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Lecture 0: Course Intro | Intro to Venture Capital-FINAN 6300 | Chad Jardine, University of Utah, 2008–

Lecture 0: Course Intro | Intro to Venture Capital-FINAN 6300 | Chad Jardine, University of Utah, 2008–

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Section 0: Course Intro

This presentation is part of a series of lectures by Chad Jardine, teaching FINAN 6300, Intro to Venture Capital at the University of Utah, 2008–.

This video series is NOT a complete online course of itself (with context, exercises, examinations, etc.), but it contains lecture content from FINAN 6300 about the language, skills, know-how, concepts, attitudes and information surrounding raising capital for new and growing businesses. We’ll focus on four dimensions of funding a new venture: Company, Context, Investors and the terms of the Deal.

This course aims to increase your odds for success in dealing with investors, by learning to think like one. In addition to becoming familiar with the process of financing a new venture, the course focuses on how to build fundamental value within a company and increase a new venture’s investment worthiness. These include concepts like the importance of the opportunity, favorable deal structure, clear customer acquisition strategy, presentation of current and projected financials, mitigating the four components of risk, legal and capital structures, venture capital, private placements, initial public offerings (IPO), mezzanine debt, preferred stock, warrants and other forms of new venture financing.

Section 0: Course Intro

This presentation is part of a series of lectures by Chad Jardine, teaching FINAN 6300, Intro to Venture Capital at the University of Utah, 2008–.

This video series is NOT a complete online course of itself (with context, exercises, examinations, etc.), but it contains lecture content from FINAN 6300 about the language, skills, know-how, concepts, attitudes and information surrounding raising capital for new and growing businesses. We’ll focus on four dimensions of funding a new venture: Company, Context, Investors and the terms of the Deal.

This course aims to increase your odds for success in dealing with investors, by learning to think like one. In addition to becoming familiar with the process of financing a new venture, the course focuses on how to build fundamental value within a company and increase a new venture’s investment worthiness. These include concepts like the importance of the opportunity, favorable deal structure, clear customer acquisition strategy, presentation of current and projected financials, mitigating the four components of risk, legal and capital structures, venture capital, private placements, initial public offerings (IPO), mezzanine debt, preferred stock, warrants and other forms of new venture financing.

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Lecture 0: Course Intro | Intro to Venture Capital-FINAN 6300 | Chad Jardine, University of Utah, 2008–

  1. 1. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Venture Capital: FINAN 6300
  2. 2. Advanced Venture Capital: FINAN 6310 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Intro and Course Format Course Requirements How to get an ‘A’ Agenda
  3. 3. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Instructor Chad Jardine Consultations: Call for Appointment (801) 362-7654 chad@chadjardine.net
  4. 4. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. What to expect from FINAN 6300
  5. 5. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Course Context & Objectives NewCo Company How do I make my startup attractive and fund it? Investor Understanding the psychology and needs of potential investors. Context Understanding the playing field and the rules for funding your venture. Deal What goes into a successful deal: terms and valuation.
  6. 6. Advanced Venture Capital: FINAN 6310 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Intro and Course Format Course Requirements How to get an ‘A’ Agenda ✓
  7. 7. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Course Overview Coursework Video Quizzes 180 pts. 36% Discussions 80 pts. 16% Icebreaker 30 pts. 6% Business Mod Canvas 100 pts 20% Mini Case 20 pts. 4% Case Analysis 40 pts. 8% Final Exam 50 pts. 10% TOTAL 500 pts. 100% Grading A ≥ 930 pts. ≥ 93% A- 891–929 pts. 90–92% B+ 861–890 pts 87–89% B 831–860 pts. 84–86% B- 801–830 pts. 81–83% C+ 771–800 pts. 78–80% C 741–770 pts. 75–77% C- 711–740 pts. 72–74% D+ 681–710 pts. 69–71% D 651–680 pts. 66–68% D-/F ≤ 650 pts. ≤ 65%
  8. 8. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Assignments All assignments are due at the specified date and time in Canvas. Late work is NOT accepted.
  9. 9. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Quizzes: 20 pts. each. | 180 pts. total. Each video lecture will be followed by a short quiz. Quizzes are taken on Canvas = Test Question
  10. 10. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Current Event Discussions: Connect course material to current events 1- article with summary 3-comments on classmate articles Discussions: 20 pts. each. | 80 pts. total.
