Course Outline: Day 1

Transcription

1 The Israel Venture Association and Interdisciplinary Center (IDC), Herzliya are pleased to announce the 2 nd annual Venture Capital Executive Workshop for IVA members and representatives from leading Israeli institutional organizations. This two day executive seminar is targeted for senior management members of the Venture Capital, Limited Partner and Private Equity communities. It will be an excellent opportunity for all parties to learn together about the current trends within the Israeli and Global venture capital industry and the importance of this sector to Israeli industry. The syllabus will reflect the current market status and will include new topics. This will be an intensive and serious executive seminar with a high level of discussion. Course Outline: Day 1 Module I: Introduction and State of the Market 09:00 10:30 Opening lecture: Introduction and State of the Venture Capital Market 10:45 12:00 Investment Trust (Economics of private equity partnerships; role of terms) Module II: LP Investment Strategies and Evaluating VC Success 13:30 14:45 Yale Investments Office (Perspective of limited partners) 15:00 16:15 Venture Capital Investment Success: What Research Tells Us 16:30 18:00 Networking Cocktail Day 2 Module III: Managing the Venture Capital Firm 09:00 10:30 Tad O'Malley: May 2005 (Introductory case in which associate at venture capital firm looks at PowerPoint presentations, and argue which deal is best) 10:45 12:00 Building a Sustainable (and Successful) Venture Capital Firm Module III: Structuring Transactions and Successful Exits 13:30 14:45 The Financing of Project Achieve (Introduction to valuation and deal structuring approaches) 15:00 16:15 Lecture: Successful Venture Capital Exits: The Secrets of Success

2 Detailed course Information: Day 1 Session 1 Introductory Lecture and State of the Venture Capital Industry There will be several articles handed out for this session. Session 2 Acme Investment Trust Assignment Questions Supplemental Reading: A Note on the Private Equity Partnership Agreements 1. A major corporate pension fund is considering investing in a new private equity partnership sponsored by Hicks, Muse, Tate & Furst. The private placement memorandum calls for a somewhat different fee structure from that usually employed by private equity funds. The pension fund's managers must decide whether this should affect their decision to invest. Why is Hicks, Muse proposing this novel guarantee structure? 2. More generally, why are the incentives offered private equity investors so similar? 3. What are the financial implications of the offer? In particular, how does the limited and general partners' compensation change with the size of the fund raised? To examine this question, you may wish to compare the net present value of their management fee with the variable compensation. (You may want to use a discount rate of 15% for the carried interest, and 10% for the management fee.) The following assumptions may help: The fund raises two, three or five billion dollars. $200 million is drawn down immediately to cover the Internet investments; the remainder is drawn down in four equal installments at the beginning of the first, second, third and fourth years of the fund. The non Internet funds are invested immediately upon being drawn down The annual management fee is 2% of the total committed capital. In years 8 and beyond, the fee is reduced by 25%. Assume that the fee is paid in one lump sum at the beginning of the year. The fees terminate when the last investment is distributed. The Internet investments are completely worthless. If there is no guarantee, the fund pays out nothing for these investments; if there is a guarantee, the fund pays out $500 million at the end of year 5. Beginning at the end of the 6th year, the fund liquidates the investment made 6 years before. The investment has grown at 20% annually. The amount (less any management fees paid out) is distributed. Thus, the first distribution would be less the management fees paid out in years 1 through 6. The second distribution in year seven would be less the management fee paid in year 7, and so forth. The actual amount invested in these deals is returned to the limited partners. The remainder is divided 80% 20% between the limited and general partners respectively.

3 Session 3 Yale Investments Office Assignment Questions 1. How has the Investment Office selected, compensated, and controlled private equity fund managers? What explains the differences between their strategy in private equity with that in other asset classes (e.g., real estate)? 2. How has the Investment Office decided when to make private equity investments? What explains the differences between their strategy in private equity with that in other asset classes (e.g., real estate)? 3. How has the Investment Office made international private equity investments? What explains the differences between the performance of their international and domestic private equity investments? 4. How is the private equity industry changing? How could Swensen s private equity strategy go wrong? 5. Should David Swensen shift his private equity strategy? Session 4 Venture Capital Investment Success: What Research Tells Us There will be a variety of research articles assigned for this session. Day 2 Session 1 Case: Tad O'Malley: May 2005 TBD Session 2 Lecture: Building a Sustainable (and Successful) Venture Capital Firm There is no assignment for this session Session 3 Case: Project Achieve Assignment Questions 1. What is Project Achieve s competitive advantage? What uncertainties does it confront? 2. How have the angel investors valued the company? Has the issuance of the angel round reduced the percentage ownership of Boyd as a common shareholder? Has the issuance of the angel round reduced the value of Boyd s common stock?

4 3. Nine public companies have been identified as comparable to Project Achieve. Which of these companies do you consider to be most comparable? How can Boyd use her research on comparable companies in her valuation of Project Achieve? 4. What discount rate should Boyd use in her valuation of Project Achieve? 5. Boyd anticipates that Project Achieve will have different types of users (customers). What are these customer types? What is the most likely type of customer? 6. What value does each customer type have to Project Achieve? 7. What value does each targeted customer have to Project Achieve? 8. What is the value of all of Project Achieve s targeted customers? 9. What is the value of Project Achieve? 10. Boyd s potential investors have widely varying estimates of the value of Project Achieve. How will Boyd s valuation of Project Achieve contribute to her negotiations with potential investors? Why might their valuations differ from Boyd s? 11. Boyd s potential investors include angel investors, venture capitalists, a strategic investor, and Jostens, a school supply company. What are the advantages and possible disadvantages to Project Achieve of each type of investor? Which type of investor would you consider most suitable for Project Achieve? Session 4 Lecture: Successful Venture Capital Exits: The Secrets of Success There are no readings for this session.

5 Paul Gompers, Eugene Holman Professor of Business Administration and Director of Research at the Harvard Business School, specializes in research on financial issues related to start up, high growth, and newly public companies. Professor Gompers has an appointment in both the Finance and Entrepreneurial Management areas. He received his A.B. summa cum laude in biology from Harvard College in After spending a year working as a research biochemist for Bayer Chemical AG, he attended Oxford University on a Marshall Fellowship where he received an M.Sc. in economics. He completed his Ph.D. in Business Economics at Harvard University in Professor Gompers spent two years as an Assistant Professor of Finance at the Graduate School of Business, the University of Chicago where he created a new course entitled "Entrepreneurial Finance and Management." His course development efforts at the Harvard Business School focuses on issues affecting entrepreneurial firms and their investors. His research focuses on the structure, governance, and performance of private equity funds; sources of financing, incentive design, and performance of private firms; and long run performance evaluation for newly public companies. His work on private equity funds has examined the relationship between general partners and their portfolio companies. (Much of his research is collected in The Venture Capital Cycle, forthcoming from MIT Press.) Gompers has investigated factors affecting the structure, timing, and monitoring activities by the general partner and how these factors affect the success or failure of entrepreneurial firms. Similarly, he has examined the relationship between institutional investors and private equity fund managers. This work has examined a large collection of partnership agreements and examined issues of compensation, covenants and restrictions, as well as distribution policy and performance. Other research efforts examine the institutional and market factors that influence the performance of newly public companies. He is a Research Associate in the National Bureau of Economic Research s Corporate Finance Program. Cost: NIS 5,500 (including refreshments and lunch) Number of places is limited. The course will be held in English. Further information : Executive Education Department, The Interdisciplinary Center (IDC), Herzliya Tel: , Fax: exceed@idc.ac.il;