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FTE-P10
PGDM 2010-12: Term-VI

Financial Tools for Entrepreneurs
(3 Credits)
Course Facilitator: Dr. Shridhar Dash


I. Course Overview and Objective

Overview
Research has shown that access to finance is a major constraint faced by entrepreneurs. A majority of early stage entrepreneurs go out of business due to mismanagement of cash-flows in the early stage of the entrepreneurial venture. There is a constant dilemma in an entrepreneur’s mind about the amount of fund to be raised, the appropriate time for raising fund, the source of finance (venture capitalist, angel investor, loan from financial institutions), the reasonable valuation of the venture, the deal structure, and whether to exit or not.

Objective
· Understand the cash-flow problems of an early stage venture
· Learn to value an early stage venture from an entrepreneur’s perspective
· Understand about the appropriate financing options of an entrepreneur
· Structure and design a win-win deal for investors and entrepreneurs
· Find an appropriate exit strategy and avoid costly pitfalls
· Learn to manage the investor-entrepreneur relationships

Reference Books

1. To be provided

II. Detailed Session Plan

Session 1-4: Understanding the financial dilemmas: An entrepreneur’s perspective

Session 1: The capital requirement of an entrepreneurial venture is defined by the business model. Appropriate assumptions can help to estimate the capital requirements of the firm and the effect of capital infusion on the profitability and scale of the venture.

Case: An internet business

Session 2: In which stage should the entrepreneur raise finance? What is the extent of dilution that one should expect? Whom to approach for fund? How to decide the best tie for external capital infusion?

Discuss multiple options/stories


Session 3: Decision on issues with external funding: the classical bootstrapping model.

Case study on bootstrapping

Session 4: Raising funds: pitching, drawing a business plan/term sheet, and other process for closing the funding.

These sessions will be facilitated along with Wribhu Tyagi, CEO ValueMax

Session 5: The entrepreneur’s #1 priority: Indentifying the problem areas and resolving them to create wealth for stake-holders

Why should an entrepreneur start a venture? Should he focus on growth or profitability? What are the implications of the above decisions on financial issues?

Case: To be provided

Session 6: Understanding the cash-flow problems of an early stage venture

Emphasis on cash-flows problems faced by an entrepreneur & means to mitigate them. Estimation of possible growth through internal finances to gauge the limits of growth,

Case: To be provided

Session 7: The pitch for the funding and the journey: The entrepreneur’s and the investor’s perspective

How to pitch/communicate to the investor? Understand the difficulties faced by an investor while evaluating investable opportunities.

Case: To be provided

Session 8: The pitch for the funding and the journey: The entrepreneur’s and the investor’s perspective

Case: A VC financed entrepreneur will share his experience while raising finance for his venture

The session will be facilitated along with Srikumar Mishra, CEO MilkMantra

Session 9: Understanding investor’s dilemma: Theoretical foundations of risk capital.

Agency conflicts between investors (venture capital & private equity player) and investees (entrepreneurs) and means to mitigate them through contracts, staging of capital infusion & signaling by entrepreneurs

Reading Material would be provided

Session 10: Evolution of venture capital and private equity industry in India

Evolution of venture capital and private equity industry in India and the role played by them in creating entrepreneurial opportunities. Emphasis will be on regulatory aspects and opportunities ahead.

Reading Material would be provided

Session 11-12: Valuing early stage and privately owned companies: The entrepreneur’s and the investor’s perspective

Tools of valuation, with emphasis on early stage entrepreneurial venture

Case: To be provided

Session 13-15: Deal structuring: Equity Vs debt Vs hybrid financing

Focus on deal structuring while raising money. Discussion will be on Changes in pre and post investment valuation through the choice of financial instruments used for investment.

Case: To be provided

Session 16-17: Making the financial deal work: Business models that can grow

Discussion will be on the role of external capital in the growth of the firm, and associated issues for the entrepreneur.

Case: To be provided

Session 18: Managing exit

Discussion will be on management of exit by the entrepreneur and associated dilemmas.

Case: To be provided

Session 19-20: Learning from practitioner’s perspective

These sessions will be facilitated by Sanjay Anandaram, Founding Patner, JumpStartUp




III. Evaluation
The evaluation will be as follows:

Components
Weights (%)
Class Participation
20
Surprise Quizzes (2)
40
End Term
40
The class participation will be based on the regularity of attendance and discussion of cases inside class. Students are expected to read the cases and solve them before coming to class.

Quizzes will be MCQs with negative marks. There will be two quizzes of 20 marks each. Both quizzes will cover the portion discussed till then.

End term examination will cover the entire syllabus and will test a student’s understanding of the subject.
Created By: Debasis Mohanty on 11/21/2011 at 10:40 AM
Category: PGDM-II Doctype: Document

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