  11. 11. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Icebreaker Video: Introduce yourself and get familiar with GoReact You will record a short video introduction and comment on at least 8 of your classmates’s videos. Icebreaker: 30 pts.
  12. 12. When I die, I want the people I did group projects with to lower me into my grave so they can let me down one last time.
  13. 13. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Mini Case/Story Problems Give your brains a warm-up. Mini Case: 20 pts.
  14. 14. Venture Capital: Financing for New Ventures: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Business Model Canvases The Business Model Canvas Revenue Streams Channels Customer Segments Value Propositions Key Activities Key Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version: Designed for: designed by: Business Model Foundry AG The makers of Business Model Generation and Strategyzer This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? is your business more Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing) Value Driven (focused on value creation, premium value proposition) sample characteristics Fixed Costs (salaries, rents, utilities) Variable costs Economies of scale Economies of scope Through which Channels do our Customer Segments want to be reached? How are we reaching them now? How are our Channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines? channel phases 1. Awareness How do we raise awareness about our company’s products and services? 2. Evaluation How do we help customers evaluate our organization’s Value Proposition? 3. Purchase How do we allow customers to purchase specific products and services? 4. Delivery How do we deliver a Value Proposition to customers? 5. After sales How do we provide post-purchase customer support? For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues? For whom are we creating value? Who are our most important customers? Mass Market Niche Market Segmented Diversified Multi-sided Platform What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Which ones have we established? How are they integrated with the rest of our business model? How costly are they? examples Personal assistance Dedicated Personal Assistance Self-Service Automated Services Communities Co-creation What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? catergories Production Problem Solving Platform/Network What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? types of resources Physical Intellectual (brand patents, copyrights, data) Human Financial Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquairing from partners? Which Key Activities do partners perform? motivations for partnerships Optimization and economy Reduction of risk and uncertainty Acquisition of particular resources and activities What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying? characteristics Newness Performance Customization “Getting the Job Done” Design Brand/Status Price Cost Reduction Risk Reduction Accessibility Convenience/Usability types Asset sale Usage fee Subscription Fees Lending/Renting/Leasing Licensing Brokerage fees Advertising fixed pricing List Price Product feature dependent Customer segment dependent Volume dependent dynamic pricing Negotiation (bargaining) Yield Management Real-time-Market strategyzer.com 4.What’s the overall health of the market you are targeting? 5.What’s the potential of the market? (add answers to questions 1 – 4) 1.Who’s your target customer? (see Nail ItThen Scale It, p. 81) 2.What’s the job your customer is trying to perform? 3.What’s the pain your customer is experiencing while doing the job? 4. How big is the pain the customer is feeling? 5. How often are customers feeling the pain? 6.What’s the pain score? (multiply answers to questions 4 & 5) 7. How much market knowledge do you have to understand the pain? THE BIG IDEA CANVAS WHAT’S THE BIG IDEA? DEVELOPED BY: DATE: 1. PAIN OF THE CUSTOMER 1 Mosquito Bite 3 4 2 5 Shark Bite Jellyfish Sting 2.Who are the current market leaders? 3.Are you competing head-to-head for their customers? 4. Do you currently have access to relevant distribution channels? 5. If yes, to what distribution channels do you currently have access? 6. Based on the proposed solution, what’s your market-entry strategy? Developed by Paul Ahlstrom | Designed by William Standish Dog Bite Spider Bite 1 Flat-Lined 3 4 2 5 Super Strong Holding Steady Improving In Decline 4 Teeny Tiny 12 16 8 Super Sized Medium Large Small 5. PATH TO THE EXIT 1. How large is the universe of potential buyers for the company? 2.Who are the top likely potential buyers of the company? 3. Do you plan to engage in partnerships with them? If so, how? 4.What’s the overall likelihood of the company becoming acquired? 1 Never Ever 3 4 2 5 A Sure Bet 50/50 Very Likely Long Odds * *Concept pioneered by Clayton M. Christensen. www.nailthenscale.com 1. How many customers are experiencing the pain? 2.Are they willing and able to pay to alleviate the pain? 3.What’s the financial potential of a business that solves the pain? 2. POTENTIAL OF THE MARKET 1 A Few 3 4 2 5 Billions Thousands Millions Hundreds 1 Nope 3 4 2 5 Absolutely Sometimes For the Most Part In Rare Cases 1 Once Only 3 4 2 5 Daily Monthly Weekly Annually 20 This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.To view a copy of this license, please visit https://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, CA 94105, USA. 1 Taco Stand 3 4 2 5 A Unicorn Lifestyle Company High Growth Low Growth 3. PRESCRIPTION FOR THE PAIN 1.What’s the name of your proposed solution to the pain? 2. Describe your proposed solution to the pain and its key benefits. 