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JOHN F. KENNEDY SCHOOL OF GOVERNMENT
HARVARD UNIVERSITY
Entrepreneurial Finance
MLD-829MA
Fall Term, Mod2
(0.5 credits)
Carl Byers
Adjunct Lecturer in Public Policy
Harvard Kennedy School
Carl_Byers@hks.harvard.edu
Tuesdays and Thursdays
11:40 PM – 1:00 PM
Littauer 140, Harvard Kennedy School, 79 JFK Street
Shopping Session:
Friday, 9/2/2014, 10:10a-11:25a, LAND classroom (Belfer Building, 4th Floor)
Note: The shopping session is not where/when the course will be conducted
First Session:
Tuesday, October 21st
Office Hours:
Tuesdays, 10:00 AM – 11:30 AM, Starting 10/28/2014; other hours to be added
124 Mount Auburn St., Suite 100 (wait in suite lobby)
By appointment, via online signup: http://ow.ly/zSsDi
Course Assistants:
Ibraheem Mehmood; Ahmed El Mahi (contact details to be provided)
CA Hours: See course page announcement
Faculty Assistant:
Veronica Chapman (veronica_chapman@hks.harvard.edu, 617-495-8833)
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Overview
“Creating something from nothing,” the essence of entrepreneurship, requires more than the
capacity to innovate, recruit, inspire, and strategize. Building a new organization also demands
facility with the language of commerce. Whether leading for-profit or not-for-profit ventures,
entrepreneurs must speak fluently with those who fund, oversee, and support them about the
financial dynamics of their operations.
This course teaches such leaders essential financial terms, tools, and concepts with an emphasis
on “business plan” development. Those interested in innovation from the standpoint of policy,
regulation, or politics also will benefit from gaining this type of knowledge about independent
enterprises, as will those who seek to be “intrapreneurs” in governments or corporations.
Subject matter will include the entrepreneurial process, expectations of investors / funders, key
accounting terms / concepts, valuation, and the practical application of these topics to financial
planning and performance analysis. Students will acquire familiarity and comfort with financial
statements (income statements, balance sheets, statements of cash flows) and with related
accounting issues. We also will review how an understanding of economic drivers enables the
successful development of an organization’s strategy, forecasts, systems, and culture.
Lecture, discussion, case studies and small working groups are employed in the class. The class
also engages real-world entrepreneurs and financiers from the for-profit and not-for-profit
sectors in panel discussions to probe more deeply the application of these concepts. As they
learn key concepts and practices, students construct an integrated financial plan for their
proposed (or hypothetical) venture, sharing their work with the instructor via Dropbox. Each
student pursues a unique plan, engaging in small working groups for feedback and support. The
course concludes with a business plan competition within the class for those who chose to
enter.
This course precedes MLD-839M “Entrepreneurial Finance II” that extends the concepts and
develops in greater depth the financing process for entrepreneurial ventures. Students with a
background in finance / accounting and a well-developed venture plan may take MLD-839M
alone, with the permission of the instructor.
Approach
Many books and courses about financial topics focus first on systems of accounting, diving
immediately into debits and credits or the process of recordkeeping. Others take a theoretical
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bent, going into mathematical proofs to translate concepts of supply, demand, and risk into
quantitative tools. These approaches can leave potential entrepreneurs unfulfilled because they
require an extensive investigation of mechanics before they can be applied to the core
objectives of a new venture.
This course looks at similar subject matter from a different perspective. Regarding new
ventures, we first will ask about what exactly the new organization / initiative will do and how it
will do it. We will build financial literacy starting with the activities of the proposed
organization. By developing finance and accounting vocabulary in the context of practical
questions about the way a new venture will operate, students can absorb concepts in a manner
that is immediately relevant to what they propose to accomplish.
Hence, the criteria applied to the design and content of this course are:
(1) What financial dynamics entrepreneurs need to understand about proposed ventures?
(2) What language entrepreneurs need to speak to engage others in supporting them?
Course Objectives
1. To help students build financial literacy, so that their new ventures can be properly
described, discussed, and managed
2. To enable students to development dynamic, integrated and insightful financial plans
for new ventures
3. To provide students with a pragmatic understanding of what it takes for a venture to
succeed, including what is required to meet the expectations of sources of funding
Outline
