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INSTRUCTOR:
OFFICE:
PHONE:
E-mail
William L. Dougan
Hyland Hall 4513
262/472-1159 (office) or 262-472-3964 (Dept.) douganw@uww.edu
OFFICE HOURS: MT 3:00-6:15, or by appt.
NOTE: SOME CLASS MATERIALS WILL BE PLACED ON A COURSE SERVER.
The address for the website is: http://facstaff.uww.edu/douganw/F370/
OVERVIEW OF COURSE:
The purpose of this course is to provide a solid foundation for mastering the financial knowledge and skills necessary for managing a venture from the pre-startup to the harvest stage. Specific topics focus on (a) alternatives for funding a startup organization, including debt capital options and risk capital options (b) short-term decision models associated with financial management of a startup organization (e.g., cost-volume-profit, forecasting), (c) the production of acceptable financial documents for a proposed business, including a revenue model and pro forma income statements, cash flow documents, and balance sheets (d) long-term decision models (e.g., strategic plans) (e) raising capital to finance the growth of an enterprise (f) transactions-related techniques used by capital providers for managing the flow of capital to and from startup organizations (g)the structure and functioning of the risk capital industry, including a variety of alternative practices typically used to locate, evaluate and fund startups.
PREREQUISITE: FNBSLW 344
COURSE MATERIALS:
*Calculator with basic functions,
*Copy of business planning software: http://www.bizstartsmilwaukee.com/BizFiles/TemplatesForms/FastTrac_MyFinancialPlanV6.xls
GOALS
1.
Introduce the concepts and techniques necessary to understand the special requirements of funding new ventures.
2.
Describe a variety of alternatives for providing financial capital for a new venture.
3.
Describe the nature of the industry providing debt capital for startup ventures, and the procedures and practices that must be followed by new ventures to make application for it.
4.
Describe the nature of procedures and practices used in the industry for providing risk capital for startup ventures, including angel investing, venture investing, private placement, leveraged buyouts and search funds.
5.
Describe techniques used to evaluate new ventures as a basis for investment decisions.
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6.
Understand techniques used for financial planning and financial development of a new business idea.
4.
Examine the advantages and disadvantages of a number of alternative approaches for acquiring financial capital for a proposed or ongoing business and rules for choosing between them.
5.
Describe the process of exiting a venture – including private sale and initial public offering.
READINGS:
There are five major sources of readings for the course. These include:
(1)A text, Entrepreneurial Finance (2 nd Ed.), by J.K. Smith and R.L. Smith. Hoboken, NJ:
John Wiley. 2004. This is available in the bookstore. [Designated S&S]
(2)A text, New Venture Creation: Entrepreneurship for the 21 st Century (7 th ed.), by Jeffery
Timmons. Irwin-McGraw-Hill: Boston. 2007 [Designated T7] OR New Venture Creation:
Entrepreneurship for the 21 st
Century (8 th
ed.), by Jeffery Timmons and Stephen Spinelli. Irwin-
McGraw-Hill: Boston. 2008. [Designated T8]. These will be distributed in class, and then collected before the end of the semester.
(3) Cases, which will sometimes be available on the internet and sometimes in paper form in class.
(4)Handouts, which will be distributed in class or via the net.
(5)Internet information sources.
EVALUATION:
Your overall performance will be judged on the basis of five factors: (1)your performance on an inclass, midterm exam, (2)your performance on an in-class final examination (3)your performance on a proposed venture idea (4) your performance on a several assignments which will result in a financial plan for a new business (5)your performance on two of three case write-ups, due in class on the assigned day and (6) the quality and quantity of your in-class effort and participation.
The relative value for the four factors is based on the following schedule:
Midterm Exam 15%
Final Exam
Idea Generation Paper
20%
5%
Financial Documents
Case analyses (2 of 3)
20%
25%
Class Participation 15%
Let me deal with each of these in turn:
(1)Midterm Exam—(15%)This will be composed of closed-book, relatively short problems and/or essay questions that may include theoretical questions, problem solving
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or the application of material covered in the class to real-world business problems. The exam will be held in class.
