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15.431

Entrepreneurial Finance and Venture Capital

3-0-6 units · Graduate

Examines the elements of entrepreneurial finance, focusing on technology-based start-up ventures, and the early stages of company development. Addresses key questions which challenge all entrepreneurs: how much money can and should be raised; when should it be raised and from whom; what is a reasonable valuation of a company; and how funding, employment contracts and exit decisions should be structured. Aims to prepare students for these decisions, both as entrepreneurs and venture capitalists. In-depth analysis of the structure of the private equity industry. Meets with 15.4311 when offered concurrently. Expectations and evaluation criteria for graduate students will differ from those of undergraduates; consult syllabus or instructor for specific details.

Spring 2011 · Entrepreneurial Finance

Topics

  • Introduction and overview of entrepreneurial finance
  • DermaCare
  • Discounted cash flow (DCF) and the venture capital method
  • Netflix
  • Real option valuation
  • Real option valuation (cont.)
  • Genzyme/Geltex
  • Deal structure
  • Walnut Venture Associates (A) and (D)
  • Deal structure (cont.)
  • Guest: John H. Chory (Partner, WilmerHale Venture Group)
  • Metapath
  • BNI Video Guests: Conrad Clemson (Founder and CEO, BNI Video) and Carl Stjernfeldt (General Partner, Castile Ventures)
  • BNI Video Guest: Carl Stjernfeldt (General Partner, Castile Ventures)
  • Guest: Dr. William Janeway (Senior Advisor, Warburg Pincus)
  • Portfolio and partnership Guest: Carl Stjernfeldt (General Partner, Castile Ventures)
  • VC Vignettes Guest: Carl Stjernfeldt (General Partner, Castile Ventures)
  • Grove Street Advisors - September 2009 Guest: Christopher E. Yang (General Partner, Grove Street Advisors)
  • Forte Ventures
  • Initial public offering (IPO) Guest: Michael Szeto (Managing Director of Private Equity, WR Hambrecht)
  • Grand Junction Guest: Michael Szeto (Managing Director of Private Equity, WR Hambrecht)
  • Blackstone
  • Final review

Readings

  • SES #: 1 · TOPICS: Introduction and overview of entrepreneurial finance · READINGS: Fenn, George W., Nellie Liang, and Stephen Prowse. “The Economics of the Private Equity Market.” Board of Governors of the Federal Reserve System, December 1995.
    Reading assignment
  • SES #: 2 · TOPICS: DermaCare · READINGS: Hamermesh, Prichard G., and Lauren Barley. “DermaCare: Zapping Zits Directly.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-808-064, Rev. October 21, 2010.
    Reading assignment
  • SES #: 3 · TOPICS: Discounted cash flow (DCF) and the venture capital method · READINGS: Kaplan, Steven N., and Antoinette Schoar. “Private Equity Performance: Returns, Persistence, and Capital Flows.” Journal of Finance 60, no. 4 (2005): 1791-1823.
    Reading assignment
  • SES #: 4 · TOPICS: Netflix · READINGS: Mayfield, E. Scott. “NetFlix.com, Inc.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-201-037, Rev. March 24, 2003.
    Reading assignment
  • SES #: 7 · TOPICS: Genzyme/Geltex · READINGS: Jacquet, Pierre, Robert Bruner, and Samuel E. Bodily. “Genzyme/Geltex Pharmaceuticals Joint Ventures.” Darden Business School Case. Darden Business Publishing. Case: UVA-F-1254, 1999.
    Reading assignment
  • Roberts, Michael J. “Walnut Venture Associates (A): RBS Group Investment Memorandum.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-899-062, Rev. December 7, 1998.
    Listed reading
  • Roberts, Michael J. “Walnut Venture Associates (D): RBS Deal Terms.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-899-097. Rev. November 19, 1998.
    Listed reading
  • SES #: 12 · TOPICS: Metapath · READINGS: Hardymon, Felda, and Bill Wasik. “Metapath Software: September 1997.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-899-160, Rev. November 30, 1999.
    Reading assignment
  • SES #: 16 · TOPICS: Portfolio and partnership Guest: Carl Stjernfeldt (General Partner, Castile Ventures) · READINGS: Hardymon, Felda, and Ann Leamon. “Portfolio & Partnership.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-806-036, October 5, 2005.
    Reading assignment
  • Lerner, Josh, Antoinette Schoar, and Wan Wong. “Smart Institutions, Foolish Choices?: The Limited Partner Performance Puzzle.” Journal of Finance 62, no. 2 (2007): 731-764.
    Listed reading
  • Glynn Jr., John W., and Christopher S. Flanagan. “VC Vignettes.” Stanford Graduate School of Business Case. Harvard Business School Publishing. Case: E93, June 21, 2001.
    Listed reading
  • SES #: 18 · TOPICS: Grove Street Advisors - September 2009 Guest: Christopher E. Yang (General Partner, Grove Street Advisors) · READINGS: Rhodes-Kropf, Matthew, and Ann Leamon. “Grove Street Advisors: September 2009.” Harvard Business School Case. Harvard Business School Publishing. Case: N1-810-064, October 29, 2009.
    Reading assignment
  • Kaplan, Steven N., Naveen Baweja, and Atinder Singh. “IDFC Private Equity and GMR Energy Limited – 2003.” University of Chicago Graduate School of Business, 2007.
    Listed reading
  • SES #: 19 · TOPICS: Forte Ventures · READINGS: Hedberg, Carl, and Jeffry Timmons. “Forte Ventures.” Babson Arthur M. Blank Center for Entrepreneurship, October 1, 2004.
    Reading assignment
  • SES #: 21 · TOPICS: Grand Junction Guest: Michael Szeto (Managing Director of Private Equity, WR Hambrecht) · READINGS: Mansour, Nick, and H. Irving Grousbeck. “Grand Junction.” Graduate School of Business, Stanford University. Case: S-SB-186, September 5, 1997.
    Reading assignment
  • SES #: 22 · TOPICS: Blackstone · READINGS: Hardymon, Felda, Josh Lerner, and Ann Leamon. “The Blackstone Group’s IPO.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-808-100, Rev. May 13, 2008.
    Reading assignment

Prerequisites & course information

Prereq: 15.402 , 15.414 , or 15.415 G (Fall, Spring) 3-0-6 units Credit cannot also be received for 15.4311

Sources