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SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE Bus 332-01 CRN 93685 STONY BROOK UNIVERSITY College of Business BUS332 ENTREPRENEURIAL FINANCE Before going public, companies like Facebook, LinkedIn, and Zynga relied on venture capital financing to grow. Similar companies are increasingly choosing private market solutions as the IPO market has weakened due to increased government regulation, compliance costs, and listing requirements. Small- cap investors vying to add the “next Facebook” to their portfolio are now investing earlier in the cycle (pre-IPO). This increase in demand led to the development of secondary markets that provide an alternative to the traditional IPO. This course teaches the necessary tools for investors and entrepreneurs to build and evaluate these early-stage companies. Prerequisite: BUS major/Minor, BUS330 3 credits Tuesday 7:00 - 9:50 PM Melville Lib W4535 West Campus 8/28-12/20 Professor: Thomas Tallerico, Email: [email protected] Phone 631-513-6070 cell Office Hours: Tuesday 10-11pm Harriman Hall Room 301 (Adjunct office) REQUIRED TEXT: ebook and rental available ENTREPRENEURIAL FINANCE 9781285425757/ 1285425758 BY LEACH, J. CHRIS PUBLISHED BY CENGAGE LEARNING 6 th edition or later OPTIONAL TEXT (I will provide slides and handouts) Title: Entrepreneurial Finance: Strategy, Valuation, and Deal Structure ISBN: 0804770913 Authors: Janet Kiholm Smith, Richard L. Smith & Richard T. Bliss Publisher: Stanford Economics and Finance (March 22, 2011) Other sources Shark Tank program Various texts on Business Plan Creation. Zero to One Peter Thiel Entreprenuership Websites Your contributions

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Page 1: SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE … · SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE Bus 332-01 CRN 93685 STONY BROOK UNIVERSITY College of Business BUS332 ENTREPRENEURIAL

SYLLABUS Fall 2017

ENTREPRENEURIAL FINANCE Bus 332-01 CRN 93685

STONY BROOK UNIVERSITY College of Business

BUS332 ENTREPRENEURIAL FINANCE

Before going public, companies like Facebook, LinkedIn, and Zynga relied on venture capital financing

to grow. Similar companies are increasingly choosing private market solutions as the IPO market has

weakened due to increased government regulation, compliance costs, and listing requirements. Small-

cap investors vying to add the “next Facebook” to their portfolio are now investing earlier in the cycle

(pre-IPO). This increase in demand led to the development of secondary markets that provide an

alternative to the traditional IPO. This course teaches the necessary tools for investors and entrepreneurs

to build and evaluate these early-stage companies.

Prerequisite: BUS major/Minor, BUS330

3 credits

Tuesday 7:00 - 9:50 PM Melville Lib W4535 West Campus 8/28-12/20 Professor: Thomas Tallerico, Email: [email protected]

Phone 631-513-6070 cell

Office Hours: Tuesday 10-11pm Harriman Hall Room 301 (Adjunct office)

REQUIRED TEXT: ebook and rental available ENTREPRENEURIAL FINANCE

9781285425757/ 1285425758 BY LEACH, J. CHRIS

PUBLISHED BY CENGAGE LEARNING 6th edition or later

OPTIONAL TEXT (I will provide slides and handouts)

Title: Entrepreneurial Finance: Strategy, Valuation, and Deal Structure

ISBN: 0804770913

Authors: Janet Kiholm Smith, Richard L. Smith & Richard T. Bliss

Publisher: Stanford Economics and Finance (March 22, 2011)

Other sources

Shark Tank program

Various texts on Business Plan Creation.

Zero to One Peter Thiel

Entreprenuership Websites

Your contributions

Page 2: SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE … · SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE Bus 332-01 CRN 93685 STONY BROOK UNIVERSITY College of Business BUS332 ENTREPRENEURIAL

LEARNING OBJECTIVE

The course provides students an understanding of the economics of entrepreneurial finance and private

equity, especially venture capital. We will address financing and strategic issues faced by entrepreneurs

in the early stage of a firm. Financial modeling will be used to determine how much money can and

should be raised and from what source, and how the funding should be structured. Specific topics

include: methods of valuing private firms, simulation to make better strategic choices, business plans,

economics of contracts that underlie new venture finance venture capital partnerships (agreements, term

sheets, etc.), financing sources, creating value through financing contracting, and exit strategies (initial

public offerings, merger, other).