3. How distinct is your solution from what already exits? 4.What types of innovation are you using to differentiate yourself? 5.What are the primary differentiators of your solution? 6. How much domain expertise do you have to solve the pain? 1 Cut & Pasted 3 4 2 5 Night & Day Middle of Road Very Different Almost Identical 4. POSITIONING IN THE MARKET Technological Business Model Service Customer Experience Business Process Product Performance Design Marketing No Innovation 1.Where’s your industry in the industry life cycle? Introduction Growth Maturity Decline YES NO N/A PARTNERING YES NO KIND OF N/A Target unmet needs of underserved customers at the low end of an existing market; competitors flee up market rather than fight for the low end. Develop products that are 10x better than market leaders; competing for same customers with high “switching costs” (i.e., 10x innovation). Import proven business models and innovations from one country to another (i.e., geographic innovation). Extend an existing market by adding a product or service onto the market’s current offerings; partner with market leader (i.e., incremental innovation) Face Punch Strategy Compete head-to-head with market leaders for existing customers with a solution that is similar to existing offerings (i.e., no innovation). Greenfield Strategy Create a brand new market category where competition is non-existent; create new customers and draw customers in from other markets. Bolt-on Strategy Geographic Strategy Breakthrough Strategy Disruptive Strategy * 1 A Few 3 4 2 5 A Hundred Twenty Fifty Ten NONE JV VARSITY PRO NONE JV VARSITY PRO Supply Chain Distribution Channel Other The Pitch Canvas© Product Customer Traction Product Demo What’s Unique Business Model Team Why You? Simple Statement of what change you and your product are making in the world. Pain (+ Gain) Investment Version 7.8. Produced by David Beckett and Geert van Vlijmen. Illustrations: BirgitSmit.com This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. To view a copy of this license, go to: http://creativecommons.org/licenses/by-sa/4.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. DESIGNED BY: Best 3 Minutes Presentation Services Developed from an original idea by David Beckett Please feel free to share The Pitch Canvas©. Ensure you reference Best3Minutes.com after each use. Call To Action and End Statement An entrepreneurial brainstorming tool that helps you structure and visualise your pitch on one page . A memorable one-sentence explanation of what you do for customers. What problem are you solving for your customers? What does the pain result in? What opportunities do you provide for people to be faster, more cost-effective, more efficient, happier, safer? How many people need this problem solved - market size? Have you validated that people will pay to have it solved? Live demo? (always risky, but powerful if it works...) A screenflow movie of a working app convinces this is for real. Physical product convinces you can execute. Screenshots are also OK, but can look like a mock-up - moving product on screen is better. Can you show a real customer using it? As simply as possible: what does your product do for customers? How does it work? How have you tested it with customers? (Be sure not to let the product dominate the pitch.) Technology/Relationships/Partnerships. How do you help your customers get results differently to your competition, or alternatives? Show you have researched the market and know what competition is out there. Success so far? Pilot customers? Major brands? Progression in users or downloads? Customer reference quotes or movies? PR coverage? Competition wins? Use data and facts to strengthen your case. How do you get paid? What’s the opportunity for growth? How can you scale beyond your current scope: new industries, territories, applications of partnerships and technology? Have you invested money yourself? Have you raised money so far? How much are you looking for now? How many, and what type of investor are you looking for? What expectations do you have of your investors; network, expertise? What big steps will you use the investment for? What milestones will you reach with the money? What relevant experience and skills does your team have that supports your story? Brands worked for? Achievements? Sales success? What binds you together as people and as entrepreneurs to fix this problem? What;s special about the character of your team, that will make you stand out and be memorable? Finish the pitch strongly with a clear request for the audience to take action - what is their first next step? NOTE: Why You? can show up in any part of the pitch. Why do you care about solving this problem for your customers? How has your life been affected by this industry and business? Why should your audience have confidence that you will do what you say you are going to do?
