ALS 450: Entrepreneurial Finance
Course Number: ALS 450
Course Name: Entrepreneurial Finance
Year: Second-year
Semester: Spring
No. Units: .5
Faculty/Instructor(s): Luann Bangsund
Description
This course addresses the challenges faced by entrepreneurs as they seek financing for new ventures. Unlike the mature firms that have the extensive capital markets available to them for financing, the financial performance of startup companies is generally unpredictable. As a result, the sources and the nature of financing available to these young firms are significantly different from those of established firms. We will examine the sources of financing available during the different stages of the lifecycle of a young company..
In addition to identifying financing sources available to new ventures, the course introduces methods of valuation used by venture capitalists and other investors when considering investing in early stage firms. Students will learn how these alternative valuation methods compare and/or contrast with the valuation methods used by established firms.
Finally, we will examine the alternatives for investors to realize a return on their investment through "harvesting" of the investment. Most venture capitalists are investing with a relatively short time-period in mind. As a result, entrepreneurs need to address how the venture capitalists will be able to exit the investment within five to ten years from the initial investments. We will examine several alternative exit strategies and the impact of each strategy on the entrepreneur and the investors. In considering appropriate exit strategies, the course will introduce students to typical "deal terms" and term sheets.
The course is taught using the case method. Each class session will be for three hours, in which the first half of the class is a case discussion based on the material covered in the lecture of the prior week.
Course Material
Luecke, Richard, Entrepreneurs' Toolkit: Tools and Techniques to Launch and Grow Your New Business (Harvard Business Essentials), Harvard Business School Press, December 2004 (ISBN: 978-1591394365)
A packet of readings and a book of cases, both available at the bookstore
Prerequisites
ALS 350 and 351 or their equivalent
Topics Covered
- Angel Finance
- Venture Capital
- Valuation
- Deal structure
- Term Sheets
- Exit Strategies
Learning Objectives
Students who successfully finish the class should be able to:
- Identify various sources of financing available to young, high-growth companies
- Explain the difference between the different sources of financing and when each source of financing is appropriate
- Determine a value for a firm using the following valuation methodologies
- Discounted Cashflow
- Relative Value Method (multiples)
- Venture Capital Method
- Explain the difference between the various valuation methods and when each method is appropriate
- Analyze a term sheet for a new venture financing
Grading
| Percentage of course grade | |
| Final case write-up | 45% |
| Participation | 55% |