COURSE EXPECTATION

This course will emphasize the application of analytical methods to actual securities. A basic

background in accounting and investments is also expected. Course work will include projects and

assignments, which will require some familiarity with Microsoft windows and Microsoft office,

particularly a basic understanding of how to utilize an excel spreadsheet. In addition, class members will

need to acquire skills in using Internet search engines to gather needed information for course projects

and assignments.

COURSE METHODOLOGY

The instructional format includes lecture sessions; class projects, assignments and articles. The financial

press will form the basis for some of the class discussions. Active participation in discussions is a course

expectation.

COURSE GOALS and LEARNING OBJECTIVES

• Understand the implications of the important differences between new venture finance and

corporate finance (finance of large public corporations)

• Think analytically about the business plan in terms of an organic documents with multiple

purposes, including a means of testing assumptions, validating, learning, measuring, signaling

• Recognize the importance of financial modeling and strategic planning

• Be able to describe the various sources of funding for new ventures (venture capital, angel

capital, private equity and many others) and evaluate which of the choices are feasible in the

particular setting

• Understand the organization of the venture capital industry and the economics underlying the

contracts that are used in the industry

• Appreciate the importance of real options and milestones in new venture development and think

about them in terms of decision trees that are tied to important milestones

• Learn the basics of financial modeling, the importance of grounding the model in well-

documented assumptions, and learn how to use the model to assess cash needs

• Learn to value new venture opportunities using state-of-the art valuation methods and understand

how these methods relate to the financial economic theory that you have learned in corporate

finance (methods covered include the Venture Capital method, First Chicago method, discounted

cash flow using either risk-adjusted discount rate or certainty equivalent approach, relative

value)

• Appreciate the differences in value to an underdiversified entrepreneur compared to a diversified

investor and learn how to exploit the differences to design investment agreements

Page 3: SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE … · SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE Bus 332-01 CRN 93685 STONY BROOK UNIVERSITY College of Business BUS332 ENTREPRENEURIAL

• Learn why harvesting is tied to the initial investment decision and understand the costs and

benefits of the various exit alternatives, including IPO and merger

STUDENTS WHO WILL BENEFIT MOST FROM THE COURSE

• Students who are involved, or aspire to be involved, in entrepreneurial ventures will learn how to

identify opportunities with the potential to be successful, how to structure the opportunities to

maximize the probability of securing financing, and how to structure the deal to suit their

objectives.

• Students who aspire to be involved in venture capital or angel investing will learn to assess the

merits of investment opportunities, and to create value by linking financing choices to key

strategic decisions, and how to analyze the harvesting of the investments.

• Students who aspire to careers in social venturing and corporate venturing will learn how to use

elements of deal structure to create value for all parties involved and how to create successful

opportunities when the parties disagree about the prospects of the venture.

STUDENT RESPONSIBILITIES

• You are required to attend each class regularly.

• You are expected to do all the reading and assigned problems as assigned for each class session.

• There will be no make up for Mid Term or Final examinations, except for documented

emergencies.

• You should be conversant with current business and financial news and prepared to discuss

events.

• Each student is expected to participate in class discussions.

• You will be required to complete the problem sets, which will be assigned in class. No problem

set will be accepted after the due dates.

• A minimum of 5-7 hours per week should be allowed for class preparation.

GRADING:

Midterm 35 Points

Final 40 Points

Homework: 10 Points

Project: 15 points

Total 100 Points

1. No make-up exams unless student has a documented medical or legal excuse.

2. No Late assignments will be accepted.

3. Unless there is a computational error, absolutely NO final semester grades will be changed. The time

to be concerned about your grade is NOW and NOT the end of the semester.

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Grades: Points to letters.