(2)Final Exam—(20%)This will be composed of closed-book, relatively short problems and/or essay questions that may include theoretical questions, problem solving or the application of material covered in the class to real-world business problems. The exam will be held in class, and will be longer than the midterm examination. In general, it will cover material from the second half of the course, but may rely on information from the first half of the course.
(3) Idea Generation Paper--(5%) Identify a need that is not being addressed in the current marketplace and write a paper describing an idea for a product or service that will satisfy that need. Your idea should have some potential to become a new venture. The paper should describe and explain each of the following: (1) An unmet current need, (2) How this need is currently being addressed/accommodated, (3) Your proposed idea
(description of product or service), (4) How your idea will meet/satisfy customer needs,
(5) Potential customers or supporters and how much they might pay to satisfy this need, and (6) How the idea can be delivered to those that will benefit. This is an individual assignment.
(4) Financial Statements--(20%) The intent of these assignments is to take a realistic financial view of a proposed organization, utilizing methods for projecting and modeling what the organization will look like as an economic entity. This includes (a)identification of likely startup costs for the organization (2%) (b) creation of a revenue model for projecting future revenues (2%) (c)construction of a proposed income statement using sales and expenses (2%) (d) construction of a proposed cash flow document (2%) (e) construction of a proposed balance sheet (2%). These documents are likely to involve consideration of alternative forms of financing and/or entry and exit strategies for venture capital if applicable. Based on revisions from initial feedback, a final set of statements will be required. (10%) These will be individual assignments.
(5)Case Writeups—(25%) For these exercises you will be required to generate a written response to a hypothetical business situation. Your answers will be judged on the basis of:
(a)the clarity and cogency of your writing, (b)the degree to which you actually complete the given task, (c)the creativity and insight you demonstrate in analyzing the situation and in generating possible solutions, (d)the degree to which your suggestions can be feasibly implemented, (e)the degree to which you are able to identify and counteract potential problems with your suggested solutions and (f)the degree to which you demonstrate mastery and understanding of the material covered in the class. The case problem on which you do best will be weighted at 15%, the case on which you do second best will be weighted at 10%.
(6)Class Participation—(15%)This component of your grade is actually composed of four different parts: (a)your demonstrated degree of concern for the learning process, evidenced by attention, no instances of disruptive behavior and no pattern of absence from class sessions (b)your demonstrated degree of preparation for discussion, evidenced by your ability to respond satisfactorily to both factual and analytic questions about the material at hand,
(c)your demonstrated degree of mastery of the material, evidenced by the quantity and, more
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importantly, the quality of your spontaneous comments and (d)your active participation in discussions of business situations that will be presented in class. The class will rely heavily on the participation of students in the discussion.
POLICIES
1.
The better prepared you are for classes the better you will do in the course. Poor attendance usually results in poor performance.
2.
You are responsible for all material regardless of whether or not you were in class when it was presented.
3.
Make-up opportunities will be given only to those with instructor-approved absences.
Absence because of officially sanctioned university activities requires at least one week's notice to the instructor and must be documented before approval may be granted. All make-up efforts must be taken within three days of the regularly scheduled activity.
4.
There will be no opportunity to make up participation when a class is missed without prior notification.
5.
Late enrollment in a business administration course will normally be permitted only if the course has not completed the equivalent of one full week of meetings. (3 meetings for
MWF classes, 2 meetings for TR classes, one meeting for once-per-week classes.)
6.
This course may rely on the contributions of guest speakers from the community who are accomplished executives, entrepreneurs or service providers in the community. It is extraordinarily important for attendance to be high and participation to be both competent and active. The outside world judges us by what they see, and it is important for them to see our best.
7.
