Harvard Business School Venture Capital Method Valuation

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					                                Venture Capital
                                           An Introduction
                               MAFC Exec utive Training Series 2010


Course Outline
Synopsis
This course provides an introductory understanding of venture capital and entrepreneurial finance.
Topics include:
    how venture capital impacts the overall economy
    how the private market interacts with the public market
    what are the dimensions along which VC assess investment opportunities
    how to value privately-held companies with highly uncertain cash flows, and
    what the peculiarities of the negotiation between the entrepreneur and the venture capitalist


During the two days, students will enhance their learning experience through a negotiation role-play.

Who should attend
Anyone who needs to develop an understanding of venture capital and entrepreneurial finance would
benefit from this course. Those who intend working as, or alongside, venture capitalists, either as
advisers (lawyers, accountants, investment bankers), fund managers investing in private equity, or
managers of firms financed by venture capitalists will also benefit.

Prerequisites
None.

Text
There is no specific text book. Readings and case study materials will be supplied.

Calculators
A calculator that can handle basic arithmetic will be required.

Lecturer
Stephane Chatonsky, BA ESSEC Paris, MBA Wharton, Visiting Fellow in
Applied Finance.
Stephane Chatonsky has a background in Private Equity, Venture Capital,
Investment Banking and Corporate Strategy obtained at Macquarie bank,
Lazard Freres and McKinsey. He is a Principal at LeapFrog Investments, an
innovative global private equity fund investing in emerging Africa an Asia.




Venture Capital – an introduction [ver: 7/06/2010]                                                  Page 1
Macquarie University Applied Finance Centre                      Executive Training Series 2010


Detailed Outline
1. Introduction & Definition of Venture Capital
   Overview of venture capital industry & key definitions
   Impact of venture capital on the overall economy and interaction with public market financing
   Remuneration of venture capitalists
   Examples of successes and failures

2. Assessment of investment opportunities
   5 dimensions of assessment
   Specific examples

3. Valuation in a Venture Capital Context
   Specific challenges of valuation
   Four valuation methods used by venture capitalists
   Comparables
   NPV
   Venture capital method
   Stages ‘method’
   Valuation Problem

4. Negotiating and Investing
   Negotiation role-play – each student will be either an entrepreneur or a venture capitalist and will
   negotiate a ‘real life’ venture capital deal
   Managing the information asymmetry
   Contracting




Venture Capital – an introduction [ver: 7/06/2010]                                             Page 2
Macquarie University Applied Finance Centre                       Executive Training Series 2010


Readings
Part 1: Introduction & Definitions
“A Note on the Venture Capital Industry”, Harvard Business School
“Yearbook 2005” by Avcal
“Australian Venture Capital Journal – March 2003”
“How Venture Capital Works” by Bob Zider, Harvard Business Review
“What do Venture Capitalists Do?” Harvard Business School
“Global Private Equity 2006”, PwC
“The Venture Capitalist as Entrepreneur”, Harvard Business School
“Why and How to Invest in Private Equity”, Avcal
“Private equity’s new challenge”, McKinsey Quarterly
“Yale University Investment Office: July 2000”, Harvard Business School

Part 2: Assessment of Investment Opportunities
“Some Thoughts on Business Plans” by William A.Shannan, Harvard Business School
“The Top Ten Lies of Entrepreneurs” by Guy Kawasaki, Harvard Business Review
“Life in the half-fast lane” and “Lies VC tell” by Howard Anderson, Technology Investor
“How VC evaluate potential venture opportunities”, Harvard Business School

Part 3: Valuation in a Venture Capital Context
“Valuation Issues in Start-Ups & Early-Stage Companies: The Venture Capital Method”, by Robert M.
Johnson, London Business School
“How much is flexibility worth”, by Thomas Copeland and Philip Keenan, McKinsey Quarterly
“A Note on Pre-money and Post-money Valuation”, Harvard Business School
“A Note on Valuation in Private Equity Settings”, Harvard Business School
“The Venture Capital Method – Valuation Problem Set”, Harvard Business School

Part 4: Negotiating and Investing
“Venture Capital Negotiations: VC versus Entrepreneurs”, Harvard Business School
“Note on Financial Contracting: “Deals”, Harvard Business School
“Contracting and Control in Venture Capital”, Harvard Business School
“Good and bad leavers”, by Keith Fountain




Venture Capital – an introduction [ver: 7/06/2010]                                          Page 3

				
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