94.01 - 100 A

90.01 - 94 A-

87.01 - 90 B+

84.01 - 87 B

80.01 - 84 B-

77.01 - 80 C+

74.01 - 77 C

70.01 - 74 C-

67.01 - 70 D+

64.01 - 67 D

60.01 - 64 D-

0 - 60 F

CLASS SCHEDULE

Class 1 Chapter 1 Introduction to Finance for Entrepreneurs/Discuss Project

Class 2 Chapter 2 Developing the Business Idea/ Group formation

Class 3 Chapter 3 Organizing and Financing a new Venture

Class 4 Chapter 4 Preparing and Using Financial Statements

Class 5 Chapter 5 Evaluating Operational & Financial Performance

Class 6 Chapter 6 Managing Cash Flow

Class 7 midterm TBD

Class 8 Chapter 7 Types and costs of Financial Capital

Class 9 Chapter 8 Securities Law

Class 10 Chapter 9 Projecting Financial Statements

Class 11 Chapter 10 Valuing Early Stage Ventures

Class 12 Chapter 11/12 Venture Capital Valuation Methods/ Professional Venture Capital

Class 13 Final Project Presentations

Class 14 Final Project Presentations

Final TBD

Page 5: SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE … · SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE Bus 332-01 CRN 93685 STONY BROOK UNIVERSITY College of Business BUS332 ENTREPRENEURIAL

DISABILITY INFORMATION DISCLOSURE

If you have a physical, psychological, medical or learning disability that may impact your course work,

please contact Disability Support Services, 128 ECC Building (631) 632-6748. They will determine with

you what accommodations are necessary and appropriate. All information and documentation is

confidential.

Students who require assistance during emergency evacuation are encouraged to discuss their needs with

their professors and Disability Support Services. For procedures and information go to the following

web site: http://www.ehs.sunysb.edu and search Fire Safety and Evacuation and Disabilities.

THE COLLEGE OF BUSINESS STATEMENT REGARDING ACADEMIC DISHONESTY

The College of Business regards any act of academic dishonesty as a major violation punishable by

severe penalties, including dismissal from the University. University policy requires that instructors and

GAs report all suspected cases of academic dishonesty to the appropriate Academic Judiciary

Committee, which is empowered to take strong action against violators, including expulsion from the

University. Please note that there is a link to the Academic Judiciary web site on the Blackboard home

page.

Under no circumstances will the College of Business permit cheating of any kind. Many activities

constitute academic dishonesty. The following list is not inclusive, only suggestive:

On Examinations:

Referring in any way to the examination paper of another student.

Use of materials (notes, books, etc.) not explicitly permitted by the

instructor.

The exchange of any information concerning the examination with

any other person after the examination has begun.

On Papers:

The submission in whole or part of the work of another person as if

it were your own.

The citation of the work of others without proper reference and

credit.

If you have any questions about the honesty of an action, please consult with any faculty member for

clarification. We will not construe such consultation as evidence that you have committed any violation

or are even contemplating it. We will not accept failure to understand the rules as an excuse.

If you are considering any act of academic dishonesty, the College of Business advises you in the

strongest possible terms to abstain. The consequences associated with academic dishonesty are

substantial enough literally to ruin your career. DON’T DO IT.

What is Plagiarism?

Page 6: SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE … · SYLLABUS Fall 2017 ENTREPRENEURIAL FINANCE Bus 332-01 CRN 93685 STONY BROOK UNIVERSITY College of Business BUS332 ENTREPRENEURIAL

There is nothing wrong with using the words or thoughts of others or getting help. Indeed, it is good to

do so as long as you explicitly acknowledge your debt. It is plagiarism when you pass off the work of

others as though it were your own:

Copying without quotation marks or paraphrasing without acknowledgment from the writing of

someone else. Using someone else’s facts or ideas without acknowledgment. Submitting work in one

course that you submitted for credit in another course without the permission of both instructors.

You can strengthen your paper by using material by others – as long as you acknowledge your use, and

as long as you use that material as a building block for your own thinking rather than a substitute for it.

When you use published words, data, or thoughts, you must footnote your use. (See any handbook or

dictionary for footnote formats.) When you use the words or ideas of friends or classmates, you should

thank them in an endnote (e.g., “ I am grateful to my friend so-and-so for the argument in the third

paragraph.”) If friends just give you reactions but no suggestions, you need not acknowledge that help in

print (though it is gracious to do so).

The academic and business worlds depend on people using the work of others for their own work.

Dishonesty destroys the possibility of working together as colleagues. Faculty and researchers do not

advance knowledge by passing off the work of others as their own. Students do not learn by copying

what they should think out on their own. Therefore, the University insists that instructors report every

case of plagiarism to the Academic Judiciary Committee, which keeps records of all cases. The

recommended penalty for plagiarism is failure for the course and possible expulsion from the

University.

Unintentional plagiarism is still plagiarism. You cannot plead ignorance. Therefore, if you have any

questions about the proper acknowledgment of help, be sure to ask your instructor.