  15. 15. Advanced Venture Capital: FINAN 6310 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. The Business Model Canvas Revenue Streams Channels Customer Segments Value Propositions Key Activities Key Partners Key Resources Cost Structure Customer Relationships Designed by: Date: Version: Designed for: designed by: Business Model Foundry AG The makers of Business Model Generation and Strategyzer This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? is your business more Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing) Value Driven (focused on value creation, premium value proposition) sample characteristics Fixed Costs (salaries, rents, utilities) Variable costs Economies of scale Economies of scope Through which Channels do our Customer Segments want to be reached? How are we reaching them now? How are our Channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines? channel phases 1. Awareness How do we raise awareness about our company’s products and services? 2. Evaluation How do we help customers evaluate our organization’s Value Proposition? 3. Purchase How do we allow customers to purchase specific products and services? 4. Delivery How do we deliver a Value Proposition to customers? 5. After sales How do we provide post-purchase customer support? For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues? For whom are we creating value? Who are our most important customers? Mass Market Niche Market Segmented Diversified Multi-sided Platform What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Which ones have we established? How are they integrated with the rest of our business model? How costly are they? examples Personal assistance Dedicated Personal Assistance Self-Service Automated Services Communities Co-creation What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? catergories Production Problem Solving Platform/Network What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? types of resources Physical Intellectual (brand patents, copyrights, data) Human Financial Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquairing from partners? Which Key Activities do partners perform? motivations for partnerships Optimization and economy Reduction of risk and uncertainty Acquisition of particular resources and activities What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying? characteristics Newness Performance Customization “Getting the Job Done” Design Brand/Status Price Cost Reduction Risk Reduction Accessibility Convenience/Usability types Asset sale Usage fee Subscription Fees Lending/Renting/Leasing Licensing Brokerage fees Advertising fixed pricing List Price Product feature dependent Customer segment dependent Volume dependent dynamic pricing Negotiation (bargaining) Yield Management Real-time-Market strategyzer.com Business Model Canvases
  16. 16. Advanced Venture Capital: FINAN 6310 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Business Model Canvases
  17. 17. Advanced Venture Capital: FINAN 6310 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Business Model Canvases The Big Idea Canvas by Alta Ventures
  18. 18. Advanced Venture Capital: FINAN 6310 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Business Model Canvases 4.What’s the overall health of the market you are targeting? 5.What’s the potential of the market? (add answers to questions 1 – 4) 1.Who’s your target customer? (see Nail ItThen Scale It, p. 81) 2.What’s the job your customer is trying to perform? 3.What’s the pain your customer is experiencing while doing the job? 4. How big is the pain the customer is feeling? 5. How often are customers feeling the pain? 6.What’s the pain score? (multiply answers to questions 4 & 5) 7. How much market knowledge do you have to understand the pain? THE BIG IDEA CANVAS WHAT’S THE BIG IDEA? DEVELOPED BY: DATE: 1. PAIN OF THE CUSTOMER 1 Mosquito Bite 3 4 2 5 Shark Bite Jellyfish Sting 2.Who are the current market leaders? 3.Are you competing head-to-head for their customers? 4. Do you currently have access to relevant distribution channels? 5. If yes, to what distribution channels do you currently have access? 6. Based on the proposed solution, what’s your market-entry strategy? Developed by Paul Ahlstrom | Designed by William Standish Dog Bite Spider Bite 1 Flat-Lined 3 4 2 5 Super Strong Holding Steady Improving In Decline 4 Teeny Tiny 12 16 8 Super Sized Medium Large Small 5. PATH TO THE EXIT 1. How large is the universe of potential buyers for the company? 2.Who are the top likely potential buyers of the company? 3. Do you plan to engage in partnerships with them? If so, how? 4.What’s the overall likelihood of the company becoming acquired? 