Dr. William H. Moore, Jr. Craig Gordon Assistant Professor, Finance Senior Managing Director [email protected] Frontside Research LLC 415-442-6573 Entrepreneur Edward S. Ageno School of Business GOLDEN GATE UNIVERSITY Fall Term, 2008 San Francisco Campus Thursday 4:00 PM FI 318 – VENTURE CAPITAL & START-UP FINANCING Preliminary Course Outline Course Description This course is designed to provide each student with a comprehensive overview of the entrepreneur and the entrepreneurial process with an emphasis on financial decision-making. Specifically, students will explore these basic questions: what is a start-up, who gets start-up financing and who provides it, what types of start-ups do capital markets finance and why, what are the expectations of entrepreneurs and investors in the financing process, how do entrepreneurs and investors work together to create mutually beneficial financing strategies, how are start-up’s valued and why valuation is an important step in the start-up financing process, and what strategies can be employed to harvest the value of the start-up once it has matured. Additional topics to be touched on include ethics, managing failing ventures, franchising, the Internet as a new venture vehicle and business planning. During the first few weeks of the trimester, students will explore the nature of the entrepreneur, the entrepreneurial process and a number of related “background” topics. The business planning process will also be discussed during the first few weeks. This material provides an excellent framework for the finance specific material that is the focus of the balance of the trimester. During the balance of the trimester, students will focus on the financing objective. Topics to be explored include obtaining capital (debt and equity), valuing the venture, structuring and negotiating a financing deal, managing rapid growth and a troubled company and harvesting the successful new venture. Through short case studies (written mini-assignments) and an individual project, each student will have an opportunity to personalize the learning process by applying key analytical tools of finance and by selecting and studying a highly entrepreneurial industry of personal interest. Finally, all of the course material is based on this key underlying premise: it’s important for each student to understand the perspective of both the entrepreneur and the entity providing capital. To that end, in this class each student will develop a balanced and complete understanding of both perspectives. Course Objectives Upon successful completion of this course, each student will have good appreciation for the following: • Why is entrepreneurial activity important to the economic well being of a country? • What does it take to be a successful entrepreneur? • How does the role of an entrepreneur change as the firm grows? • How can you distinguish between a good opportunity and a good idea? • What are the key factors that drive continuous growth? • How do I marshal the resources necessary to start and grow the business? Why are teams important? • What are the critical tasks and hurdles is seizing an opportunity and building the business? • How much money do I need to start the business and when, where, and how can I get it on acceptable terms? • What financing sources, strategies, and mechanisms can I use? • Why is a business plan important? What are the key features of a good business plan? • How can I evaluate the quality of a business plan? • How do I identify customers for whom I must create or add value to achieve a positive cash flow and to develop harvest options? • What is the business worth and how do I negotiate what portion to sell? • What are some of the issues, problems, and ethical dilemmas I need to anticipate, prepare for, and respond to? Course Prerequisites Students are expected to have completed at least one finance course (equivalent to FI 100, FI 203, FI 300 or FI 300A) which should provide a basic understanding of the important techniques of financial analysis including risk assessment, calculating rates of return, cash flow analysis, the cost of capital, capital structure, and valuation. Reasonable math skills (algebra is fine) and an understanding of accounting concepts (primarily the structure of an income statement, a cash flow statement and the balance sheet) will also be very helpful. A financial calculator will also be needed. 