BAFI580B: VENTURE CAPITAL
Course Outline
COURSE GOALS
The course aims to familiarize students with the workings of venture capital funds
and venture capital financing. Students will be acquainted with the theory and
empirical evidence concerning venture capital markets. The course will cover
contracting, fundraising, and financing choice in depth, with the aim of catering to
students interested in raising venture capital financing as entrepreneurs, investing
in innovative companies as angels, or working at venture capital or private equity
funds.
LEARNING OBJECTIVES
While the main goal of the course is to familiarize students with the fundamental
theoretical concepts, we will also emphasize the concepts’ practical applications.
This will be done through a case studies, Excel computer coursework, and
homework assignments. Students will be exposed to real-life examples and
applications. Venture capitalists, entrepreneurs, and limited partners will be
brought in to illustrate relevant concepts. Lectures will also cover main empirical
results from current academic research papers that are related to the course
topics.
Students will understand the structure of the venture capital industry, the
contracts venture capital firms and angel investors write, and the investment
process.
ASSESSMENT SUMMARY
Course grade will be a weighted average of marks with the following weights:
20%
Case: Evaluation of Term Sheets
20%
Case: SunRun: Raising Series A Round
20%
Case: Trulia: IPO or Sale
20%
Participation
20%
Final exam
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BAFI580B: VENTURE CAPITAL
Course Outline
PROGRAM GOALS
B.COM
Critical Thinking
Analytical Decision-making
Oral & Written Communication
Ethics & Sustainability
COURSE INFORMATION
Division: Finance
Instructor: Will Gornall
Email: will.gornall@sauder.ubc.ca
Phone: (604) 827 4372
Office: Henry Angus 877
Office hours: Monday and Tuesday 2:00–3:00
Sections:
001 (HA 133, Monday & Wednesday 10:00-12:00)
Course duration:
Mar 07, 2016 to Apr 16, 2016
Pre-requisites:
MBA
Course website:
www.connect.ubc.ca
BRIEF COURSE DESCRIPTION
This course covers all the stages of investment in early stage high-growth
companies, from the seed funding of a novel idea to venture capital rounds to a
successful exit, be it an IPO or through M&A. We will concentrate on how
investors and entrepreneurs make and should make important decisions at
different stages. Some questions that we will discuss are the following: How do
angels and VCs generate and process their deal flow and select companies?
What are typical mistakes of entrepreneurs in raising capital and negotiating with
financiers? How do VC funds operate and make decisions? How are VCs
involved in business decisions such as recruiting talent and replacing CEOs?
What are the important provisions of financial contracts between VCs and
founders? How to value early-stage companies? The course is mostly case-
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BAFI580B: VENTURE CAPITAL
Course Outline
based and as a part of the course we will simulate angel group and VC partner
meetings. The course is for both those who want to become entrepreneurs and
thus likely consumers of angel and VC financing and those who want to pursue a
career in the financial services industry. No prior knowledge of the VC industry is
needed.
COURSE MATERIALS & REQUIREMENTS
Lecture notes
There is no textbook for this course. Handouts will cover a lot of material. There
will be teaching notes and cases posted online and distributed in class.
Excel spreadsheets
Complementary material in the form of Excel spreadsheets will be available on the
course VISTA website. These Excel files contain the details of calculations
presented in lectures.
Further / more specialized reading
If you are interested in supplementary reading on the subject, the following two
books can be of interest.
The Venture Capital and the Finance of Innovation, by Andrew Metrick.
The Venture Capital Cycle, by Paul Gompers and Josh Lerner.
ASSESSMENT
Final Exam
There will be a closed book final exam. You are required to take the exam. The
exam has not been scheduled yet.
Cases
To help you better understand the material, the course has weekly cases, some of
which will be graded. Please work through all cases in small groups (3-5) and be
ready to discuss the cases. Graded cases should be submitted by one student in
a group of 3 to 5 students. You can, and are encouraged to, form different groups
for different assignments. All cases are due at 11:59 PM on the due date.
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BAFI580B: VENTURE CAPITAL
Course Outline
You do not have to hand in the remaining (unmarked) cases; however,
understanding cases will be crucial to class discussion.
Participation
Please make every effort to attend the class meetings and come well-prepared.
Students are expected to be able to answer questions and participate in discussion
on the case.
Clickers will be used on a trial basis to assess understanding of the material.
Please ask questions or contribute to lecture discussions at any time. I also
encourage you to provide feedback about how to improve the course.
SCHEDULE
Please note that we may deviate from our plan and that some cases and materials
can be updated/changed. The new versions will be posted online and highlighted
in class. The course may “pivot” to add guest speakers or meet student demand.
Week 1
Materials:
HANDOUTS: Slides will be posted online, so that you can review the class
material beforehand.
We will start with the general overview of the world of angel and venture capital
investment. We will talk about problems that effective innovative ecosystems
should solve, and why Silicon Valley became such an ecosystem. We will identify
the major players and issues. We then overview the major trends in recent years.
We spend most of the time on contracting between entrepreneurs and venture
capitalists (contracting between entrepreneurs and angels will be dealt next week).
This is a building block for all our discussions in the course. We will start by
discussing the major issues in negotiations and contracting, as well as the purpose
of the term sheet. We then devote most of our time understanding, step by step,
various securities issued in the process of funding start-ups, their purpose and
their differences, and then will go into great detail about important features of
contracts.
Week 2
Materials:
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BAFI580B: VENTURE CAPITAL
Course Outline
NOTE: Note on Angel Financing
Read and discuss in groups. Prepare questions to our guests (angel
investors)
CASE: Sand Hill Angels
Refer to case study questions. Please come fully prepared.
We will start by introducing in more detail the world of angels. We then discuss the
contracting issues between entrepreneurs and angel investors.
We will spend most of the time discussing how angel investors select deals, advise
companies, and value deals. We will also talk about the dynamics of angel
decision-making process as well as types of angels (individuals, groups,
incubators, superangels).
Week 3
Assignment to be submitted:
CASE: Choosing VCs: Evaluation of Term Sheets
Refer to case study questions. Please come fully prepared.
Materials:
CASE: VC Deal Sourcing and Screening
Refer to case study questions. Please come fully prepared.
NOTE: Day in Life of Venture Capitalist
Read and discuss in groups. Prepare questions to VCs
In the first part of the class, we will discuss the structure of VC funds, compensation
of VCs, and the relationship between VCs and their investors. We then will discuss
the case on VC Deal Sourcing and how VCs spend most of their day.
Week 4
Assignment to be submitted:
CASE: SunRun: Raising Series A Round
Refer to case study questions. Please come fully prepared.
Materials:
CASE: SunRun: Raising Series A Round
We will start the class by discussing in depth the valuation methods used in venture
capital.
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BAFI580B: VENTURE CAPITAL
Course Outline
We will then turn our attention to the process of Series A funding. We will discuss
the dynamics of fund-raising, the relationship between VCs and founders, and
revisit practical implementation of the term sheet.
Week 5
Assignment to be submitted:
CASE: Trulia: IPO or Sale
Materials:
CASE: Trulia: IPO or Sale
Refer to case study questions. Please come fully prepared.
We will spend this and next sessions discussing exit options. We will also
concentrate on the dynamics of the board decisions in entrepreneurial firms, postinvestment relationship between VCs and founders, and valuation of late-stage
entrepreneurial ventures.
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