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ESE 302: Special Topics - Venture Capital
                            From an Entrepreneur’s Perspective
The Perfect Store: Inside eBay; Adam Cohen; Back Bay Books; 2002; ISBN – 0-316-16493-3
(Required – Available in Bookstore)...
Guidelines for written work:
Effective communication is an integral part of entrepreneurial management. For the purposes o...
on their recommendation and their ability to negotiate favorable deal terms. Specifics about this project
will be distribu...
completing above-excellent work, engaging speakers and your fellow classmates in a lively discussion, and
looking and acti...
DATE              TOPIC                                         READING / ASSIGNMENT
Wed., Mar. 7th    Top Down: Markets, ...

J. Bren Varner
Program Director, Wake Forest University Center for Entrepreneurship
Instructor, Wayne Cal...
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ESE 302: Special Topics - Venture Capital


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ESE 302: Special Topics - Venture Capital

  1. 1. ESE 302: Special Topics - Venture Capital From an Entrepreneur’s Perspective COURSE SYLLABUS Spring 2007 INSTRUCTORS J. Bren Varner John Abraham WFU, 208 Kirby Hall Kodiak Venture Partners (336) 758-5098 (609) 275-8553 CLASS MEETINGS Select Wednesday afternoons – Jan. 17, 31, Feb. 7, 21, Mar. 7, 28, Apr. 4, 18, 25 3:00 – 5:15 p.m., Room 005 Kirby Hall OFFICE HOURS By appointment COURSE OVERVIEW This course will address the current investment and management trends in the venture capital industry from the perspective of the entrepreneur. Students will explore concepts related to venture capital, entrepreneurial finance, and business planning. In addition, the course will look at how venture capital investments are structured, how valuation issues are addressed, and how venture capitalists create value for entrepreneurs and start-up ventures. Founders of several venture-backed companies will share their experiences in class discussions. This class will investigate the theoretical underpinnings of the venture capital process from the perspective of the entrepreneur. You will gain exposure to basic business concepts; you will apply fundamental entrepreneurial principles; and you will be challenged to think critically about the types of venture creation. This is not a course consisting solely of the “nuts and bolts” of the venture capital and private equity industry. Our hope is that the resources provided in this course, along with your own personal reflection on the concepts, principles, and topics discussed, might lead to the recognition of opportunities, the launch of future ventures, and/or future careers in venture capital. COURSE GOALS • Offer a survey-level course that will examine entrepreneurial and venture capital concepts • Provide a basic understanding of venture capital, entrepreneurship, the entrepreneurial process, and basic business concepts • Encourage entrepreneurship and active participation in new venture creation • Facilitate access to resources at the university and off campus that will enhance the entrepreneurial learning experience • Provide inspirational role models through guest speakers, articles, and case studies • Encourage class discussion, exchange of ideas, and practical application of business/entrepreneurial concepts within the liberal arts environment TEXTBOOKS AND READINGS Accidental Empires: How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition, and Still Can’t Get a Date; Robert X. Cringely, HarperBusiness Publishing; 1996; ISBN – 0-88730-855-4 (Required – Available in Bookstore) eBoys: The First Inside Account of Venture Capitalists at Work; Randall E. Stross, Texere Publishing; 2002; ISBN – 1-58799-135-7 (Required – Available in Bookstore) -1- ESE 302
  2. 2. The Perfect Store: Inside eBay; Adam Cohen; Back Bay Books; 2002; ISBN – 0-316-16493-3 (Required – Available in Bookstore) Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets; Nassim Nicholas Taleb; Random House Trade Paperbacks; 2nd. Edition, 2005; ISBN – 0-8129-7521-9 (Select Chapters Required – Available in Bookstore) Prologue – pp 1-5 Chapter 1 – pp 11-25 Chapter 2 – pp 26-39 Chapter 5 – pp 68-83 Chapter 11 – pp 187-195 (Entire Text – Available Online) The Structure of Scientific Revolutions; Thomas S. Kuhn; The University of Chicago Press; 3rd Edition, 1996; ISBN – 0-226-45808-3 (Select Chapters Required – Available in Bookstore) Chapter 2 – The Route to Normal Science pp 10-35 Chapter 6 – Anomaly and the Emergence of Scientific Discoveries pp 52-65 Chapter 7 – Crisis and the Emergence of Scientific Theories pp 66-76 Chapter 8 – The Response to Crisis pp 77-91 Chapter 9 – The Nature and Necessity of Scientific Revolutions pp 92-110 (Entire Text – Available Online) The PayPal Wars: Battles with eBay, the Media, the Mafia, and the Rest of Planet Earth; Eric M. Jackson; World Ahead Publishing, Inc.; 2nd Edition, 2006; ISBN – 0-9778984-3-1 (Optional Text – Available Online) Additional readings will be posted on Blackboard or available on reserve in the library. PERFORMANCE EVALUATION Every great entrepreneurial venture requires a tremendous amount of commitment, thought, and excellence in order to succeed. This class should be treated with the same level of dedication as your own entrepreneurial venture. You are all encouraged to strive for an A. You will be evaluated on a combination of individual and group performance. Your individual performance will be based on a number of in-class and out-of-class assignments. Your group performance will be evaluated through a semester-long group project and will include an evaluation by your instructors and by your teammates. Grades for this class will be based on the following classifications: A Exceptionally high achievement B Superior C Satisfactory D Passing but unsatisfactory Grading Scale A 93-100 C+ 77-79 D- 60-62 A- 90-92 C 73-76 F <60 B+ 87-89 C- 70-72 B 83-86 D+ 67-69 B- 80-82 D 63-66 -2- ESE 302
