The Lee Kong Chian School of Business Academic Year 2015 /16 Term 1

Transcription

1 The Lee Kong Chian School of Business Academic Year 2015 /16 Term 1 FNCE213 ENTREPRENEURIAL FINANCE Instructor Name : Thong Tiong Yang, PhD Title : r of Finance Tel : tythong@smu.edu.sg Office : LKCSB #4065 COURSE DESCRIPTION Entrepreneurial finance introduces the theories, knowledge, and financial tools an entrepreneur needs to start, build, and harvest a successful venture. The successful entrepreneur must know how and where to obtain the financing necessary to launch and develop the venture. Eventually, that same successful entrepreneur must know how and when to interact with financial institutions and regulatory agencies to take the venture to its potential and provide a return and liquidity for the venture s investors. You will learn the knowledge of entrepreneurial finance from the useful, important, interesting, enjoyable and relevant case studies in this course. All of us will discuss the weekly topics with interacting method in class. We cater to the founders and management who have selected us as their business partners. We have learned that the only way to help develop a fabulous company is one step at a time. This only happens if the company makes wonderful products or delivers a service that thrills large numbers of customers. If that occurs then founders, management, and employees of these companies prosper. It is only then that the investor deserves to be rewarded. It has to happen in that order. There are no shortcuts. -Sequoia Capital Company Website 2011 Successful companies are not formed in isolation. Entrepreneurs need seed funding, experienced mentors, and a strong network of seasoned professionals and peers. -Golden Gate Venture Company Website 2014 I could either watch it happen, or be part of it. -Elon Musk Co-founder of Paypal, founder of Tesla, Space-X.etc. LEARNING OBJECTIVES By the end of the course, students will be able to: Describe the entrepreneurship with creative mindset Explain the life cycle theory of venture capital Evaluate and analyze the investments and risks of start-ups Discuss and apply the holistic concepts and strategies learned to the real world examples and you should think like entrepreneurs in this course Create and make successful business model and opportunities Personal solutions for the Da Vinci 8 powerful questions 1

2 PRE-REQUISITE/ CO-REQUISITE/ MUTUALLY EXCLUSIVE COURSE(S) Please refer to the Course Catalogue on OASIS for the most updated list of pre-requisites / co-requisites for this particular course. Do note that if this course has a co-requisite, it means that the course has to be taken together with another course. Dropping one course during BOSS bidding would result in both courses being dropped at the same time. ASSESSMENT METHODS The assessment consists of the following components: Description Wight Class Participation 20% Business Plan (Group) 40% Final Exam 40% Total 100% ACADEMIC INTEGRITY All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication, facilitation of acts of academic dishonesty by others, unauthorized possession of exam questions, or tampering with the academic work of other students) are serious offences. All work (whether oral or written) submitted for purposes of assessment must be the student s own work. Penalties for violation of the policy range from zero marks for the component assessment to expulsion, depending on the nature of the offence. When in doubt, students should consult the course instructor. Details on the SMU Code of Academic Integrity may be accessed at INSTRUCTIONAL METHODS AND EXPECTATIONS Class Participation (20%): Active participation and discussion are strongly encouraged in class. Web discussion topics will occasionally be posted in SMUVista. Please feel free to post your analysis, supporting it with references and links, in the course site. Where the links are long, please provide a summary as part of your analysis. You are also encouraged to prepare the weekly case-study problems beforehand and discuss actively in class. Those who contribute to our class, case-study and web discussion will be rewarded considering that 20% is a big portion of your final grade. Those who do not participate in lecture discussions will not have the opportunity of scoring maximum marks for class participation. Business Plan & Presentation (40%): This business plan proposal is designed to encourage teamwork and provide you the opportunity to apply the knowledge and skills learned in this course. Importantly, you have chance to learn and understand how to write and evaluate business plan from identifying the idea, developing the idea to realizing the idea and to creating value. The preferred group size is 5 members forming in first session, exceptions to this point will have to be pre-approved by the instructor. No individual business plan is allowed. The business plan topics will be determined by the groups. Final business plan is ONLY in Powerpoint format. There will also be a session for business plan presentations near the end of the term. All members of the team must present. Powerpoint of business plan must be submitted in both hard and soft copies in last class. You will be graded on the final submission as well as the oral presentation. Peer appraisal will be taken into account for the determination of the final project presentation grade. More details will be provided in class. 2

3 Final Exam (40%): The final exam is 2-hour and will be held during the university examination period. The exam will cover all materials covered in the course over the term, including any material from the relevant chapters in the text book and any additional material discussed in the lectures. The final exam will be open-book. Further details of the final exam will be announced in due course. No make-up exam will be allowed without prior permission. CONSULTATIONS AND TEACHING ASSISTANTS Teaching assistant(s) (TA) will be announced during the first session. You may also me or TA directly to make appointment for consultation. Consultation hours will be announced in first class. CLASS TIMINGS This course will be taught in one 3-hour session. RECOMMENDED TEXT AND READINGS Leach J. C. and R. W. Melicher Entrepreneurial Finance, 5 th edition (with publisher s e-book) South-Western Cengage Learning 2014 ISBN: Readings: SMUVista & Weekly uploading Case-studies: Distribute in class 1 week prior to the discussion 3