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This course employs a few related streams of activity and learning that work together to
support the course objectives:
o Readings, discussion, and assessments about finance concepts to build literacy
o Case analyses to apply these concepts to real-world scenarios
o Panel discussions to hear first-hand from entrepreneurs and funders
o An integrated, cumulative financial planning project to develop a plan for a
specific proposed venture
These work-streams are structured around five key topic areas:
1. The activity of the organization and how it relates to REVENUE
2. The delivery of services and how it relates to EXPENSES AND MARGINS
3. Financial dynamics and how they relate to the BALANCE SHEET
4. The purpose and insights provided by analysis of CASH FLOWS
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5. How social impact and financial investors assess VALUATION when funding
enterprises
Each topic area will include a mix of lecture, discussion, and case study analysis, in
addition to a concept review short assignment and work on a relevant part of the
financial planning project
With case studies, there are often many aspects of each situation worthy of
consideration; we will focus on how financial concepts come into play
o Specific questions and /or data will be presented prior to each case discussion to
focus students on aspects of entrepreneurial finance within each scenario
o Weeks noted as “mini-case” days are not necessarily shorter case documents,
but questions asked and time used in class will be narrower than other case days
The class also includes two panel discussions during class time, to help bring the ideas to
life and to allow students to tailor questions to their specific ideas and plans
o An Not For Profit Entrepreneur / Financier Panel
o A For Profit Social Entrepreneur / Financier Panel
The short assignments noted in this syllabus (informational forms and concept-review
short assignments) will be posted on the class website when assigned
o The two informational forms will help the instructor and the class understand
the backgrounds and goals of students collectively and will set-up the proposed
venture financial planning project
o The five concept review short assignments are designed to cover key aspects of
each concept, to draw on use of required readings and to ensure that everyone
is following content that builds cumulatively over the course
Guidance regarding how to construct your Excel file will be provided on the course page
after completion of the Personal Profile and Proposed Venture short assignments
The following diagram shows the relationship of lectures, case studies, panels, review
assignments, and project deliverables to the five key topic areas (with dates shown for
each)
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Course Requirements and Grading
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There are two informational forms and five concept review short assignments, all of
which are graded on a “check,” “check minus” or “check plus” basis, leading to a
cumulative result
Each student will develop an integrated set of financial projections (which can be a
planned venture, if so desired, or a hypothetical enterprise)
o These financial projections will be prepared in Microsoft Excel and will be
developed incrementally as the course proceeds
o At sequential “checkpoints” throughout the term, students will be expected to
have applied the conceptual learning to their proposed venture; consultative
groups will be formed among students to help each other with these steps and
some students will be asked to share their interim work with the class
o A letter grade will be given for this assignment
A final exam will cover the key concepts of the course and evaluate each student’s
ability to apply the concepts to real-world scenarios, which will receive a letter grade
Student are expected to engage actively in class discussions
Grades will be based on two factors: work done and participation
o The work grade will be based 1/3 on the weekly short assignments, 1/3 on the
financial projections project and 1/3 on the final exam
o Typically, the work grade will drive the final letter grade
o Participation is expected as a minimum condition of the course, both to facilitate
your own learning and to help others learn
o Students who are particularly engaged and helpful may earn a “bump up” of
their grade; students who are particularly unengaged and unhelpful may earn a
“bump down” of their grade
o Ultimately, the instructor will adhere to the HKS grading standards, which
indicated a range of grades; it is likely that the grading policies noted above will
indicate a clear range of outcomes that will be translated to grades accordingly
Work will be shared with the teaching team via Dropbox; each student should create a
folder with their name as the title and share it with the following account:
EntFin01@gmail.com
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Schedule
#
1
2
3
Day, Date
Tues., 10/21
Thurs., 10/23
Tues., 10/28
4
Thurs., 10/30
5
Tues., 11/4
6
Thurs., 11/6
7
Thurs., 11/13
8
Tues., 11/18
1
Topic
Entrepreneurial
Finance as a
Language
Readings1
Text

