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Toptal Finance Blog

The Toptal Finance Blog is a hub for in-depth studies and analysis on all facets of finance, ranging from innovative strategies on raising capital to detailed coverage of new finance trends and technologies.

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Forecaster’s Toolbox: How to Perform Monte Carlo Simulations

by Stefan Thelin

One of the most important and challenging aspects of forecasting is handling the uncertainty inherent in examining the future. Every CEO, CFO, board member, investor, or investment committee member brings their own experience and approach to financial projections and uncertainty, influenced by different incentives. Oftentimes, comparing actual outcomes against projections underscores the need to explicitly recognize uncertainty. Monte Carlo simulations are an extremely effective tool for handling risks and probabilities, used for everything from constructing DCF valuations, valuing call options in M&A, and discussing risks with lenders to seeking financing and guiding the allocation of VC funding for startups. This article provides a step-by-step tutorial on using Monte Carlo simulations in practice.

22 minute readContinue Reading
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The Most Exciting Asset Class in Private Equity? Search Funds from the Investor’s Perspective

by Toby Clarence-Smith

In the current low interest rate environment, investors have been increasingly moving towards alternative asset classes, particularly private equity which continues to attract the lion’s share of investor capital. But could a relatively unknown, niche new asset class hold the key for outsized market performance? In this article, Toptal Finance Expert Toby Clarence-Smith uncovers the world of search fund investing, reviewing some of the key aspects of the asset class from the investor standpoint as well as running through the main benefits of putting money to work in this space.

14 minute readContinue Reading
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How to Understand and Appraise Private Real Estate Fund Investing

by Martin Kemeny

The extent of investing in real estate for most individuals is in the bricks and mortar of their own house. For braver investors, there are a range of other options, the most notable being private real estate offerings. Similar to PE and VC funds, these structures can allow for tailored investments in skilled management teams undertaking complex projects.

16 minute readContinue Reading
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Legal Sports Betting: A New Economy Built on Vice

by Elizabeth J. Howell Hanano, CFA

In the last Super Bowl when the New England Patriots faced off against the Philadelphia Eagles, Americans bet a staggering $4.76 billion on the game. 97% of that figure was done so illegally. However, this will likely change by the time the next Super Bowl rolls around. In a hotly anticipated move on May 14, 2018, the US Supreme Court struck down the Professional and Amateur Sports Protection Act, paving the way for states to legalize sports betting. This article covers the foundations of sports betting, including its $150 billion market size, implementation timeline, and revenue distribution. It will also examine the implications of its legalization, including increased sports engagement and popularity, ethical concerns, fresh opportunities, and its impact on fantasy sports and eSports.

16 minute readContinue Reading
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Don't Scale an Unprofitable Business: Why Unit Economics (Still) Matter

by Toby Clarence-Smith

With venture funding having grown more than 120% in the US in the last five years, startup founders and investors alike have grown increasingly comfortable with low margin business models. But the successes of the Amazons and Facebooks of this world often mask failure in a slew of other sectors, where the "build it and they will come" model doesn't always work. In this article, Toptal Finance Expert Toby Clarence-Smith brings attention back to the importance of studying a business’ long-term sustainability prospects, with a particular focus on unit economics, one of the building blocks of profitability and breakeven analysis for startups.

19 minute readContinue Reading
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Mission Statements: How Effectively Used Intangible Assets Create Corporate Value

by Orinola Gbadebo-Smith

Of the three functional categories that drive value in business—i.e., the "hard," the "soft," and the "intangible"—mission statements comfortably reside in the third, alongside such concepts as brand and culture. But despite the skepticism that is often associated with this category, and having uncovered some of the greatest gems in the corporate arena, this article argues that mission statements, when crafted and utilized effectively, are capable of driving billions of dollars in value.

14 minute readContinue Reading
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Applications of Statistics for Measuring Company Growth

by Erik Stettler

Eyeballing the top-line figures of company growth is unlikely to uncover anything particular radical. To understand the trends that lead to user growth, retention, and/or engagement, statistical tools should be employed to test the underlying drivers behind performance.

14 minute readContinue Reading
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Selling a Business for Maximum Value in a Challenging M&A Market

by William B. Doyle, Jr.

With $936 billion of uninvested private equity capital inching down market, why do 46% to 80% of lower middle market sell-side transactions fail to close? The usual answer is that companies are not ready for buyers’ examination and owners can be overly optimistic or even greedy. Business owners can do much more to put themselves in the driver’s seat. Success boils down to the following: (1) take the time and do the work to prepare for an exit transaction and (2) apply “intelligent greed” to close your best deal.

18 minute readContinue Reading

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