NYU Stern School of Business

Undergraduate College

C15.0061.001: TOPICS IN ENTREP FINC

Spring 2011

Instructor Details

Okun, Glenn

gokun@stern.nyu.edu

212-998-0780

By appointment

KMC 7-53

 

Course Meetings

MW, 11:00am to 12:15pm

Tisch T-201


Final Exam:

Schedule exceptions
    Class will not meet on:
    Class will meet on:

 

Course Description and Learning Goals

COURSE DESCRIPTION

This course seeks to provide an understanding of the financial and transactional skills that are required to fund new businesses and mature firms. The course will integrate both an academic and practitioner view of the challenges facing entrepreneurs and investors involved in business start-up, venture capital, and private equity investment activities.

The course presents frameworks and techniques that are needed to evaluate high-risk opportunities and structure appropriate investment transactions. It should be of interest to those who wish to work as entrepreneurs or as members of a venture capital or private equity investment company.

 

Course Outline

SCHEDULE

January 24                    Introduction

January 26                   Raising and Structuring Venture Capital and Private Equity Funds

                                    Session #1       The Institutional Investment Decision

                                    Case:               “Yale University Investments Office: July 2003”

Questions:       How has Yale selected, compensated and controlled private equity fund managers?  Compare the approach with the approach used in other asset classes.  How has Yale determined the timing of investing in this asset class?  What are the risks in Swensen’s private equity strategy?

January 31                   Session #2       Evaluating a Prospective Partnership Investment

              Case:               Francisco Partners”

Reading:          “A Note on the Private Equity Fundraising Process”

                                                            “A Note on Private Equity Partnership Agreements”

Questions:       What is the fund’s investment rationale?  What are the strengths, weaknesses and key risks of the new fund?  How can you assess Stanton’s past performance?  What are the key deal terms for the general and limited partners?

February 2            Session #3       The Problem of Underperformance

                                    Case:               Venture Capital Fund Restructuring Vignettes

Questions:       What actions would you recommend for each of the funds under consideration?

 

February 7                                       Session #4       A Perspective on Funds and Fundraising

 

February 9          The Fund Business

                             Session #5       Entering the Investment Field

                                    Case:               ColumbiaCapital

                                                                                    Questions:       Should they form a fund?

February 14                  Session #6       Fund Structures

 

February 16                                       Start-Up Investing

                                    Session #7       The Business Plan

 

                                    Case:               AsiaRenal

                                    Reading:          Some thoughts on Business Plans

                                                                                               

February 23                  Session #8      

                                    Case:               Heather Evans

                                    Reading:          A note on pre and post money valuations

                                                                                               

February 28 &    Session #9 & 10

March 2                   Case:               Valuing Project Achieve

                                    Reading:          A note on valuation in private equity settings           

                                               

March 7               Conducting Due Diligence: The Investor’s Perspective

Session #11

                                    Case:               “Eclipse (A)”

                                    Reading:           

Questions:       What issues require investigation after analyzing the business plan?  How do you propose acquiring or developing the information in order to understand the open issues and to perform a risk assessment for the business?

                                                  

March 9               Session #12

                             Case:               Eclipse (B,C,D)” (to be handed out)

                                                                                    Reading:          Venture Capital (Bagley), Chapter 13 from The Entrepreneur’s Guide to Business Law (Thomson)

                        A note on private equity securities

                        Securities law and private financing

 

                                  Questions:       How do you assess the attractiveness of having PEP as an investor?  How do you respond as the entrepreneur to the additional analytical requests by PEP?

           

March 21             Other Investors & Investment Structures

Session #13    

                                    Case:               Parenting Magazine

March 23             Session #14     Start-Up Transaction And Early Stage Investments        

 

March 28 & 30    Session #15 & 16       

                                    Case:               Xedia and Silicon Valley Bank

Questions:       Should SVB make the loan?  Determine and justify an appropriate deal structure including material business terms such as interest rate and warrant coverage.

                                            

April 4                  Later Stage Investing

Session #17     Turnarounds

                                    Case:               Dragonfly

      

April 6                 Session #18     Acquisition Opportunities

                                    Case:               Radio One

                                    Reading:          A note on valuing private businesses

                                                            An introduction to cash flow valuation methods          

 

April 11               Session #19     Consolidation Opportunities

                                    Case:               Car Wash Partners

April 13                                       The Strategy of Consolidation

 

April 18               Session #20     Leveraged Buyouts

              Case:               Seagate Technology

                                    Reading:          Technical Note on LBO Valuation (A)

                                                            Technical Note on LBO Valuation (B)

                                 

April 20               Session #21     Leveraged Buyouts

                                    Case:               Seagate Technology (continued)

                                    Reading:           

April 25               Session #22     Later Stage Investment Structuring           

 

April 27                   Session #23     Repurchasing a Minority Equity Stake

              Case:               Kohler Co.

                                  Questions:       Determine a settlement offer.  Substantiate it with a complete valuation using DCF and multiples analysis.

                       

May 2                  Session #24     Exit Transactions

                                    Case:      

                                    Reading:          A Note on the Initial Public Offering Process           

May 4                  Project Presentations

May 9                  Project Presentations

 

Required Course Materials

Required Materials. Cases and Readings Packet

 

Assessment Components

Grading Plan.The course grade will be based on the following components and weights:

Classroom Contributions:                   20%

Case Report 1:                                                30%

Business Plan Project:                        50%

 

Course Methods

Each class will include discussion of readings, case analysis and group activities.  Students will analyze cases with an action orientation, for example, what steps should we take to further the development of the venture?  What are the venture’s risks and how should they be managed? How should the company be financed?  How should the deal be priced and structured?   What tactics might be utilized in order to secure a more favorable deal? We will adopt the perspective of different roles in all case discussions (for example, the issuer versus the financier, corporate investors versus fund operators and angels). 

