Risk and Opportunity: Investing In Innovative Companies
Fall 2015
B8440
Wednesdays 4:00 p.m. – 7:15 p.m.
Warren Hall Room 416
Adjunct Professor Jeffrey Harris
email: jah2126@columbia.edu
Venture investing entails risk, but it also provides the potential for significant capital gain.
It is an active profession practiced by those who exhibit insights, passion, and judgment in
the face of incomplete information. This course is designed to help students learn how
to evaluate investment opportunities in new and emerging growth companies across
different industries and geographies. Through a combination of lectures, case studies,
readings, and weekly guest speakers (who are active practitioners or entrepreneurs) the
course will expose students to the real-world best-practices and methodologies of
financing the entrepreneurial economy in the U.S. and internationally. Students should
expect to complete the course with a basic framework for making venture investment
decisions and implementing them.
The course is geared toward those interested in investing, venture capital,
entrepreneurship and innovation. Materials will cover opportunities primarily in ecommerce, healthcare, consumer businesses, energy, and other technology-based ventures.
Although the class is not overly quantitative, there are several cases that require
spreadsheet work. Familiarity with basic financial analysis and corporate finance will be
helpful, though the bulk of the course and class discussion will focus on evaluating markets,
products, management, business models, corporate strategies, and competitive advantage
leading to determination of whether the potential rewards justify the financial risks.
Each week students will have assigned readings and cases. In addition, incremental
optional reading will be suggested and included in the course packet for those seeking to
dig into the relevant topics. The course is designed around class discussion and all
students are expected to be active participants every week sharing their thoughts,
questions, analyses, and perspective. If you prefer to be a spectator, you may find other
courses more to your liking.
Course Requirements (Grade Weightings)
 Class participation (quality, not quantity) and homework submissions (50%)
 4-5 page mid-term individual paper that evaluates the early decision made by some, but
passed by most, to invest into Elon Musk’s Tesla Motors (25%)
 10-15 page final paper; groups of 2-3 students; topic selected by students consistent
with the broad themes of the course and is intended to be an opportunity to look at a
matter or company or entrepreneurial effort of particular interest to the group. All
work must be original and not completed in conjunction with other projects or
papers. (25%)
Jeffrey Harris
Adjunct Professor
Jeffrey Harris has spent over 30 years in the venture capital and private equity business
funding and building innovative companies in the U.S. and internationally, from start-ups to
buyouts, and across numerous industries. From 1983-2011 he worked at Warburg Pincus
where he was a senior partner of the firm involved primarily with technology, telecoms
and energy-related businesses. In 2012 he started his own investment and advisory firm,
Global Reserve Group.
Professor Harris began teaching at Columbia Business School in 2005 where he has created
two courses: Venture Capital: Risk and Opportunity, and more recently, Innovate or Die.
His new course offering - Risk and Opportunity: Investing In Innovative Companies draws on his experiences in his day job, as well as what he has learned from his teaching
and research on entrepreneurship and venture capital. He has authored numerous case
studies published by Columbia CaseWorks, and his book Transformative Entrepreneurs:
How Walt Disney, Steve Jobs, Muhammad Yunus and Other Innovators Succeeded was
published in 2012 by Palgrave Macmillan.
He is past Chairman of the National Venture Capital Association, and currently is a member
of the Board of Trustees for New York-Presbyterian Hospital, Friends of the High Line, and
the Cranbrook Educational Community. He has a B.S. in Economics from the Wharton
School at the University of Pennsylvania, and an MBA from Harvard Business School.
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Risk and Opportunity: Investing In Innovative Companies (B8440)
Class #1 (September 2, 2015)
In The Beginning
Course introduction and overview + historical perspective on venture capital and its role in
the economy + alternative sources of financing for entrepreneurs + introduction to venture
math.
Required Reading
Transformative Entrepreneurs: How Walt Disney, Steve Jobs, Muhammad Yunus, and Other
Entrepreneurs Succeeded – Introduction + Chapters 10, 13, and 14
Optional Reading
 NVCA 2015 Yearbook – download from nvca.org
 “New Venture Financing”
 “The Basic Venture Capital Formula”
Class #2 (September 9, 2015)
Let The Games Begin
Evaluating new business models for the new economy.
Case Study: Galvanize, LLC (overview memo/slides); evaluating an investment
in an early stage company creating a nationwide ecosystem to support new
and fast-growing e-commerce companies
Guests: Jim Deters, founder and CEO, Galvanize (Denver)
Ryan Craig, Managing Partner, University Venture Funds (New York)
Case Study: Getting In Tune: Venture Math - Part 1
Students should submit their answers to Questions 1-3 at the beginning of class
Optional Reading
 “Venture Capital: The Good, Bad, and Ugly”
 “A Note on Private Equity Securities”
 “A Method For Valuing High-Risk, Long-Term Investments”
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Class #3 (September 16, 2015) Crunch Time
Running the numbers and assessing the primary drivers of successful ventures.
Case Study: Getting In Tune: Venture Math - Part 2
Students should submit their answers to Questions 4-7 at the beginning of class
Case Study: Hardina Smythe and the Healthcare Investment Conundrum;
weighing different criteria when analyzing early stage healthcare companies
Guest: Carmichael Roberts, Managing Director, North Bridge Capital (Boston)
Students should submit a half-page write-up describing their final paper
Optional Reading
 “How Venture Capital Works”
 “How Venture Capitalists Evaluate Potential Venture Opportunities”
 Transformative Entrepreneurs – Chapter 1
Class #4 (September 23, 2015) New Horses For New Courses
Evaluating investment opportunities including business plan review, conducting due
diligence, assessing valuation and weighing the risk-reward.