1 Never Ever 3 4 2 5 A Sure Bet 50/50 Very Likely Long Odds * *Concept pioneered by Clayton M. Christensen. www.nailthenscale.com 1. How many customers are experiencing the pain? 2.Are they willing and able to pay to alleviate the pain? 3.What’s the financial potential of a business that solves the pain? 2. POTENTIAL OF THE MARKET 1 A Few 3 4 2 5 Billions Thousands Millions Hundreds 1 Nope 3 4 2 5 Absolutely Sometimes For the Most Part In Rare Cases 1 Once Only 3 4 2 5 Daily Monthly Weekly Annually 20 This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.To view a copy of this license, please visit https://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, CA 94105, USA. 1 Taco Stand 3 4 2 5 A Unicorn Lifestyle Company High Growth Low Growth 3. PRESCRIPTION FOR THE PAIN 1.What’s the name of your proposed solution to the pain? 2. Describe your proposed solution to the pain and its key benefits. 3. How distinct is your solution from what already exits? 4.What types of innovation are you using to differentiate yourself? 5.What are the primary differentiators of your solution? 6. How much domain expertise do you have to solve the pain? 1 Cut & Pasted 3 4 2 5 Night & Day Middle of Road Very Different Almost Identical 4. POSITIONING IN THE MARKET Technological Business Model Service Customer Experience Business Process Product Performance Design Marketing No Innovation 1.Where’s your industry in the industry life cycle? Introduction Growth Maturity Decline YES NO N/A PARTNERING YES NO KIND OF N/A Target unmet needs of underserved customers at the low end of an existing market; competitors flee up market rather than fight for the low end. Develop products that are 10x better than market leaders; competing for same customers with high “switching costs” (i.e., 10x innovation). Import proven business models and innovations from one country to another (i.e., geographic innovation). Extend an existing market by adding a product or service onto the market’s current offerings; partner with market leader (i.e., incremental innovation) Face Punch Strategy Compete head-to-head with market leaders for existing customers with a solution that is similar to existing offerings (i.e., no innovation). Greenfield Strategy Create a brand new market category where competition is non-existent; create new customers and draw customers in from other markets. Bolt-on Strategy Geographic Strategy Breakthrough Strategy Disruptive Strategy * 1 A Few 3 4 2 5 A Hundred Twenty Fifty Ten NONE JV VARSITY PRO NONE JV VARSITY PRO Supply Chain Distribution Channel Other
  19. 19. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Business Model Canvas *Business Model Canvas (Draft) 30 pts. 20% *Business Model Canvas (Final) 30 pts. 20% *Group Presentation 20 pts. 20% Peer Feedback 10 pts. 20% Inter-team Evaluation 10 pts. 20% TOTAL 100 pts. 100% Business Model Canvas: 100 pts. 4.What’s the overall health of the market you are targeting? 5.What’s the potential of the market? (add answers to questions 1 – 4) 1.Who’s your target customer? (see Nail ItThen Scale It, p. 81) 2.What’s the job your customer is trying to perform? 3.What’s the pain your customer is experiencing while doing the job? 4. How big is the pain the customer is feeling? 5. How often are customers feeling the pain? 6.What’s the pain score? (multiply answers to questions 4 & 5) 7. How much market knowledge do you have to understand the pain? THE BIG IDEA CANVAS WHAT’S THE BIG IDEA? DEVELOPED BY: DATE: 1. PAIN OF THE CUSTOMER 1 Mosquito Bite 3 4 2 5 Shark Bite Jellyfish Sting 2.Who are the current market leaders? 3.Are you competing head-to-head for their customers? 4. Do you currently have access to relevant distribution channels? 5. If yes, to what distribution channels do you currently have access? 6. Based on the proposed solution, what’s your market-entry strategy? Developed by Paul Ahlstrom | Designed by William Standish Dog Bite Spider Bite 1 Flat-Lined 3 4 2 5 Super Strong Holding Steady Improving In Decline 4 Teeny Tiny 12 16 8 Super Sized Medium Large Small 5. PATH TO THE EXIT 1. How large is the universe of potential buyers for the company? 2.Who are the top likely potential buyers of the company? 3. Do you plan to engage in partnerships with them? If so, how? 4.What’s the overall likelihood of the company becoming acquired? 