoming masterclasses of the Tech Investors Academy!

Our final event from this series will end with a live debate on a case study, and a networking event on 7 December. All our guests, so far, will do a joint session as a wrap-up to align all the information gathered during past events. RSVP here.

There will be a live startup pitch, and with the help of the panellists, the participants will address the right questions to evaluate whether or not that is a viable investment opportunity. A wine & cheese networking event will follow.