Classroom Contributions.The learning experience in a course like this one depends heavily on each student being prepared to actively participate in every class session.  We all have expectations that will enrich the topic and direction of discussion in the course.  This means that you need to be fully acquainted with the readings and cases for a given session.  Positive participation includes attendance, active involvement in all in-class exercises and discussions, and maintenance of a classroom demeanor that encourages the participation of others.  You will be evaluated on the quantity as well as the quality of your contribution and insights.  Quality comments possess one or more of the following attributes: (a) Contribute to moving the discussion forward; (b) Offer a different, unique and relevant perspective on the issue; (c) Build on other comments of others; and (d) Include some evidence or analysis of inherent tradeoffs, i.e., demonstrate reflective thinking.

Written case analysis. Students will be required to prepare a written case-related analysis of “Xedia and Silicon Valley Bank”.  This assignment is due on March 25 at   9 AM. It should be a maximum of 7 pages, excluding exhibits. The case analysis papers consist of in-depth written analysis and application of techniques and methods to a company’s venturing experience.  The paper should address the questions assigned in the syllabus. The case assignment will be graded for content and format. You are required to turn in papers that conform to professional standards of organization, grammar, punctuation, spelling, and paragraph/sentence structure.  This paper must be individual work.    Do not discuss the cases or proposed solutions.

Business Plan Evaluation Project.  See herein.

Delivery.  Reports should be sent by email to each of the following two addresses: gokun@stern.nyu.eduand gokun1@mac.com.  Students must send two separate emails (not one in which the other address receives a copy upon delivery). 

Late papers will receive a grade of F.  Emails without attached papers or with attachments that are unreadable by Microsoft Word will be considered to have not been submitted and will also receive an F.  An F will be quantified as a zero in the calculation of course grades.

No extensions to deadlines will be granted.

 

Business Plan Evaluation Project

The major assignment for the course will be a group project that involves assessing a firm in which a venture capital or private equity organization might want to invest. The objective of this group assignment is towrite an evaluation of its business plan and current performance and to present your analysis and investment recommendation to an “investment committee.”  Groups will be expected to address business and industry analysis as well as deal structure and valuation.   Teams must explain what factors, including business plan elements that would need to change so that an affirmative opinion (including a specific deal structure and valuation) would be offered on a contingent basis.  Teams should be composed of no more than six people.

Oral Presentation.Each team is required to do a 20 minute (maximum) oral presentation of their report. Prepare a set of 5-6 “main” slides to be used for the body of the presentation and a set of "appendix" slides that provide more detailed background  (and which you would use to address questions for further clarification that might come up during a Q&A session). Each team should hand in a copy of their presentation slides before they present.

The oral presentation represents half the project grade and will be evaluated on bothcontent (how well it addressed the assignment questions) and form, i.e., the extent to which it displayed: (a) good focus and flow (e.g., development and communication of a logical progression of ideas, appropriate use of time, etc.), (b) good demeanor and attitude (e.g., visual contact with audience, self-confidence and authority, good handling of audience questions, etc.), and (c) good use of visual aids and handouts (e.g., legibility, integration into oral presentation, etc.).

Written Report.Your report is due, by 9 AM, April 24. Late papers will not be graded. Each group should submit two copies of its final report. 

Text. The report should not exceed20 double-spaced typed pages with normal margins, excluding exhibits, tables, figures, appendices, and references. The name of the firm analyzed, the names of the team members responsible for the report preparation, the date, and the course number should be on the front page.

Exhibits. Exhibits should contain specific types of analyses, such as financial ratio analyses, break-even charts, decision tree analyses, organization charts, etc.  In general, exhibits should contain any information that is relevant, but would take up too much space if included in the body of the paper.  Exhibits should not be used as strictly an extension of textual material.

References. Footnotes should be used to acknowledge sources quoted in the text. The bibliography should list all the sources referenced or quoted in the body of the text in alphabetical order by author.  

Delivery.  Reports should be sent by email to each of the following two addresses: gokun@stern.nyu.eduand gokun1@mac.com.  Students must send two separate emails (not one in which the other address receives a copy upon delivery).

 

Group Projects

Guidelines for Group Projects

Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.

Every member is expected to carry an equal share of the group’s workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for each part. The group project will be graded as a whole:   its different components will not be graded separately. Your exams may contain questions that are based on aspects of your group projects.

It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution.

You will be asked to complete a peer evaluation form to evaluate the contribution of each of your group members (including your own contribution) at the conclusion of each project. If there is consensus that a group member did not contribute a fair share of work to the project, I will consider this feedback during grading.

 

Grading

At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter.  In general, students in undergraduate core courses can expect a grading distribution where: 

Note that while the School uses these ranges  as a guide, the actual distribution for this course and your own grade will depend upon how well  you actually perform in this course.

 

Re-Grading

The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.

If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.

 

Professional Responsibilities For This Course

Attendance

 

Participation

In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:

 

Assignments

 

Classroom Norms

 

Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 

 

Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 

 

Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.

 

Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.

 

Recording of Classes

Your class may be recorded for educational purposes

 

Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.

 

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