  3. 3. Guidelines for written work: Effective communication is an integral part of entrepreneurial management. For the purposes of this class, all written work must be on standard 8.5” x 11” paper, with 1-inch margins on all sides. Failure to submit written work in this required format will negatively impact your grade. Your ability to present a clear, succinct, and effective message will positively impact your evaluation. Submissions are not accepted late. You should submit work early if you will know you will not be present for a class meeting. You may work with other classmates to discuss class assignments. However, you are expected to turn in your own, unique written work. A reminder: the Wake Forest Honor Code applies to all work completed in this class. ATTENDANCE POLICY As an entrepreneur, you have to show up to seize the opportunity, pitch your idea, make the sale, or close the deal – and the same applies for venture capitalists. Your attendance in class is critical to your educational experience and to your grade. Any absences from class have the potential to negatively impact your class participation grade – if you aren’t in class, you can’t participate. You are allowed only one absence this semester – either excused or unexcused. For each absence over one, your participation grade will be lowered by a full letter grade. If you have to miss a class meeting, please let the instructors know ahead of time. COURSE METHOD This course will be taught using a combination of mini-lectures, class discussions, and guest speakers centered around entrepreneurial issues and concepts related to venture capital. Outside reading is listed on this syllabus and posted on Blackboard. Potential discussion questions will also be posted on Blackboard to help you prepare for class. Because this course is centered around class discussion and student-led learning, you are expected to come to class prepared, ready to engage your classmates in a lively discussion, and ready to participate in a dialogue with guest speakers. ASSIGNMENTS Assignments for the semester and percentage of your grade are as follows: Assignment Individual/Group Percentage Reading Summaries (2) Individual 10% Investment Simulation Project Group 35% Final Exam Individual 30% Class Participation Individual 25% Reading Reports Preparing for class discussion is an integral part of this course. You will be required to complete two written reports of assigned readings this semester. These written reports can be on topics of your choice, but each report should be related to one of the assigned books for this course. You can pick the two books for which you would like to complete a written report. These reports are designed to help you critically analyze the readings and help you better prepare for class discussions. Written reports should be no longer than two pages, single-spaced, with 1-inch margins, and Times New Roman font no smaller than 10-pt. Reports should be turned in at the beginning of class on the day of the assigned reading. Final Exam – The final exam will count for 30% of your final grade. The exam will use essays and an analysis of an entrepreneurial case to judge your comprehension of the course material. The final exam will be scheduled during finals week. No alternative times or make-up exams will be given. You must be present on the assigned date in order to complete your examination. Investment Simulation Project – This project is designed to simulate the actual investment process that venture capitalists employ. You will be assigned to groups of 3-4 students and will be challenged to evaluate a set of business plans based on a variety of criteria discussed in class this semester. Your group will be required to make a recommendation on your investment decision and will compete with other groups in negotiating deal terms for the entrepreneurial ventures of your choice. Groups will be evaluated -3- ESE 302
