Venture Capital: Risk and Opportunity

Transcription

1 Venture Capital: Risk and Opportunity Over the past 60 years venture capital has evolved and grown to become an important participant and catalyst for the entrepreneurial community through providing risk capital and advice to management teams striving to create and grow new businesses. This course will focus on the role of venture capital, and venture capitalist in identifying, selecting, and developing new companies. Students should expect to complete the course with a thorough understanding of the processes, incentives, structures, and activities employed by those making the risk-reward determinations to fund new and growing companies. The class should be of assistance and interest to students considering a career in venture capital, investing in growth companies, or entrepreneurship. Coursework will be organized around the activities and challenges faced by venture capitalists, primarily evaluating new ventures and growth company investment opportunities, reviewing business plans, conducting due diligence, determining valuations and financing structures, negotiating with management teams, constructing term sheets and legal papers, working alongside management teams to enhance their businesses, and implementing exit strategies. In addition, the course will touch upon the opportunities and hurdles surrounding the internationalization of venture capital. Course material will include case studies, business plans and articles, and classes will feature a combination of company evaluation, lectures, guests (entrepreneurs and venture capitalists), and group discussions. Course Requirements (Grade Weight) Class participation (40%) Project (40%): preparation of a page paper and a 20 minute presentation on either: - a review/analysis of a real-world successful or failed venture - a business plan analysis and recommendation - anything else that is directly related to venture capital or entrepreneurial activity Groups of no more than 3 people. All topics must be approved in advance. Classic Sports Network business plan review: outline pros and cons and investment recommendation in a few pages (Session #7) (10%) Negotiating session results (Session #8) (10%)

2 B Venture Capital: Risk and Opportunity Class #1 (September 12, 2005) In The Beginning Course introduction and overview including discussion of project ideas and requirements History of venture capital and its current role in the economy Guest: John Taylor, National Venture Capital Association (Washington D.C.) A Note on the Venture Capital Industry (HBSP ) by Professor Paul A. Gompers, July 12, 2001; 29 pages Glossary of Terms Related To Venture Capital (Ewing Marion Kauffman Foundation ( NVCA 2005 Yearbook Venture Impact 2004 Class #2 (September 19, 2005) Horses For Courses Alternative sources of financing for entrepreneurs New Venture Financing (HBSP ) by Professors Howard H. Stevenson and Michael J. Roberts July 22, 2004; 13 pages Angel Investing (HBSP ) by Michael Roberts, et. al. February 24, 2000; 24 pages Guest: Keith Blakely, CEO and founder, Nanodynamics, Inc. (Buffalo, New York) Nanodynamics, Inc. Financing Information Memorandum - Review

3 Class #3 (September 26, 2005) 20/20 Hindsight Evaluating the primary drivers of successful ventures, and why many ventures fail Case Material: Martin Smith May 2000 (HBSP ) by Professors Josh Lerner and Felda Hardymon, August 6, 2003; 19 pages How Venture Capital Works by Bob Zider Harvard Busines Review (Reprint 98611) November-December 1998; 9 pages How Venture Capitalists Evaluate Potential Venture Opportunities (HBSP ) b Michael J. Roberts and Lauren Barley, December 1, 2004; 19 pages Guest: Jeff Horing, Founder, Insight Venture Partners (New York) Topic: Sourcing New Investments Half-page write-up due describing your project Class #4 (October 3, 2005) Crunch Time Valuation guidelines and transaction structuring Case Material: The Venture Capital Method Valuation Problem Set (HBSP ) by Andrew Janower; 3 pages Valuation Problem Set Clarifications from JAH Students should submit a copy of their answers to Questions 1-5 prior to the beginning of class. Chemdex.com (HBSP ) by Laurence E. Katz, June 22, 1999; 31 pages A Note on Private Equity Securities (HBSP ) November 9, 2001 by Professors Felda Hardymon and Josh Lerner; 14 pages A Method For Valuing High-Risk, Long-Term Investments (HBSP ) by Professor William A. Sahlman August 12, 2003; 52 pages Guest: Josh Lewis, Salmon River Capital (New York) Topic: On the bubble with Chemdex