1 Never Ever 3 4 2 5 A Sure Bet 50/50 Very Likely Long Odds * *Concept pioneered by Clayton M. Christensen. www.nailthenscale.com 1. How many customers are experiencing the pain? 2.Are they willing and able to pay to alleviate the pain? 3.What’s the financial potential of a business that solves the pain? 2. POTENTIAL OF THE MARKET 1 A Few 3 4 2 5 Billions Thousands Millions Hundreds 1 Nope 3 4 2 5 Absolutely Sometimes For the Most Part In Rare Cases 1 Once Only 3 4 2 5 Daily Monthly Weekly Annually 20 This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.To view a copy of this license, please visit https://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, CA 94105, USA. 1 Taco Stand 3 4 2 5 A Unicorn Lifestyle Company High Growth Low Growth 3. PRESCRIPTION FOR THE PAIN 1.What’s the name of your proposed solution to the pain? 2. Describe your proposed solution to the pain and its key benefits. 3. How distinct is your solution from what already exits? 4.What types of innovation are you using to differentiate yourself? 5.What are the primary differentiators of your solution? 6. How much domain expertise do you have to solve the pain? 1 Cut & Pasted 3 4 2 5 Night & Day Middle of Road Very Different Almost Identical 4. POSITIONING IN THE MARKET Technological Business Model Service Customer Experience Business Process Product Performance Design Marketing No Innovation 1.Where’s your industry in the industry life cycle? Introduction Growth Maturity Decline YES NO N/A PARTNERING YES NO KIND OF N/A Target unmet needs of underserved customers at the low end of an existing market; competitors flee up market rather than fight for the low end. Develop products that are 10x better than market leaders; competing for same customers with high “switching costs” (i.e., 10x innovation). Import proven business models and innovations from one country to another (i.e., geographic innovation). Extend an existing market by adding a product or service onto the market’s current offerings; partner with market leader (i.e., incremental innovation) Face Punch Strategy Compete head-to-head with market leaders for existing customers with a solution that is similar to existing offerings (i.e., no innovation). Greenfield Strategy Create a brand new market category where competition is non-existent; create new customers and draw customers in from other markets. Bolt-on Strategy Geographic Strategy Breakthrough Strategy Disruptive Strategy * 1 A Few 3 4 2 5 A Hundred Twenty Fifty Ten NONE JV VARSITY PRO NONE JV VARSITY PRO Supply Chain Distribution Channel Other
  20. 20. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Case Analysis Reports Investor Entrepreneurs (Want Investment) Analysts/ Consultants Should I invest? (You) Cases: 40 pts.
  21. 21. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Case Analysis Reports You MUST provide a recommendation (Buy or Sell) to receive credit. Cases: 40 pts.
  22. 22. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. UBS Investment Research Gogo Inc Product announcements should drive stock Text & Talk service to go live on business jets in October Gogo announced that its Business Aviation (private jet) customers will be able to make calls from their own iPhones while airborne, beginning 10/1, and from Android phones on 11/1. Text & Talk is an add-on for Gogo Biz customers and starts at $134.95/mo for 60 voice minutes, suggesting very attractive economics. Expect demand for voice to drive ARPU in Business Aviation We expect high utilization from price-insensitive biz jet customers to drive ARPU gains in excess of the headline price as penetration ramps, given average monthly flight time of 30+ hours per plane. Gogo’s ATG network enables it to provide voice to airborne smartphones at quality levels similar to terrestrial wireless service, further differentiating the product. New technology announcement should help quell competitive concerns Separately, Gogo said it will introduce its next-generation technology during a webcast with Virgin America from the APEX trade show on 9/11. We expect the announcement to address how and when Gogo will incorporate satellite transmission into its U.S. business plan, providing a major increase in capacity and speed. We believe this announcement will reduce worries over competitive threats. Valuation: Maintain Buy We believe Gogo’s business plan is strong and remains on track while these announcements provide some catalysts. We think international wins should help drive the stock toward our price target. Our $20 price target is DCF-based (10% WACC, 2% perp growth). Highlights (US$m) 12/11 12/12 12/13E 12/14E 12/15E Revenues 160 234 308 415 605 EBIT (UBS) (34) (27) (56) (44) 30 Net Income (UBS) (18) (96) (93) (86) (13) EPS (UBS, US$) (2.63) (14.07) (1.10) (1.02) (0.15) Net DPS (UBS, US$) 0.00 0.00 0.00 0.00 0.00 Profitability & Valuation 5-yr hist av. 12/12 12/13E 12/14E 12/15E EBIT margin % - -11.7 -18.3 -10.5 4.9 ROIC (EBIT) % - (15.7) (23.9) (14.1) 8.4 EV/EBITDA (core) x - - >100 18.6 6.1 PE (UBS) x - - NM NM NM Net dividend yield % - - 0.0 0.0 0.0 Source: Company accounts, Thomson Reuters, UBS