P&L:
Revenue 1,
Idea, Canvas,
TAM, and Goto-Market
P&L:
Revenue 2,
Case and
Working Group
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P&L:
Expense and
Earnings 1,
Unit Models,
and Income
Statements
P&L:
Expense and
Earnings 2,
Case and
Working Group
Balance Sheet:
Assets and
Liabilities 1,
The Balance
Sheet Mindset
Balance Sheet:
Assets and
Liabilities 2,
Case &
Working Group
Cash Flows:
Cash
Conversion
Cycles,
2/19 Case
Continued
Text



Project Q&A
Concept Q&A
Lecture

Case
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
TAM, Business
Model and Sales
Plan (Project) *
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Project Q&A
Concept Q&A
Case Review
Working Group
Consultation
Project Q&A
Concept Q&A
Lecture
Project Q&A
Concept Q&A
Case Review
Working Group
Consultation
Project Q&A
Concept Q&A
Lecture
Mini-Case
Review
Income
Statement
(Project.)*


Text
Article
Case
Text
Text
Article
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

Case
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Text
MiniCase
Class Session
Course
Overview
Lecture
General Q&A
Lecture
Project
Overview
Profile
Feedback
Concept Q&A
Case Review
Working Group
Consultation
Due
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Personal Profile
Form
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Assigned
Dropbox
Setup
Personal
Profile Form
Proposed
Venture
Form
Concept
Review 1
Dropbox
Setup
Proposed
Venture
Form
Concept
Review 1
Concept Review
2
Concept Review
2
Concept Review
3
Concept Review
4
See week-by-week section of this syllabus for details.
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#
9
10
Day, Date
Thurs., 11/20
Tues., 11/25
Topic
Valuation and
Fund Raising,
Process and
Methods
Readings1
 Text
 Article
Panel 1


11
Tues., 12/2
Panel 2
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12
Thurs., 12/4
13
Tues., 12/9
14
TBD
Overall
Concept
Summary &
Plan
Competition


Panelist
Info
One
reading
Panelist
Info
One
reading
Text
MiniCase
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Class Session
Project Q&A
Concept Q&A
Lecture


Due
Balance
Sheet
(Project) *
Concept
Review 3
Panel 1: Not For
Profit Entrepreneur
/ Financier Guests
Panel 2: For Profit
Social Entrepreneur
/ Financier Guests
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Project Q&A
Concept Q&A
Lecture
Plan
Competition
Assigned
Concept Review
5