The University of Wisconsin-Whitewater is dedicated to a safe, supportive and non-discriminatory learning environment. It is the responsibility of all undergraduate and graduate students to familiarize themselves with University policies regarding Special
Accommodations, Misconduct, Religious Beliefs Accommodation, Discrimination and
Absence for University Sponsored Events. (For details please refer to the Undergraduate and Graduate Timetables; the "Rights and Responsibilities" section of the Undergraduate
Bulletin; the Academic Requirements and Policies and the Facilities and Services sections of the Graduate Bulletin; and the "Student Academic Disciplinary Procedures" [UWS
Chapter 14]; and the "Student Nonacademic Disciplinary Procedures" [UWS Chapter
17]).
8.
As members of the University of Wisconsin College of Business & Economics community, we commit ourselves to act honestly, responsibly, and above all, with honor and integrity in all areas of campus life. We are accountable for all that we say and write. We are responsible for the academic integrity of our work. We
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pledge that we will not misrepresent our work nor give or receive unauthorized aid. We commit ourselves to behave in a manner which demonstrates concern for the personal dignity, rights and freedoms of all members of the community. We are respectful of college property and the property of others. We will not tolerate a lack of respect for these values and fully accept responsibility to maintain the honor code at all times.
ASSIGNMENTS:
January 21: Introduction and Course Administration
An Overview of New Venture Financing
Reading: Note on Affordable Loss (W)
Reading: Chapter 2 (S&S)
Assignment: Bakers Dozen Ideas
January 28: New Venture Strategy
Revenue Models
Reading: Note on New Venture Performance (W)
Reading: Chapter 4 (S&S)
Assignment: Idea Generation Paper
February 4: The Business Plan.
Reading: Chapter 3 (S&S)
Reading: Chapter 6 (S&S)
February 11: Determining expected startup requirements
Cash Flow Documents
Reading: Chapter 12 (T7) or Chapter 11 (T8)
Reading: Chapter 7 (S&S) (pp. 174-191)
Assignment: Revenue Model
February 18: Cash Flow Documents
Income Statements
Reading:
Assignment: Startup requirements document
February 25: Income Statements and Operating Statements
Balance Sheets
Assignment: Cash Flow Document
Reading:
March 4: Balance Sheets
Reading:
Assignment: Complete Set of Pro Forma Documents
The Framework of New Venture Valuation
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Reading: Chapter 8 (S&S)
Assignment: Income Statement
Reading: Chapter 14 (T7) or Chapter 15 (T8)
Distribute First Case Writeup Assignment
March 11: Valuation in Practice: The Investor’s Perspective.
Reading: Chapter 9 (S&S)
Valuation: The Entrepreneur’s Perspective
Reading: Chapter 10 (S&S)
Assignment: First Case Writeup Assignment (Oyster Media)
March 18: Funding Alternatives
Reading: Chapter 13 (T7) or Chapter 14 (T8)TBA
Debt Financing
Reading: Chapter 15 (T7) or Chapter 16 (T8)
March 26: SPRING BREAK
April 1: MIDTERM EXAMINATION
April 8: Angel Capital
Reading: Note on Angel Investing (W)
Distribute Second Case Writeup Assignment
Venture Capital
Reading: Note on the Venture Capital Industry (W)
Reading: Chapter 14 (S&S)
April 15: Venture Capital
Reading: Note on Venture Capital Portfolio Management (W)
Reading: Note on Venture Capital Due Diligence (W)
Assignment: Second Case Writeup Assignment ()
Term Sheets
Reading: Term Sheet (W)
April 22: Limited Partnership Agreements
Reading: Note on Limited Partnerships (W)
Private Placement
Reading: Note on Private Placement Asset Allocation (W)
Reading: Note on Private Placement (W)
Distribute Third Case Writeup Assignment
April 29: LBO
Reading: Note on LBO (W)
Evaluating alternative forms
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Reading: Chapter 15 (S&S)
Assignment: Third Case Writeup Assignment (Stemina Biotech)
May 6: Harvest
Reading: Chapter 16 (S&S)
Reading : Chapter 19(T7) or Chapter 19(T8)
Reading: Note on Exit Routes
Reading: Note on Exits
May 13: Final Exam 5:30-7:30pm
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