Case Study: Investing In Online Marketplaces; choosing new e-commerce businesses
Case Study: Dropbox; a potential investment in a leading cloud computing company
Guest: Loretta McCarthy, Managing Director, Golden Seeds (New York)
Optional Reading
 “The Top Ten Lies of Entrepreneurs”
 “Women In Venture Capital”
 Transformative Entrepreneurs – Chapter 2
Class #5 (September 30, 2015) New Horses For Old Courses
Assessing potential investments in early stage companies based on bringing new
technologies to mature industries.
Case Study: Terrapower; a new nuclear power technology company backed by Bill Gates
Case Study: Blue River Technology; new technology to improve worldwide agribusiness
Guest: Cecilia Gonzalo, Managing Director, Vatera (healthcare investments)
Optional Reading
 “Venture Capital Investment In The Clean Energy Sector”
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
Transformative Entrepreneurs – Chapter 3
Class #6 (October 7, 2015)
Foreign Affairs
Evaluating international investment opportunities while assessing the added risks of
foreign currency, different political and cultural norms, and less advanced financial
markets.
Short Subject Lecture: Cross-border investing
Case Study: Karma Oil; evaluating an oil exploration venture investment in West Africa
Case Study: Flipkart; evaluating an investment in a rapidly expanding online retail site in
India
Guest: Kesha Cash, founder and General Partner, Impact America Fund, CBS ‘10
Optional Reading
 Transformative Entrepreneurs – Chapter 4 and Chapter 11
Class #7 (October 21, 2015)
Cars
Evaluating an investment in a new company trying to break into the U.S. automotive
market; a feat not accomplished successfully since Chrysler in 1925.
Required Reading
 “The Mechanic of Revolution – Henry Ford”
 “The Car of Tomorrow – Today” – Tucker Automotive
 “The Playboy” – DeLorean Motors
 “Tesla’s Wild Ride”
 “How Elon Musk Turned Tesla Into the Car Company of the Future”
 “Tesla Motors – Evaluating A Growth Company”
 “Tesla IPO Filing – selected pages”
Students should submit their mid-term paper at the beginning of class evaluating
and analyzing the attractiveness of an early stage investment in Tesla Motors
Short Subject Lecture: Why Silicon Valley works; can it be cloned?
Optional Reading
 “Fisker Automotive Investor Presentation 2009”
 “Capstone Investments Research Report on Tesla Motors”
 “The Origins and Development of Silicon Valley”
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Class #8 (October 28, 2015)
Failure Is An Option
Not all new businesses succeed; failure is the most likely outcome.
Case Study: The Human Transporter; Segway, a high profile venture capital failure
Negotiating the terms of trade between entrepreneurs and financiers; students face off
“mano a mano” to negotiate the financial provisions of a term sheet with prizes and pain for
winners and losers.
Case Study: eSurg (A): Negotiating the Start-Up + eSurg (B): Second Round Financing
Students to submit their assessment of “fair” valuation for eSurg
Optional Reading
 “Venture Capital Negotiations: VC versus Entrepreneur”
 “You Can Negotiate With Venture Capitalists”
Class #9 (November 4, 2015)
Lawyers In Love
Understanding the terms of trade between entrepreneurs and those providing the risk
capital.
Case Study: For Everyman, Inc.; evaluating different term sheets
Students to submit For Everyman, Inc. worksheets at the beginning of class
Guest: Adam Dinow, Partner, Wilson Sonsini Goodrich & Rosati (New York)
Case Study: Venture Capital Vignettes; adding value to portfolio companies
Guest: David Yang, Managing Director, Essex Woodlands (Shanghai); CBS ‘06
Class #10 (November 11, 2015) A New York State of Mind
Understanding early stage ventures for the public good; social ventures in New York.
Case Study: Elevated Innovation: Urban Entrepreneurship and New York City’s High Line
Guest: Robert Hammond, co-founder/Executive Director, Friends of the High Line
Case Study: Modern Urban Mobility: Bicycle Sharing For New York City?
Students to submit a 2-3 page write-up outlining their Final Project
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Class #11 (November 18, 2015) Head For The Exits
Decisions and alternatives for harvesting successful and failed investments. Getting in is
often much easier than getting out of an investment.
Case Study: Rightnow Technologies; cashing out or staying the course for a fast-growing
software company
Case Study: Warburg Pincus and emgs: The IPO decision (A); the challenges of going public
outside of the U.S. for an innovative Norwegian technology company
Guest: Ira Cohen, Managing Director, Morgan Stanley (New York)
Optional Reading
 “A Note on the Initial Public Offering Process”
Class #12 (December 2, 2015) It’s A Business Too
Venture capital firm management and economics in a maturing, cyclical industry.
Case Study: Andreessen Horowitz; the new force in Silicon Valley
Guest: Kathleen Jacobs, Chief Investment Officer, NYU Endowment Fund
Lecture: Final review and summary of the course teachings
Optional Reading
 “Venture Capital At The Harvard Management Company In Historical Perspective”
 “The Mind of Mark Andreessen”
 “Venture Partners Fund, L.P. Summary of Principal Terms”
 “A Day In The Life Of A Venture Capitalist”
 Steve Jobs’ commencement address at Stanford University (June 2005)
FINAL PAPERS MUST BE SUBMITTED ELECTRONICALLY BY NOON ON SUNDAY,
DECEMBER 6th
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