Cash Flows
(Project)*
 Concept
Review 4
Concept Review
5
FINAL PROJECT,
including
Valuation /
Impact*
Take Home
Final Exam
* Please note that these project “checkpoints” are not firm deadlines and will not be checked
by the instructor unless students seek feedback. Working groups are designed to facilitate
learning and compliance related to these checkpoints. The grade on this project will be based
on the work submitted by Monday, March 10th as the final project deliverable.
Required Book
Karen Berman and Joe Knight, Financial Intelligence: A Manager’s Guide to Knowing What
the Numbers Really Mean (Harvard Business Review Press, 2013, $27.00)
This book is available for purchase at The Coop.
Other Books Used in the Class
What follows are books that we will read 1-3 chapters from. PDFs will be made available on the
course page.
Brad Feld and Jason Mendelson, Venture Deals: Be Smarter Than Your Lawyer and Venture
Capitalist (John Wiley & Sons, Inc., 2013)
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McKinsey & Company (Tim Koller, Richard Dobbs and Bill Huyett), Value: The Four
Cornerstones of Corporate Finance (John Wiley & Sons, Inc., 2011)
Alexander Osterwalder and Yves Pigneur, Business Model Generation (John Wiley & Sons, Inc.,
2010)
Stevenson, Howard with Shirley Spence, Getting to Giving: Fundraising the Entrepreneurial
way by a billion-dollar fundraiser (Timberline LLC, 2011)
Noam Wasserman, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can
Sink a Startup (Princeton University Press, 2012)
Reading Assignments
Session 1 (10/21): Entrepreneurial Finance as a Language
 Berman & Knight, Financial Intelligence, Part One (Ch. 1-4, plus Toolbox, 32 pages
together)
 Paul Graham, How to Get Startup Ideas, November 2012:
http://paulgraham.com/startupideas.html
 Chris Dixon at Startup School 2013 (Y Combinator), 23 minutes,
http://www.youtube.com/watch?v=akOazwgDiSI
 Wendy Kopp interview, “Charisma? To Her, It’s Overrated,” New York Times, July 4,
2009:
http://www.nytimes.com/2009/07/05/business/05corner.html?pagewanted=all&_r=0
 “Accounting Vocabulary” and “Accounting Grammar” handouts to be provided by
instructor
Session 2 (10/23): P&L: Revenue 1 – Idea, Canvas, TAM, and Go-to-Market
 Berman & Knight, Ch. 5 & 7 (12 pages together)
 http://www.ssireview.org/articles/entry/ten_nonprofit_funding_models (14 pages)
 Steve Blank, “Why The Lean Startup Changes Everything”, Harvard Business Review,
R1305C, May 2013 (7 pages)
 Steve Blank and Bob Dorf, The Start-Up Owner’s Manual: The Step-By-Step Guide for
Buidling a Great Company, excerpt from Chapter 4: Customer Discovery, Phase One:
State Your Business Model Hypothesis, pp. 69-81 (13 pages)
 “How to Plan: Phase One” handout to be provided by instructor
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Session 3 (10/28): P&L: Revenue 2, Case and Working Group
 CASE: Lifespring Hospitals: Delivering Affordable, High-Quality Maternal Health Care in
India, Anant, Mukherjee et al, Ivey Publishing (ISB CEIBS SW), Case ID#9B12M105,
February, 2013 (17 Pages)
 ABC News profile of LifeSpring Hospitals:
http://www.youtube.com/watch?v=9KKVdPWTUI8
 Osterwalder & Pigneur, Business Model Generation, Definition of a Business Model,
Customer Segments through Revenue Streams, pp. 14-33 (19 pages)
Discussion Questions
1. What is the scope of the problem Lifespring Hospitals aims to address?
2. Is this a social enterprise?
3. How would you characterize the business model using the Osterwalder &
Pigneur framework?
4. How is this venture doing? What metrics support your view?
5. What questions remain about the venture’s prospects?
6. What path forward would you recommend?
Session 4 (10/30): P&L: Expense and Earnings 1 – Unit Models, Margins and Income Statements
 Berman & Knight, Ch. 6, 8, and 9, plus Toolbox (31 pages together)
 Osterwalder & Pigneur, Definition of a Business Model, Key Resources through Cost
Structure, plus iPod/iTunes example and Unbundling Business Models, pp. 34-59 (25
pages)
 “How to Plan: Phase Two” handout to be provided by instructor
Session 5 (11/4): P&L: Expense and Earnings 2 – Case and Working Group
 CASE The “Tipping Point” and Green Dot Public Schools, (33 pages), Stanford GSB Case
SI-109, 12/8/2008
 http://www.fastcompany.com/1835678/how-green-dot-charter-turned-around-lasworst-schools
 http://articles.latimes.com/2013/aug/29/local/la-me-ln-api-scores-20130829
 http://www.greendot.org/uploaded/uploads/homeoffice/documents/Green_Dot_Annu
al_Financial_Report_FY12.pdf
