| Venture Capital and Entrepreneurial Management | |
Course Overview and Design
This elective course focuses on venture capital management issues in the context of a high-growth potential start-up company. The course is motivated by rapid increases in the supply of and demand for private equity over the past two decades. On the supply side, the amount of private equity under management has increased from under $5 billion in 1980 to over $300 billion at the beginning of 2003.
1
Despite the 2001-2003 downturn in fundraising and investment activity in the venture capital sector in particular, limited partner commitments to U.S. venture capital funds have doubled in the last year, from $8.7 billion in 2003 to $16-17 billion in 2004. On the demand side, an increasing number of seed and first-round deals have been completed in the last year, reflecting the beginning of a new venture capital
cycle following the “post-bubble” declines in investment activities in 2000 through 2003.
The course addresses this topic from two distinct perspectives: issues that relate to the demand for private equity and venture capital (the entrepreneur’s perspective) on the one hand, and issues that relate to the supply of capital (the investor’s perspective) on the other. As well, we will address management issues regarding the working relationship between the VC and the entrepreneur, once an investment has been made.
The “entrepreneur’s perspective” deals with the entrepreneur’s challenge in organizing and financing the venture.
Examination of this perspective reveals how entrepreneurs gain an understanding of the context and mechanics of valuing the business. Together, these matters help define the financing requirements of the business and suggest the approach for where and how to raise capital, and thereafter manage the relationship with investors.
Complementing the entrepreneur’s point of view is the “venture capitalist’s perspective”, which explores issues of concern to investors in evaluating, structuring and pricing venture capital investments. Insights gained from these
class discussions will be valuable for students considering a career in venture capital, while also providing essential information for entrepreneurs. As we explore the venture capitalist’s perspective, we will address several aspects of the investment process including the term sheet content and structure and negotiation, valuation methods, and the impact of successive rounds of financing. The nature and tenor of this process sets the stage for the relationship between management and investors as well as the governance of the company.
The course is fundamentally pragmatic in its orientation and will attempt to expose students to both perspectives simultaneously. It will cover six principal areas relevant to the privately held high-growth-potential start-up.
1
This number includes partnerships specializing in venture capital, leveraged buyouts, mezzanine investments, build-ups and distressed debt. (Source: J. Lerner, International Journal of Entrepreneurship Education, 2003) MGMT 804 Fall 2005 Professor Raffi Amit
These include:
• Overview of the venture capital industry today, as well as a discussion of the typical venture fund
structure and related venture capital objectives and investment strategies
• Common organizational issues encountered in the formation of a venture-backed start-up, including
matters relating to initial capitalization, intellectual property, and early stage equity arrangements
• Valuation methodologies that form the basis of the negotiation between the entrepreneur and the
venture capitalist in anticipation of a venture investment
• The challenges of fundraising, due diligence, financing strategies and the importance of the
business plan and presentation
• Typical investment terms found in the term sheet and the dynamics of negotiation between the
entrepreneur and the venture capitalist
• Corporate governance in the context of a venture-backed start-up company and the typical
dynamics that play out between VC and the entrepreneur in the post-financing phase
The course is designed principally to address the interests of students who expect to embark on an
entrepreneurial career, expect to assume a managerial role with a venture-backed start-up company, or wish to
pursue a career in venture capital. The course will touch upon a range of fields including finance, accounting,
strategy, and the law while and attempt to identify mainstream “best practices” in the area of high growth
potential start-ups, ensuring that students completing the course will have a solid understanding of the questions
and issues that face the typical start-up. | |
Required Texts
Course Bulk-pack: MGMT 804: Venture Capital and Entrepreneurial Management, Fall 2005 Q2 edition, compiled by Raffi Amit | |
Session Number Date Topic Case/activity Submissions Due
1 Monday, October 31, 2005 Course introduction :
The VC industry today-
an industry in transition
2 Wednesday, November 2, 2005 VC firm structure and
activities
NOTE*** Monday, November 7, 2005 NO CLASS
3 Wednesday, November 9, 2005 Organizational issues
and initial capitalization
in the formation of a
startup
Caselettes # 1 and 2 Case Memos
4 Monday, November 14, 2005 Valuation
methodologies
HBS Problem set
case # N9-396-090
Prepare Questions 1 & 2
5 Wednesday, November 16, 2005 Valuation
methodologies
(continued)
HBS Problem set
case # N9-396-090
(continued)
Prepare questions 3 - 6
6***
Note
special
date!