estimates. (UBS) valuations are stated before goodwill-related charges and other adjustments for abnormal and economic items at the analysts' judgement. Valuations: based on an average share price that year, (E): based on a share price of US$10.73 on 28 Aug 2013 17:41 EDT John C. Hodulik, CFA Analyst john.hodulik@ubs.com +1-212-713 4226 Lisa L. Friedman Associate Analyst lisa.friedman@ubs.com +1-212-713 2589 Batya Levi Analyst batya.levi@ubs.com +1-212-713 8824 Global Equity Research Americas Wireless Communications 12-month rating Buy Unchanged 12m price target US$20.00 Unchanged Price US$10.73 RIC: GOGO.O BBG: GOGO US 28 August 2013 Trading data 52-wk range US$14.91-9.98 Market cap. US$0.71bn Shares o/s 66.0m (COM) Free float 29% Avg. daily volume ('000) 611 Avg. daily value (m) US$7.5 Balance sheet data 12/13E Shareholders' equity US$0.25bn P/BV (UBS) 3.6x Net Cash (debt) (US$0.03bn) Forecast returns Forecast price appreciation +86.4% Forecast dividend yield 0.0% Forecast stock return +86.4% Market return assumption 5.4% Forecast excess return +81.0% EPS (UBS, US$) 12/13E 12/12 UBS Cons. Actual Q1 (0.17) - (2.59) Q2 (0.23) (0.23) (1.93) Q3E (0.34) (0.31) (4.27) Q4E (0.36) (0.28) (5.29) 12/13E (1.10) (1.41) 12/14E (1.02) (0.79) Performance (US$) 07/10 10/10 01/11 04/11 07/11 10/11 01/12 04/12 07/12 10/12 01/13 04/13 07/13 0.0 5.0 10.0 15.0 20.0 25.0 0 20 40 60 80 100 120 Price Target (US$) (LHS) Stock Price (US$) (LHS) Rel. S & P 500 (RHS) Stock Price (US$) Rel. S & P 500 Source: UBS www.ubs.com/investmentresearch This report has been prepared by UBS Securities LLC ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 5. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. ab © 2014 Zacks Investment Research, All Rights reserved. www.Zacks.com 10 S. Riverside Plaza, Chicago IL 60606 The Goldman Sachs Group, Inc. (GS-NYSE) SUMMARY SUMMARY DATA Risk Level * Low, Type of Stock Large-Value Industry Fin-Invest Bkrs Zacks Industry Rank * 51 out of 267 Current Recommendation NEUTRAL Prior Recommendation Underperform Date of Last Change 02/12/2012 Current Price (09/01/14) $179.11 Target Price $188.00 Driven by strong top-line performance, Goldman s second-quarter 2014 earnings significantly surpassed the Zacks Consensus Estimate. Moreover, results were higher than the year-ago quarter figure. Investment banking revenues were on an upswing. However, the company witnessed an increase in expenses. We expect Goldman to benefit from its well-managed global franchise, strong capital base and recent investments in the near future. Moreover, the Fed s approval of the company s 2014 capital plan depicts financial stability. However, regulatory issues, coupled with fundamental pressures on the banking sector, are expected to weigh on its financials in the coming quarters. 52-Week High $179.37 52-Week Low $152.13 One-Year Return (%) 18.96 Beta 1.60 Average Daily Volume (sh) 2,040,683 Shares Outstanding (mil) 441 Market Capitalization ($mil) $78,988 Short Interest Ratio (days) 3.52 Institutional Ownership (%) 69 Insider Ownership (%) 3 Annual Cash Dividend $2.20 Dividend Yield (%) 1.23 5-Yr. Historical Growth Rates Sales (%) -7.7 Earnings Per Share (%) -1.4 Dividend (%) 12.6 P/E using TTM EPS 11.5 P/E using 2014 Estimate 10.7 P/E using 2015 Estimate 10.3 Zacks Rank *: Short Term 1 3 months outlook 2 - Buy * Definition / Disclosure on last page ZACKS CONSENSUS ESTIMATES Revenue Estimates (In millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2012 9,949 A 6,627 A 8,351 A 9,236 A 34,163 A 2013 10,090 A 8,612 A 6,722 A 8,782 A 34,206 A 2014 9,328 A 9,125 A 7,768 E 8,326 E 34,547 E 2015 34,803 E Earnings Per Share Estimates (EPS is operating earnings before non-recurring items, but including employee stock options expenses) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2012 $3.90 A $1.78 A $2.85 A $5.60 A $14.13 A 2013 $4.28 A $3.70 A $2.88 A $4.60 A $15.46 A 2014 $4.02 A $4.10 A $3.21 E $5.42 E $16.75 E 2015 $17.37 E Projected EPS Growth - Next 5 Years % 5 September 02, 2014 Flash Note January 8, 2014 Rubicon Technology Offering To Fund 2014 Expansion Opportunities; Maintain Buy Our Call We view expected share weakness from the offering as a buying opportunity as Rubicon raises funds to take advantage of positive industry fundamentals in 2014. Maintain Buy. FOLLOW-ON STOCK OFFERING ANNOUNCEMENT. Rubicon announced the sale of $28.2 million of common stock to fund research and development of new products, for capacity expansion and for general corporate purposes. The deal was done at $10.65 per share, a 7% discount to Rubicon's closing stock price of $11.44 on January 7. STERNE AGEE VIEW. While the stock will likely trade down on the dilution and deal