Discussion Questions
1. How would you characterize the Green Dot “business model” using the
Osterwalder & Pigneur business model canvas framework we have covered?
2. What drivers of student performance did Green Dot address? What do you
imagine their “driver tree” would look like as it relates to student achievement?
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3. What are the pros and cons of innovating within an established system as
opposed to creating de novo alternatives? In this case, in what ways has impact
been accelerated or diminished due to Green Dot’s approach?
4. Focusing on Exhibits 7 and 8, how would you characterize the Green Dot
financial model? What is the role of fixed and variable costs? How does
geographic concentration affect the model?
5. Do you accept the idea of a tipping point? Do you think Green Point should
expand to new markets? What adaptations might be required to do so?
Session 6 (11/6): Balance Sheet: Assets and Liabilities 1 – The Balance Sheet Mindset
 Berman & Knight, Part Three (Ch. 10-14, plus Toolbox, 32 pages together)
 HBS Note: The Accounting Framework, Financial Statements, and Some Accounting
Concepts, William J. Bruns, Jr., Case 9-193-028, Revised September 13, 2004 (12 pages)
 “How to Plan: Phase Three” handout to be provided by instructor
Session 7 (11/13): Balance Sheet: Assets and Liabilities 2 – Case & Working Group
 CASE: Gone Rural, Andre F. Perold, Harvard Business School Case 8-211-016, Revised
March 23, 2011 (9 pages)
Discussion Questions (from L. Viceira)
1. How is Gone Rural doing?
2. What is the company’s business and financial strategy?
3. Given its profitability, why is Gone Rural in need of cash?
4. What should be their policy towards offering customers discounts for shorter
payment terms?
5. Is it important that Gone Rural be a for-profit company?
Session 8 (11/18): Cash Flows: Cash Conversion Cycles and 2/19 Case Continuation
 Bergman & Knight, Part 4 (Ch. 15-19 plus Toolbox, 29 pages together)
 Continued consideration of Gone Rural
Discussion Questions (from L. Viceira)
1. Assuming Gone Rural grows its revenues at 20% per annum over the next five
years, what will be the company’s financing needs?
2. How will raising and investing R1 million in new facilities change the projections?
3. How fast should Gone Rural grow? How should Gone Rural finance itself?
Session 9 (11/20): Valuation and Fund Raising, Process and Methods
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Berman & Knight, Part 5 (37 pages)
McKinsey & Company (Koller, Dobbs & Huyett), Value, Ch. 1 and 2 (24 pages)
Acumen Fund’s BACO Framework for evaluating social impact investments:
http://www.acumenfund.org/uploads/assets/documents/BACO%20Concept%20Paper%
20final_B1cNOVEM.pdf
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Optional suggested reading for NGO fundraising: Stevenson, Howard with Shirley Spence;
Getting to Giving the Entrepreneurial Way by a billion-dollar fundraiser, Chapter 1 (23 pages)
Session 10 (11/25): Panel 1 – Not For Profit Entrepreneur and Financier Guests
We will be joined by at one or more entrepreneurs and financiers in the realm of not-forprofit organizations, including hybrid / impact guests. Invitations have tentatively been
accepted by: Willie Foote, CEO of Root Capital; Sasha Chanoff, Co-founder and Executive
Director of RefugePoint; and, Brian Trelstad, Partner at Bridges Ventures and former CIO of
The Acumen Fund (via Skype); participants may change
 Bios and articles about panelists to be provided ahead of the session
Session 11 (12/2): Panel 2 –For Profit Social Entrepreneur and Financier Guests
We will be joined by at one or more entrepreneurs and financiers in the realm of not-forprofit organizations, including hybrid / impact guests. Invitations have tentatively been
accepted by: Eric Paley, General Partner at Founder Collective and Ed Park, COO of
athenahealth, Inc.; participants may change
 Bios and articles about panelists to be provided ahead of the session
Session 12 (12/4): Valuation Discussion, Concept Summary & Working Group
 Feld and Mendelson, Venture Deals, Introduction and Ch. 1-3 (34 pages)
 Wasserman, The Founder’s Dilemmas, Ch. 9, “Investor Dilemmas: Adding Value, Adding
Risks,” (48 pages)
 Suggested / Optional: Wasserman, Ch. 11, “Wealth vs. Control Dilemmas” (56 pages)
 We also will hold the 2nd HKS Entrepreneurial Finance plan competition for interested
students (voluntary)
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