  4. 4. on their recommendation and their ability to negotiate favorable deal terms. Specifics about this project will be distributed at a later date. Class Participation – Your participation in class is critical to comprehending and practicing the theories and skills covered in this course. Your class participation will be 25% of your final grade and will depend on the following components: • In-class discussion – This includes participating in class discussions about the assigned reading or the guest speakers. Your participation will be evaluated based on the thoughtfulness of your remarks. As mentioned before, attendance is a critical component of this – you have to be present in order to participate. • Preparation – The basis for any good class discussion is preparation. Coming to class having read the material, addressed the discussion questions, and completed a detailed analysis and recommendation can improve your class participation grade. • Other Class Assignments – Several classes may include in-class exercises or preparatory tutorials. Your participation in these exercises will also contribute toward your class participation grade. After each class, the instructors will give you a grade of 0, 1, 2, or 3 based on participation for that day. At the end of the semester, the daily grades will be averaged to determine your class participation grade for the semester. NOTE: We occasionally “cold call” students in class and may ask you to share your opinions on a particular topic or your recommendation for an issue or problem discussed in class. As an entrepreneur and as a venture capitalist, you will constantly be required to pitch your idea, answer criticisms, close the sale, or provide leadership to your employees. Your ability to think “on the fly” and communicate effectively is critical. We believe this class is a friendly learning environment for practicing those skills. However, if you feel uncomfortable being put on the spot, please see one of us after class or send an e-mail and we will talk about an effective way for you to participate in an environment that is comfortable and conducive to your learning style. CLASS SPEAKERS Several seasoned entrepreneurs and investment professionals have been invited to participate in this course. Their presentations will help illustrate the real-world application of many of the concepts we will discuss in class this semester. The value of these sessions depends on your involvement. Please be in class on time and ready to engage the speakers and your fellow classmates in a lively discussion. Several of the speaking engagements may be open to a larger audience. Dinner with Speakers Many of the speakers have agreed to extend their stay and have dinner at one of Winston-Salem’s finest restaurants with a small group of students. For each dinner, 3-5 students will be eligible to attend. This is a great opportunity to continue a discussion with the speaker, meet with successful entrepreneurs and investment professionals, and build your network. Students can attend these dinners by earning and redeeming “Dinner Club Points.” Points will be awarded to students throughout the semester based on a number of criteria. These criteria may include but are not limited to the following: • Best participation in a class discussion • Best attendance • Shiniest shoes • Above-excellent work on a class assignment Dinner Club Points will be given at several unannounced times throughout the semester and based on a number of unannounced criteria. In general, you can accumulate points by coming to class prepared, -4- ESE 302
  5. 5. completing above-excellent work, engaging speakers and your fellow classmates in a lively discussion, and looking and acting in a professional manor. COURSE OUTLINE A schedule of class meetings, course topics, and assigned reading is included below. Additional reading and discussion questions will be posted on Blackboard. DATE TOPIC READING / ASSIGNMENT Wed., Jan. 17th Course Overview Introduction to course. Review syllabus. Please read the selection of articles Student introductions. Description of posted on Blackboard for today’s session Investment Simulation Project. and consider the posted discussion questions. History/Background of Venture Capital Industry What are the earliest examples of venture capital investments and how has the industry evolved over the years? What is the role of Venture Capital in today’s economy? Wed., Jan. 31st The Process: How Does Venture Capital Work? eBoys: The First Inside Account of What are the alternatives? Who invests Venture Capitalists at Work (Entire in VC funds? How are VCs paid? What Book) is the relevance of all this to America? Additional reading and discussion Guest Speaker questions posted on Blackboard. Helen Lais, Senior Executive for Alpinvest (Represents over $200 billion in capital for the Dutch pension authority). Wed., Feb. 7th The Business Model & The Team Fooled By Randomness: The Hidden What are some entrepreneurial attributes? Role of Chance in Life and in the And how important is the entrepreneurial Markets team? (Select Chapters) The Structure of Scientific Revolutions (Select Chapters) Additional reading and discussion questions posted on Blackboard Wed., Feb. 21st The Business Model What types of investments are attractive Reading and discussion questions posted to a VC fund? How do entrepreneurs on Blackboard create a sustainable business model? This class session will also look at other financing options including bootstrapping and angel investments. -5- ESE 302