discount, we view the potential stock weakness as a buying opportunity. We believe management's outlook for the industry is as bullish as ours; however, in order to capture the opportunity, Rubicon must add floor space and patterned sapphire substrate (PSS) capacity in Malaysia. Rubicon believes the launch of PSS wafers should generate $15 million in revenue for 2014, most of which should be 4 inch wafers. For 2014, we expect fundamentals each quarter to improve sequentially, driven by: price increases for 2 and 4 inch core, decreasing idle capacity charges, and a modest recovery in demand for 6 inch LED wafers. These should result in steady gross margin and EPS improvement throughout the year. Maintain Buy. Buy RBCN Price $11.44 Price Target $17.00 LED Supply Chain & Semiconductors Andrew Huang (415) 362-6143 ahuang@sterneagee.com John Shen (415) 402-6052 jshen@sterneagee.com Company Data 52-Week Range $4.83 - $13.78 Market Capitalization (M) $257.0 Shares Outstanding (M) 22.7 Avg. Daily Vol. (000) 432.0 Estimates Q2 2013E 2014E EPS (0.26) (0.89) (0.30) For the latest company report: RBCN Company Report Any Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification, Investment Banking, Ratings Definitions, and any potential conflicts of interest begin on Page I of the Appendix Section. Past performance is no guarantee of future results. 800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500 Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC Buy NEUTRAL Buy Cases: 40 pts.
  23. 23. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. “If you’re trying to create a company, it’s like baking a cake. You have to have all the ingredients in the right proportion.” —Elon Musk Photo Credit: Business Insider
  24. 24. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Case Analysis Reports Recommendation Buy/Sell on pg. 1 S.W.O.T. 1 page Risk Analysis 4 Components 1 page Quantitative 1 page Summary & Presentation 1–3 pages Cases: 40 pts. Include Appendices if Necessary e.g., financial statements, detailed quantitative analysis goes after required sections TL;DR Not too short, not too long.
  25. 25. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Case Analysis Grading Presentation & Summary 10 pts. 25% S.W.O.T Analysis 10 pts. 25% Components of Risk 10 pts. 25% Quantitative 10 pts. 25% TOTAL 40 pts. 100% Case Analysis Report: 40 pts.
  26. 26. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. IRL, DO NOT INVEST in any company you learn about during this course! Cases: 40 pts.
  27. 27. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Final Exam (50 pts.) Final Exam Questions will be a combination of multiple choice, true/false, short answer and essay. I will not intentionally throw in surprises or esoteric content! = Test Question
  28. 28. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Policies Late Assignments Late work is NOT accepted. Legitimate emergencies and university policy exceptions will be observed. Discussion of Grades Grades are open for discussion for two weeks after they have been reported to you. After that time, grades are final. Academic Honesty Students are expected to uphold high standards of academic honesty. Work of another person that is misrepresented as one's own or other dishonesty shall be cause for course failure. Use or copying of another person's material, even with modification, must be fully referenced. Student work must be done independently, unless otherwise noted. Americans with Disabilities Act The University of Utah seeks to provide equal access to its programs, services and activities for people with disabilities. If you will need accommodations in this class, reasonable prior notice needs to be given to the instructor and the Center for Disabled Student Services, 581-5020 (voice or TDD), 160 Olpin Building, to make arrangements for the accommodations. This information is available in alternative format with prior notification.
  29. 29. Advanced Venture Capital: FINAN 6310 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Intro and Course Format Course Requirements How to get an ‘A’ Agenda ✓ ✓
  30. 30. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Don’t Feel Like This Lady…
  31. 31. Advanced Venture Capital: FINAN 6310 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Intro and Course Format Course Requirements How to get an ‘A’ Agenda ✓ ✓ ✓
  32. 32. Venture Capital: FINAN 6300 Course copyright © Chad Jardine. Images, works cited, etc. are copyright © their respective owners. Venture Capital: FINAN 6300
  33. 33. Nothing in this presentation should be construed as legal or accounting advice. © Copyright Chad Jardine.

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