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PGDM 2011-13: Term-IV
Course Name: Entrepreneurial Finance: Financial Tools for Entrepreneurs
Credits
3
Faculty Name
Dr. Shridhar Dash
Program
PGP (BM)
Academic Year and Term
2012-13
IV
I. Course Overview and Objective
Research has shown that access to finance is one of the important constraints faced by the entrepreneurs, and most of the early stage entrepreneurs go out of business because of mismanaging the cash-flows. As an entrepreneur one always debates about how much finance can and should be raised to fund the investment and business operations, when should it be raised and from whom (venture capitalist, angel investor, loan from financial institutions) should it be raised, what is the reasonable valuation of the venture, and how should the entrepreneur structure the deal that is acceptable to the venture capitalists. The course makes an attempt to familiarize the students with the financial issues faced by the early stage entrepreneurs. Besides the course will enable the students to learn the financial tools needed to start and manage an early stage venture and enable them to value an early stage venture for investing in an early stage venture.
Objective to the course is to enable the students to;
1. To understand the cash-flow problems of an early stage venture
2. Learn to value of an early stage enterprise from an entrepreneurs prospective
3. Learn to structure and design a win-win deal for venture capitalists and entrepreneurs
4. Learn to manage the investor-entrepreneur relationships
II. Reference Books
1. Cases will be provided
III. Detailed Session Plan
Session 1-4: Understanding the financial dilemma faced by an entrepreneur: Learning from an entrepreneurs prospective
In this session we will discuss the financial problems of an early stage entrepreneurial venture, and the questions he/she needs to answer to resolve the dilemma faced by the entrepreneur. The problems and dilemmas that would be discussed are;
1. Business Model – What is the funding for, working capital vis-à-vis investment?
2. Profitability vis-à-vis scale and the implications for funding requirement
3. Quantifying Working capital and investment needs
4. When is a good time to raise
5. Bootstrapping, or raising money from Angels, venture capitalist, private equity investor or using debt from financial institutions- When/Why/How?
6. Using investment banks for fund raising
7. What does funding agencies look for in the venture?
8. Demystifying the term sheet, rights, and special rights
9. Understanding dilution of equity and subsequent rounds of funding
Effort would be made to bring an entrepreneur to take these classes along with the course instructor.
Session 5: The entrepreneur’s #1 priority: Indentifying the problem areas and making an effort to resolve the problem to create wealth for the stake-holders
The session would ask the question: Why should entrepreneur start a venture and should he focus on growth or profitability, and implication of the same on financial issues.
Case: To be provided
Session 6: Understanding the cash-flow problems of an early stage venture to manage the growth
The session would focus on discussion the problems of cash-flows for an entrepreneur, and what are the leverage points the entrepreneur has to get over the cash-flow problem. Besides this session will make an attempt to estimate the self-financed growth possible with the internal resources, so that the entrepreneur will know the limits of his growth, and what he/she needs to do if the aspiration is to grow more than the possible self-financed growth.
Case: To be provided
Session 7-8: The pitch for the funding and the journey: The entrepreneur’s, the investors prospective
The session would discuss the process of pitching to the investor, and prepare the students to communicate with the external investors. Besides, this session would also prepare the student to understand the difficulties an investor faces when evaluating investable opportunities.
Case: To be provided
Session 9: The pitch for the funding and the journey: Learning from the entrepreneur’s, prospective
In this session the entrepreneur would share his personal experience of raising investment for his venture.
Case: An entrepreneur who has raised money from the venture capitalist (The entrepreneur yet to confirm the participation) will share the process he/she went through.
Session 10: Understanding the dilemmas of an investor: Theoretical foundations of venture capital and private equity investment
The session would bring the theoretical foundation of the agency problem the venture capitalist, and the private equity investor faces, and the mechanism through which they make an effort to reduce the agency problem. In this session we would discuss the role of contract, staging mechanism, and implication of signaling by entrepreneurs while raising funds for the venture.
Reading Material would be provided
Session 11: Evolution of venture capital and private equity industry in India
The session would discuss the evolution of venture capital and private equity industry in India and role it has played in creating entrepreneurial opportunities in India, with emphasis on the regulatory aspect and opportunity ahead.
Reading Material would be provided
Session 12-14: Valuing early stage and privately owned companies: The entrepreneur’s, the investors prospective
These sessions would focus on the tools of valuation, especially tools of valuation of an early stage entrepreneur. The cases would enable the students to apply the tools in the case.
Case: To be provided
Session 15-17
:
Deal structuring: Equity vis-à-vis debt vis-à-vis hybrid financing options
These sessions would discuss the structuring of deals while raising money for the venture, and how the pre and post investment valuation would change with the various financial instruments of investment.
Case: To be provided
Session 18-19
:
Making the financial deal work: Business model that can grow
These sessions would discuss the role of external capital (capital raised from private equity investors) in growing the company.
Case: To be provided
Session 20
:
Managing the exit
This session would discuss the process of managing the exit, and the points the entrepreneur should consider while planning to exit the venture.
Case: To be provided
IV. Evaluation
The following table describes the per cent of weights given for the purpose of the evaluation.
Components
Weights (%)
Class Participation
20
Surprise Quiz (1)
15
Project - Business Plan
25
End Term
40
The class participation would be based on the regularity of attendance (Students attending all classes would be rewarded) and participation level on the overall learning process of the class including the discussion of the cases inside the class. Everyone is expected to read the cases and solve them before coming to class.
Quizzes would be of MCQ types with negative marks. The business plan project expected to be done at an individual level. One can include one more member with prior approval of the faculty.
End term examination would cover the entire syllabus and would test students understanding of the subject.
V. Academic Integrity
You must demonstrate high order of academic integrity being attentive in the class and regularly read the prescribed reading material. In case of group assignment, all members of the group should contribute to the preparation of the report and you are expected to write the report in your own style and language. Your basic purpose should be to learn, without resorting to any unfair means for getting a higher score/grade
.
Created By:
Debasis Mohanty
on
05/16/2012
at
10:36 AM
Category
:
PGDM-II
Doctype
:
Document
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