  6. 6. DATE TOPIC READING / ASSIGNMENT Wed., Mar. 7th Top Down: Markets, Quality Concepts, The Perfect Store: Inside eBay and People Who Vote With Their Feet (Entire Text) Guest Speaker Additional reading and discussion Scot Wingo, Founder and CEO of questions posted on Blackboard. ChannelAdvisor Wed., Mar. 28th Encouraging Accidents, Recognizing Opportunity, and Building Empires Accidental Empires: How the Boys of Silicon Valley Make Their Millions, The Pitch Battle Foreign Competition, And Still How to approach investors and the Can't Get A Date importance of PowerPoint slides. Additional reading and discussion Guest Speaker questions posted on Blackboard. James W. Judson, Jr. , Recordant Board Chairman Wed., Apr. 4th Valuation and Negotiation This class session will cover a broad Reading and discussion questions posted overview of valuation, the process of on Blackboard. valuing an early stage venture, and how that information is used in the negotiation process. Wed. Apr. 18th The Finer Points: Board Seats, Voting Rights, Strategic Alliances, and the Exits Reading and discussion questions posted This class session will look at the finer on Blackboard. points of negotiating and building long- term relationships between the entrepreneur and the venture capitalists. Guest Speaker Representatives from the Piedmont Angel Network (PAN) Wed., Apr. 25th Course Summary In this session we will review the material Reading and discussion questions posted covered in the course and discuss ways on Blackboard. that you incorporate the learning from this course in your personal and professional life. Guest Speaker Scott Hurff – Entrepreneur-In-Residence at Kodiak Venture Partners and Founder of Groupvine TBD FINAL EXAM -6- ESE 302
  7. 7. INSTRUCTOR BIOS J. Bren Varner Program Director, Wake Forest University Center for Entrepreneurship Instructor, Wayne Calloway School of Business and Accountancy Bren Varner manages the co-curricular initiatives for the Wake Forest Entrepreneurship program. As Director for the University Center for Entrepreneurship, he advises students and student groups looking to further explore the field of entrepreneurship and start new ventures. Mr. Varner is also an adjunct faculty member in the Wayne Calloway School of Business and Accountancy, where he teaches classes in entrepreneurship, venture capital, and business communication. Prior to coming to Wake Forest, Mr. Varner worked with numerous entrepreneurial ventures and has provided merger and acquisition advisory services for companies in the software and IT industries. Mr. Varner received his bachelor's degree in business from Wake Forest University and his master's degree in business administration from the Darden School of Business at the University of Virginia. John Abraham General Partner – Kodiak Venture Partners John Abraham is an industry veteran with more than 30 years of experience in technology investing, executive management, and product development that includes successful IPOs and U.S. patents. As a General Partner at Kodiak, he focuses on software and services, communications, wireless, Internet and new media. He sits on the board of directors of Kodiak portfolio companies including Application Security; ASPEED Software; ChannelAdvisor; Recordant Technologies, XDS and Weather Trends International. In his years as an investor, John has acquired and managed more than $800M worth of technology acquisitions, and has had venture investment returns of more than $1.8B above capital invested. He also has enjoyed repeat relationships with many entrepreneurs. John joined Kodiak from Battery Ventures where, as a partner, he focused on software and e-business sectors and originated private equity investments totaling more than $40M. At Battery, he was an early investor in Applimation, Inc.; OpenCOLA; OpenNetwork Technologies; and Optiant, Inc. His other successful investments include Business Software Technology, PhotoDisc, and Witness Systems, which had a successful IPO. Before joining Battery Ventures, John held a number of senior executive positions in the technology industry including President and Chief Executive Officer of Add-Vision, Inc., a designer and manufacturer of intelligent electronic display and illumination systems. Prior to Add-Vision, he served as Executive Vice President at Compuware Corporation, a publicly held, worldwide software and professional services organization, where he was responsible for managing operations including finance, management information systems and mergers/acquisitions, among others. Before joining Compuware, he was Senior Vice President of Engineering for Boole & Babbage Inc., a public software company that became the foremost vendor of automated operations software products, and ultimately was acquired by BMC Software. In 1982, John founded Condor Technology, Inc., designed and developed its products, and, as President and CEO, bootstrapped the company from start up status to a merger with Business Software Technology (BST). Condor/BST's products have sold more than $10B worldwide while operating as a division of Computer Associates, Inc. Earlier in his career, John was a computer scientist at Bell Laboratories where he authored several software products that remain in use today at every regional Bell System affiliate in the world. He also holds several US Patents. John has been a speaker at key industry conferences such as the Wharton Private Equity Conference, and the Council for Entrepreneurial Development Venture Conference, and others. He has spoken on topics including operational value ad, and driving high-growth-company sales success. John attended Columbia University and the University of Illinois, where he studied computer science. -7- ESE 302