Friday, November 18, 2005 Valuation
Methodologies (wrap
up) and Fund raising
challenges
Caselette # 3 Case Memo
7 Monday, November 21, 2005 Financing strategies
from an entrepreneur’s
perspective
Josh Kopelman,
First Round
8 Wednesday, November 23, 2005 First round financing;
Lecture on term-sheets
Caselettes #4 & 5 Case Memo
9 Monday, November 28, 2005 The term sheet Caselette # 6 Case Memo
10 Wednesday, November 30, 2005 Anatomy of a Deal:
examining successive
rounds of financing
Guest Speaker Amir
Goldman, TL
ventures
11 Monday, December 5, 2005 Term sheet negotiation
Debriefing
Governance issues
primer
Course summary
Teams must be ready to
present their negotiated term
sheet. A hard copy of the
negotiated term sheet must be
submitted to the TA
12 Wednesday, December 7, 2005 Final Exam (during
last regular class
time) MGMT 804 Fall 2005 | |
[table=98%]
[tr][td]Detailed Course Outline
Monday, October 31, 2005
Wednesday, November 2, 2005
Sessions 1 & 2: The Venture Capital Industry
• An overview and brief history of the venture
capital industry and its role in fostering the
growth firms
• Current industry trends
• The typical venture fund structure and
investment terms; venture capital objectives
and investment strategies; role of the general
partners
Reading Materials:
Required Reading
• “A Note on the Venture Capital Industry.” P.
Gompers, Harvard Business School
• “How Venture Capital Works.” B. Zider,
Harvard Business Review
• “Why Venture Funds Don’t Want Your Cash.”
The New York Times (July 18, 2004)
• “Extreme Makeover.” Institutional Investor (July
2004).
• “Venture Capitalists.” Chapter 9, Hi-Tech StartUp, by J. Nesheim.
• “The Economics of the Private Equity Market”,
Fenn, Liang, and Prowse, December Z995, The
Board of Governors of the Federal Reserve
System.
Supplemental Materials
• “Does Venture Capital Foster the Most
Promising Entrepreneurial Firms?” by R. Amit,
L. Glosten & E. Muller, California Management
Review, 32 (3): 102-111, 1990
• Summary of Principal Terms: Sample Venture
Capital Fund I, L.P.
Wednesday, November 9, 2005
Session 3: Organizational Issues and
Financing considerations of the venture
backed Start-Up Company
• Forming the company; creating a capital
structure in preparation for venture funding
• Intellectual property
• Founders’ stock and foundations of equity
incentive arrangements | Session 3, continued…
• Caselette #1: Organizational Issues in the
Formation of a Start-Up (Due at the beginning
of class on November 9, 2005)
• Caselette #2: Pre-Financing Considerations
for an Early-Stage Company (Due at the
beginning of class on November 9, 2005)
Reading Materials
Required Reading
• ”The Legal Forms of Organization.” M. Roberts,
Harvard Business School
• “The Legal Protection of Intellectual Property.”
M. Roberts, Harvard Business School
• “How to Build an Organization.” Author
Unknown.