4 Class #5 (October 10, 2005) To Invest Or Not To Invest, That Is The Question Evaluating investment opportunities including business plan review, conducting due diligence, and weighing the risk-reward Case Material: Walnut Venture Associates (A) (HBSP ); 32 pages Walnut Venture Associates (B), (HBSP ); 6 pages (to be handed out in class) Walnut Venture Associates (C) (HBSP ); 2 pages (to be handed out in class) by Michael J. Roberts, December 7, 1998 Some Thoughts On Business Plans (HBSP ) November 14, 1996 by Professor William A. Sahlman; 31 pages The Top Ten Lies of Entrepreneurs by Guy Kawasaki, January 2001, Harvard Busines Review (Reprint F0101B) January 2001; 2 pages Realistic Criteria for Judging New Ventures by James McNeil Stancil Harvard Business Review (Reprint 81613) November-December 1981; 10 pages Class #6 (October 17, 2005) Foreign Affairs Evaluating international investment opportunities and weighing the risk-reward Case Materials: Bharti Tele-Ventures (HBSP ) by Professor Tarun Khanna et.al March 12, 2004; 26 pages AsiaInfo (HBSP ) by Michael J. Roberts, May 4, 2004; 18 pages Gobi Partners: October 2004 (HBSP ) by Professor Felda Hardymon March 8, 2005; 25 pages Guests: Chang Sun, Managing Director, Warburg Pincus China Pulak Prasad, Managing Director, Warburg Pincus India Dalip Pathak, Managing Director, Warburg Pincus Europe NO CLASS ON OCTOBER 24 th

5 Class #7 (October 31, 2005) Lawyers In Love Legal papers and term sheets Case Materials: Term Sheet Negotiations for Trendsetter, Inc. (HBSP ) by William J. Coughlin, April 22, 2004; 10 pages Trendsetter, Inc. Worksheets from JAH (NVCA Website: Guest: Steve Seidman, Esq. Willkie Farr & Gallagher Classic Sports business plan write-up due at start of class Class #8 (November 7, 2005) Negotiating With Your Future Partners Entrepreneurs vs. VCs: students face off mano a mano Students will compete in small groups to negotiate the basic financial provisions of a term sheet with prizes and pain to the winners and losers. Prior to the start of class students to submit their assessment of what is a fair valuation for this round of investment in esurg. Case Materials: esurg (A): Negotiating the Start-Up (HBSP ) esurg (B): Second Round Financing (HBSP ) by Anthony Massaro, June 15, 2001; 24 pages Venture Capital Negotiations: VC versus Entrepreneur (HBSP ) by Noam Wasserman March 2, 2000; 18 pages You Can Negotiate With Venture Capitalists Harvard Busines Review (Reprint 87207) by Harold M. Hoffman and James Blakey, March-April 1987; 6 pages Class #9 (November 14, 2005) Now The Work Really Starts Assisting portfolio companies; how and when to fire the CEO Case Material: VC Vignettes (Stanford Case Number E-93) June 2001 by Christopher S. Flanagan; 6 pages

6 Venture Capital Vignettes (HBSP ) by Professor Felda Hardymon February 16, 2005; 5 pages Guest: James Thomas, Managing Partner, Thomas-McNerney Partners (Greenwich, CT) Topic: Biotechnology venture investing Class #10 (November 21, 2005) Head For The Exits Decisions and alternatives for harvesting successful and failed investments Location: New York Stock Exchange on the floor for the Closing Bell (see separate sheet for logistics, dress code, etc.) Too Soon To IPO? By David Champion, February 2001, HBR Case Study. Reprint R0102A, 9 pages RightNow Technologies (HBSP ) by Professor William A. Sahlman, November 18, 2004, 24 pages Preparing For The Google IPO: A Revolution In The Making (IMD 185) by Dinos Constantinou, November 26, 2004, 29 pages Guests: David Smoot, Managing Director, Morgan Stanley Brian Bristol, Senior Managing Director, W.R. Hambrecht & Co. Class #11 (November 28, 2005) It s A Busines Too Venture capital firm management and economics Venture Partners Fund, L.P. Summary of Principal Terms; 6 pages The Venture Capitalist as Entrepreneur (HBSP ) by Noam Wasserman, March 3, 2000; 19 pages First set of student project presentations to the class. Class #12 (December 5, 2005) Show and Tell Remaining set of student project presentations to the class. Concluding remarks.