Dr Sam Goodman [email protected]/650-364-1151) Senior Adjunct Professor, Department of Finance & Economics Edward S. Ageno School of Business GOLDEN GATE UNIVERSITY Summer Term, 2009 San Jose Campus Mon 6-8:40pm FI 318 – VENTURE CAPITAL & START-UP FINANCING Course Outline Course Description: This course examines the strategic and financial issues facing high-growth start-ups. Students develop a sophisticated understanding of the tools and techniques employed by successful entrepreneurs in raising start-up, growth, and acquisition capital for their ventures. Students also will explore alternative financing sources, notably venture capital and angel investors. In addition, students will review the exit strategies available to companies, including IPOs and mergers. Topics discussed include: the history and current direction of the venture capital industry, valuation techniques for new ventures and established private firms, raising venture capital and alternative financing, entrepreneurial management issues in capital raising, maintaining control and direction, and harvesting the venture via IPO or merger. Through two short case studies and an individual project, each student will have an opportunity to personalize the learning process by applying the analytical tools of entrepreneurial finance to real cases and by selecting and studying a highly entrepreneurial industry of personal interest. Finally, all of the course material is based on the key underlying premise that it’s important for each student to understand the perspective of both the entrepreneur and the capital provider. 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: • 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? • Why is a business plan important? What are the key features of a good business plan and how can I evaluate one? • What financing sources, strategies, and mechanisms can I use? • What is the business worth and how do I negotiate what portion to sell? • What is a term sheet and how do I prepare use one? • How do I develop harvest options? • How do I manage rapid growth or a failed attempt to build a company? Sam Goodman FI 318 Course Outline Course Prerequisites: Students are expected to have completed at least one finance course (equivalent to FI 100, FI 203 or FI 300A) which should provide a basic understanding of the important techniques of financial analysis including risk assessment, 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 be needed. Required Texts and Cases: N ew Venture Creation: Entrepreneurship for the 21 st Century. Jeffry A. Timmons and Stephen Spinelli , 7th ed., McGraw-Hill Irwin Term Sheets & Valuations: A Line by Line Look at the Intricacies of Venture Capital Term Sheets & Valuations. Alex Wilmerding, Aspatore Books, Jan. 2005 ed., (ISBN number 1-58762- 068-5). TixToGo: Financing a Silicon Valley Start-up. Harvard Business School (9-800-376), April 10, 2000. JAFCO America Ventures, Inc.: Building a Venture Capital Firm. Harvard Business School (9-899-099), March 30, 2004. 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 Internet access will generally work fine). Grading Policy: Your grade will be a weighted average of your scores on your participation in the class discussions, the two written cases, the industry case study, and your score on the quiz and final exam. Weights are as follows: Participation in Discussions 10% TixToGo Case Study 20% (due Mar.5) JAFCO America Case Study 20% (due April 19) Industry Case Study 20% (due April 16) Quiz 15% (on Jan 30) Final Exam 15% (on April 16) 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 is accepted but marked down 2% per day late. I always reserve the right to set a final due date. Unit Summaries: 2 Sam Goodman FI 318 Course Outline Unit 1 May 4 Welcome, Overview, Instructor’s Philosophy, Ground Rules, Overview Unit 2 May 11 Creating, Shaping, Recognizing, Seizing and Screening New Venture Opportunities Unit 3 May 18 Entrepreneurship Unit 4 May 25 New Venture Planning, Entrepreneurial Finance, Quiz Unit 5 June 1 Startup.com Unit 6 June 8 Obtaining Equity Financing Unit 7 June 15 Term Sheets and Valuation Unit 8 June 22 Deal Valuation, Structure, and Negotiation Unit 9 June 29 TixToGo Case Study (TixToGo Case Study Due) Unit 10 July 6 Obtaining Debt Financing Unit 11 July 13 Managing Rapid Growth and a Troubled Company Unit 12 July 20 TBD Unit 13 July 27 Harvesting Unit 14 Aug 3 JAFCO America Case Study (JAFCO America Case Study Due) Unit 15 Aug 10 Individual Research Projects, Exam (Industry Case Study Due) Unit 16 Aug 17 TBD Each Unit includes a reading assignment, an outline of the important learning points, and important instructions with respect to class participation. Please note that I plan to invite some guest speakers on some nights. The guest speakers will be experts in the specific area that we’re discussing. Those arrangements will be confirmed during the term. Quiz and Exam: There will be one quiz and one exam. The quiz will take place during Week 4. The exam takes place at the end of the term. The exam will test your understanding of 1) the key underlying principles of entrepreneurship and 2) the market for, process of acquiring, and uses of capital for start-up ventures. The quiz and exam will be open book, open notes, etc. The only limitation imposed by the university in that you are not allowed to use a notebook computer during the exam. Course Navigation: The course is built around 15 Units, most of which are constructed in the same basic way. In effect, there are two tracks. First, each week you will build background, technical and analytical skills through the reading material and our class discussions. Second, you will make progress each week on the individual research and cases, which is where the technical and analytical methods will be applied. You should also follow the news for developments, since each week we’ll probably start the discussion with a recap of the previous week’s news. Instructor’s Biography: Northern California Chapter Member Profiles Sam R. Goodman, Ph.D BMG Associates, Inc. 60 Shearer Drive Ph.:650-364-1151 Atherton, CA 94027 Fax: 650-364-8285 3 Sam Goodman FI 318 Course Outline E-Mail: [email protected] Interim Manager, Financial Advisor, Operating Advisor Works As: Consultant, Crisis Manager, Workout Officer, Bankruptcy Consultant Practice Description: Helping underperforming companies to excel. Emphasis: Multi-industry track record that includes managing difficult turnaround situations, taking companies public, creating strategic plans and arranging corporate financings. Experience in technology, consumer products, distribution, agriculture. Specialty: Family held businesses as well as public companies. Experience: In last 20 years, addressed particular problems with mergers and acquisitions, corporate turnarounds, initial public offerings and corporate financings, serving in various capacities for such companies (clients) as: o Ampex – Chief Financial Officer o Nestle – Chief Financial Officer o General Foods – Manager, Planning & Analysis o W.R. Grace – Executive Vice President o CMX – Chairman, President & CEO o Nutritional Dist. – President o Mayfair Packing – President & CEO o Ace Novelty – Chief Operating Officer o Aileen, Inc. – Vice President, Chief Financial Officer, o VM Labs, Inc. – Director o Solectek, Inc. – Director o Masstor, Inc. – Director, General Manager o GB Data Systems (Gero-Vita) – President Ph.D 1968; MBA, 1958, New York University; Author of seven well-known books and over 150 articles dealing in above specialties and strategic planning. Financial Executive Institute; Institute of Management Accountants; American Economic Association; American ARbritration Association, Turnaround Management Association – President, NorCal TMA 1999. Numerous Board positions for public and non-public companies; military awards. TMA Turnaround of the Year – 1993 – 2nd place. Unit Details:1 Unit 1: Welcome, Overview, Instructor’s Philosophy, Ground Rules, Overview (May 4) By the end of this unit, the successful student will: • Have a clear understanding of the way in which the course is structured, the learning objectives and how the learning objectives will be achieved; • Understand the instructor’s teaching philosophy; • Understand the ground rules for taking this course;