2 FI 318 – Venture Capital & Start-Up Financing San Francisco Campus Fall 2008 September 4, 2008 – December 18, 2008 Required Texts N ew Venture Creation: Entrepreneurship for the 21 st Ce ntury. Jeffry A. Timmons and Stephen Spinelli , 7th ed., McGraw-Hill Irwin (order from the GGU Bookstore, Amazon or an alternative book supplier.) Term Sheets & Valuations: A Line by Line Look at the Intricacies of Term Sheets & Valuations. Alex Wilmerding, Aspatore Books, Inc., 2006 ed., (ISBN number 1-58762-068-5). The Wall Street Journal and/or other business newspapers/periodicals. You will need access to either the print or online version of popular business newspapers and journals. Internet access will also be helpful. (There is no need to purchase subscriptions … non-subscriber access will generally work fine). Course Schedule, Topics and Instructors Unit Week Topic Instructors Due Unit 1 Sept. 4 Welcome, Overview, Instructor’s Bill Moore Philosophy, and Ground Rules; Craig Gordon The Entrepreneurial Mind for an Entrepreneurial Society Unit 2 Sept. 11 New Venture Opportunities Bill Moore Craig Gordon Unit 3 Sept 18 The Founder and Team Bill Moore Craig Gordon Unit 4 Sept. 25 Entrepreneurial Finance v. Corporate Bill Moore Short mini- Finance; Financing Cycle assignment #1 Unit 5 Oct. 2 Deal Structure; Deal Valuation Bill Moore Unit 6 Oct. 9 Capital Structure Planning Bill Moore Unit 7 Oct. 16 Structure of Venture Capital; Guest Speaker (VC) Investor Agreements Bill Moore/Craig Gordon Unit 8 Oct. 23 Midterm Exam Proctor Unit 9 Oct. 30 Investment Timing; Bill Moore Equity Term Sheets Unit 10 Nov. 6 Self-study week – No class meeting Unit 11 Nov. 13 Negotiating a Financing Deal Bill Moore Draft of individual industry case study Unit 12 Nov. 20 Obtaining Debt Capital; Bill Moore Debt Term Sheets Ryan McCalley, Atel Capital Unit 13 Nov. 27 Thanksgiving – No Class Unit 14 Dec. 4 Managing Rapid Growth; Bill Moore Managing a Troubled Company Debbie Richard, Fisher Lynch Capiatl Unit 15 Dec. 11 Harvesting Bill Moore Short mini- Guest Speaker (CFO assignment #2 that’s done an IPO) Unit 16 Dec. 18 Startup.com (movie); Final Exam Bill Moore Final industry case (Take Home) Craig Gordon study; Final due Dec. 22, 2008 3 FI 318 – Venture Capital & Start-Up Financing San Francisco Campus Fall 2008 September 4, 2008 – December 18, 2008 Grading Policy Your grade will be a weighted average of your scores on the written mini-assignments, your participation in the discussions, your scores on the midterm and the final and an industry case study. Weights will be as follows: Participation in Discussions 5% (In class) 2 Written Mini-assignments 10% (5% each) Written Case Summaries 10% (Due at beginning of class on assigned dates) Midterm Exam 20% Industry Case Study Draft 5% Final 20% Final Exam 30% Grades will be based solely on your performance on these activities and I’ll use a standard system to assign grades: 90-100% A 80-89% B 70-79% C 60-69% D < 60% F I’ll also assign +/-‘s based on the position of your scores within these ranges. Late work may be accepted. If it is, it will be marked down 2% per day late. Written Case Summaries will not be accepted late. Exams There will be two exams. The Midterm Exam will test your understanding of the key underlying principles of entrepreneurship that help make the material in the second half of the course relevant. The Final Exam will cover only the material covered after the Midterm Exam and it will focus on testing for an understanding of the market for and process of acquiring capital for start-up ventures. Both exams will be open book, open notes, calculators, etc. Using laptop computers will not be permitted during exams. 4 FI 318 – Venture Capital & Start-Up Financing San Francisco Campus Fall 2008 September 4, 2008 – December 18, 2008 Instructors Please note: Questions concerning course content, attendance, assignments and grades must be directed to Bill. Bill Moore Bill is an Assistant Professor, Finance, Ageno School of Business, Department of Finance & Economics. He also serves as a director of a $1 billion California based chartered credit union, is an advisor to several European based energy investors, and provides strategic, financial, operating, and investment advice to Innovationsgruppe AG, a Liechtenstein based Internet and technology private investment fund. He serves on the investment committees of both funds. Previously, Bill was a partner in NetBusiness Consulting AG, Chief Financial Officer of io- market AG, and Chief Operating Officer of iWorks Capital and Development AG, for whom he set up the European arm of an e-commerce incubator managing all aspects of the operation near Zug, Switzerland. Before this, he was Chief Financial Officer and Treasurer of PG&E Energy Trading, the $9 billion commodities trading subsidiary of PG&E Corporation where he was responsible for gas and power accounting, financial planning, treasury, risk management, credit, and financial reporting. Bill also held positions in corporate finance, risk management, marketing, human resources, operations, customer services, and credit and collections for PG&E Corporation and its utility subsidiary. Bill received his BA in Economics from California State University, Chico and an MBA in Management and MS in Corporate Finance from Golden Gate University in San Francisco, California. He is a graduate of Duke University’s Fuqua School of Management Program for Manager Development. Bill is a lecturer in finance and entrepreneurship at various universities in Switzerland, Liechtenstein, and Estonia and he holds a Doctor of Business Administration from the University of St.