CMiME: Entrepreneurial Finance

In this course, we focus on financial economic foundations of a new venture. We examine a new venture’s financing options, appropriate capital and governance structures, and risk management tools at each stage of its lifetime, from idea to exit. These choices are complex in nature, create path dependency (i.e. have long-term repercussions for future financial decisions), and substantially influence the magnitude of economic value created and captured by the start-up, and how this value is distributed among its shareholders.

The course is divided into four themes:

Theme 1: Entrepreneurial Finance: The First Six Months:

This theme provides an overview of the key financial decisions and considerations entrepreneurs must make in creating and launching a viable new venture. Some of the themes we cover include founder agreements, distribution of equity, cap table, vesting, and employee compensation (e.g., equity grants, options, bonuses).

Theme 2: Sourcing Non-institutional capital:

In this theme, we focus on raising capital through accelerators and especially business angels. We examine and contrast their value proposals, business models and key operational processes and outline strategies for successful fundraising through these channels.

Theme 3: Venture Capital:

This theme is about how VCs work with entrepreneurs to create successful ventures. We first explore the venture capital investment selection. Specific topics will include deal sourcing, due diligence, deal structuring, financing instruments, risk minimization, valuation, term sheets and negotiation. Subsequently, we analyze the post-investment management processes.

Theme 4: Exit strategies:

The purpose of this theme is to introduce the exit options for entrepreneurs, and to develop a strategic and operational roadmap for a successful execution of an exit strategy.

Kawasaki, G. 2001. Top Ten Lies of Entrepreneurs, Harvard Business Review, 79(1): 22-23. Wasserman, N. 2008. The Founder’s Dilemma. Harvard Business Review, 86(2): 102-109.Torres, N. 2015. What Angel Investors Value Most When Choosing What to Fund, Harvard Business Review.First Round Capital (2014): “A counterintuitive system for start-up compensation”Freely available on the web:http://firstround.com/review/A-Counterintuitive-System-for-Startup-Compensation/WHU Lecture Note: Convertible DebtDiane, M. 2013. 6 Myths About Venture Capitalists, Harvard Business Review, 91(5): 80-83.Malhotra, D. 2013. How to Negotiate with VCs, Harvard Business Review, 91(5).Friend, T. 18/5/2015. Tomorrow’s Advance Man. The New Yorker Magazine.Kupor, S. Sep 2016: “16 Definitions on the Economics of VC,” by Scott Kupor, Andreessen Horowitz (September 2016)Freely available on the web:https://a16z.com/2016/09/11/vc-economics/Roizen (2015): How to Build a Unicorn from Scratch and Walkaway with Nothing” Freely available on the web:https://www.forbes.com/sites/valleyvoices/2015/05/18/how-to-build-a-unicorn-from-scratch-and-walk-away-with-nothing/#414b611937c4

Written Work, Oral Participation

Group assignments: 50%

Individual Essay: 50%

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