Supplemental Materials
• Certificate of Incorporation
• Action by Written Consent of Sole Director
• Bylaws
• Founder’s Assignment Agreement
• Form of Common Stock, Series A Preferred
Stock Certificate
• Cinta Networks $50 Million Series C
Convertible Preferred Stock, July 2001
• Equity Compensation Overview Memorandum
2001 Stock Option Plan
• 2001 Stock Option Plan/Notice Grant and Stock
Option Agreement
• Restricted Stock Purchase Agreement
• Form of standard employee offer letter
• Form of standard assignment of inventions
agreement
• Sample form of executive employment
agreement
• Equity Compensation Normative Ranges
• Sample Equity Incentive Matrix
Monday, November 14, 2005
Wednesday, November 16, 2005
Sessions 4 & 5: Valuation of the VentureBacked Start-Up
• Financial valuation methodologies; the art and
the science of valuation
• Financing strategies and the impact of dilution
• Case Discussion: The Venture Capital
Method – Valuation Problem Set (HBS case #
N9-396-090) (Questions 1 and 2 are due at
the beginning of class on November 14. All |
Sessions 4 & 5 Continued…
other questions are due at the beginning of class
on November 16, 2005)
Reading Materials
Required Reading
• “Ownership, Dilution, Negotiation, and
Valuation,” Chapter 7, Hi-Tech Start-Up by J.
Nesheim
• “Valuation: What it’s Worth.” VentureEdge 2001
• “A Note on Valuation in Private Equity Settings”
(HBS, 9-297-050 Rev April 8, 2002)
• “Valuation of Private Company Securities
issued as compensation”, Wilson Sonsini memo
(September 2004)
Friday, November 18, 2005
Monday, November 21, 2005
Sessions 6 and 7: The Challenges of VC
Fundraising for the growth oriented firm
• We will wrap up the valuation discussion and
begin to address fund raising issues
• Raising Capital; the role of the business plan;
fundraising strategies
• Due diligence: content and process
• Compensation issues in the high growth
potential venture
• Prepare Caselette #3: Considerations in
Establishing the Initial Capitalization of the
Start-Up (Due at the beginning of class on
November 18, 2005)
• Guest speaker – Monday November 21, 2005
Reading Materials
Required Reading
• “Bootstrap Finance: The Art of Start-ups.” A.
Bhide, Harvard Business Review, Nov-Dec
1992
• “How to Write a Great Business Plan.” W.
Sahlman, Harvard Business Review, July-Aug
1997
• “How to Choose and Approach a Venture
Capitalist.” G. Tankersley, Jr.
• “How to Find the Right Investors for Your
Business.” Author unknown.
• “Meeting with the Venture Capitalist.” W.
Kingsley | Wednesday, November 23, 2005
Monday, November 28, 2005
Sessions 8 & 9: First Round Financing and
the Term Sheet
• Prepare Caselette #4: Issues encountered in
connection with First round Financing (Due at
the beginning of class on November 23,
2005)
• Prepare Caselette #5 Liquidation Preferences
and Anti-dilution Formulas (Due at the
beginning of class on November 23, 2005)
• Prepare Caselette #6: Analysis of a Typical
Venture Capital Term Sheet (Due at the
beginning of class on November 28, 2005)
Reading Materials
Required Reading
• “Venture and fundraising environment”, Heather
Gates – Massoudi, Deloitte & Touche LLP
(August 2004)
• “Venture Capital Negotiations: VC versus
Entrepreneur.” N. Wasserman, HBS
• “It May Be Time to Hit the Reset Button on
Liquidation Preferences.” R.Chiruvolu. Venture
Capital Journal, July 2002
• “Non-Traditional Financing Resources.” G.
Sneddon and J. Turner.
• “Practical Guidelines for Insider-Led, Down
Round Financings”
Supplemental Materials
• Memorandum of Terms for Private Placement
of Series A Preferred Stock
• Memorandum of Terms for Private Placement
of Series C Preferred Stock
• First Amended and Restated Articles of
Incorporation
• Summary of Terms: Recapitalization and Series
2 Preferred Stock Financing |
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托福/雅思/SAT/ACT
大学英语、实用英语
大学英语、实用英语