4 LESSON PLANS Session Specific Learning No. Objectives for the Lesson 1 Introduction to Entrepreneur Finance Concepts / Topics Covered Required Reading Characteristics of Entrepreneur 7 Principles of Entrepreneurial Finance Venture Life Cycle Assessment of Learning Instructional Strategies (Formative / Summative) Case-study 1 discussion Reading: Chapter 1 2 From Idea to Business Plan Process of Moving from an Idea to a Business Plan Components of Sound Business Model Identify the Success of Venture Learning Activities Case-study 2 discussion 3 Organizing & Operating a New Venture Reading: Chapter 2 Forms of Business Intellectual Property First-Round Financing Video Case-study 3 discussion 4 Measuring and Evaluating Financial Performance Reading: Chapter 3 Balance Sheet &Income Statement Cash Flow Statement Performance Measures Case-study 4 discussion Reading: Chapter 4 & 5 4

5 5 Financial Planning and Types and Costs of Financial Capital Estimate the Cost of Publicly Traded Equity Estimate the Cost of Private Equity Venture Investor s Target Returns Case-study 5 discussion Reading: Chapter 6 & 7 6 Valuing Early-Stage Venture Time Pattern of Cash Flow Valuation Techniques Unified Treatment of Valuation Case-study 6 discussion 7 Venture Capital Valuation Methods Reading: Chapter 9 & 10 Valuation and Percent Ownership Amount of Shares Issued Multiple-Scenario Valuation Video Case-study 7 discussion 8 Professional Venture Capital and Other Financing Alternatives Reading: Chapter 11 Professional Venture Investing Cycle Venture Capital Funds Other Financing Sources Case-study 8 discussion Reading: Chapter 12 & 13 5

6 9 Security Structures and Determining Enterprise Value Types of Securities in Venture Financing Designing Venture Securities Invited Guest Speaker Case-study 9 discussion 10 Harvesting the Business Venture Investment and Financially Troubled Venture Reading: Chapter 14 Exit Strategies Financial Distress and Insolvency Case-study 10 discussion 11 Business Plan Presentation Reading: Chapter 15 & Final Examination Big Disrupter of Uber: Tim Bradshaw and Murad Ahmed has become the poster child of Silicon Valley for disruption ; the 5-year-old company revolutionised the taxi business in 230 cities and 51 countries without owning a single car, through its smartphone app. 2. Alibaba: This online retailer, with $300 b. worth of online sales has transformed retail in China. It is now snapping up low hanging fruit in overly state regulated markets for everything. 3. Bob Diamond in Africa: He quit Barclays, and has now shown you can make money by investing in sub-saharan Africa. He raised $352 m. through an IPO in London in Dec. 2013, and has done deals in Botswana, Mozambique and Tanzania. 4. Aldi and Lidl: They are disrupting the grocery market around the world, and Aldi is even exploring China. They have doubled their market share in the UK in the past four years. Aldi has opened 1,350 stores in the U.S. and aims at 2,000 by Lidl too will soon invade the U.S. market. 5. Ford: Hard to think of Henry Ford s moribund car company as a disrupter, but the new F-150 pickup truck, with an aluminium body, never used before on a highvolume vehicle, is indeed a disrupter. To do this Ford had to replace arc-welders with new machines to screw, rivet glue and laser panels together. I remember another disrupter Subaru, which made aluminium engines in 1973; It was great, but was warned it would fail. Soon everyone was using aluminium for engines. 6. Tesla: last June founder Elon Musk offered to open up its patent book, which is very large, to rivals, in the spirit of open source movement, for the advancement of electric vehicle technology. This was a clever move, not just PR. Musk wants the big car makers to adopt Tesla technology and boost the market for electric cars. Imagine if other large companies (Intel, IBM, Hitachi, Samsung, Apple) opened THEIR patent books so that everyone could use them free of charge. 6

7 List of Articles and Cases 10 Reading Articles: 1. Disruptive Technologies: Catching the Wave. Joseph L. Bower and Clayton M. Christensen. HBR Jan Feb The Long Tail. Chris Anderson. Wired Magazine. Nov 15, Network Economics. Hans-Werner Gottinger Anatomy of a Term Sheet Venture Capital: An Overview of Trends, Strategies and Structural Issues. Andrew J. Sherman. May 23, The Art of Bootstrapping. Guy Kawasaki. Jan 26, GELT Framework Nokia Case. 7. International Private Equity and Venture Capital Valuation Guidelines. Sep Innovation Killers. Clayton M. Christensen, Stephen P. Kaufman and Willy C. Shih. Jan A Slowdown in Venture-Backed I.P.O.'s. Evelyn M. Rusli. The New York Times. Oct 3, A bubbling cauldron of Start-Up 2.0 firms. Grace Chng. The Straits Times. Aug 14, Any new/additional reading articles will also be uploaded during the term. 15 Cases but not limit to the following*: 1. Viewmax 2. Japan NTT 3. Eastman Kodak 4. How VCs Evaluate Potential Venture Opportunities 5. Analyzing New Venture Opportunities 6. Vera Bradley 7. The Founder s Dilemma 8. A Note on Valuation for Venture Capitalists 9. A Note on Valuation in Private Equity Settings 10. The Basic VC Formula 11. Startup Valuation 12. New Venture Financing 13. How VC Works 14. Deal Structure and Deal Terms 15. Term Sheet Negotiations for Trendsetter Inc. * Subject to changes throughout the term if any. 7