New Venture Finance F2023

What

Section 001: 12:30 pm - 1:45 pm TR, Bidgood Hall 125

Section 003: 2:00 pm - 3:15 pm TR, Bidgood Hall 121

New Venture Finance (MGT 481) provides students with working knowledge of financing mechanisms such as friends and family, venture capital, angel investments, and debt instruments for creating and operating a new venture; valuation methods for determining pre- and post-money; creating capitalization tables to track equity ownership assignments and investment rounds.

Pre-requisites

MGT 300 and MGT 386, MGT 387 may be taken as co-requisite

Syllabus 

see this Google doc

Strongly Suggested Texts

Three paperback (or ebooks) available at Amazon.com

• Founder’s Pocket Guide: Friends and Family Funding $7.99 ($3.03)

  • ISBN 978-1-938162-11-4

• Founder’s Pocket Guide: Startup valuation $7.99 ($3.99)

  • ISBN-13: 978-1938162046

  • ISBN-10: 1938162048

• Founder’s Pocket Guide: Term sheets and preferred shares $7.99 ($3.99)

  • ISBN 978-1-938162-06-0

The lowdown: You can probably get through this course without these books, but I purposely chose these books because of their quality, conciseness, and price. 

Course objectives

This course is for aspiring or active entrepreneurs who want to understand how to secure funding for their company. This course will demystify key financing concepts to give entrepreneurs and aspiring entrepreneurs a guide to secure funding. Examine the many financing options available to get your new venture funded. Learn the basics of finance, valuations, dilution and non-dilutive funding sources. Understand capital structure for new ventures, term sheets and how to negotiate them, and the differences between early-stage versus later-stage financing. Develop an understanding of how to develop winning investor pitches, who and when to pitch, how to avoid common mistakes that limit the effectiveness of the pitch, and how to ‘get to the close’.

Key questions answered within the course include:

• When to raise outside capital?

• What kind of investors invest by stage and where to find them?

• What are your fundraising options?

• What are the key components of the term sheet?

• How to perform company valuations?

• How to create milestones to delineate the progress of the new venture?

• How to pitch to investors?

• What techniques help the entrepreneur ‘get to the close’?

Learning outcomes

Student learning objectives include at a minimum the following:

• Recognize and anticipate situations where entrepreneurs should raise outside capital

• Identify appropriate types of investors by stage and recognize where to find them

• Identify and evaluate fundraising options that are appropriate the to type and stage of development of the venture

• Understand and differentiate the key components of the term sheet

• Perform several different approaches to company valuations

• Understand the components of an effective pitch to prospective investors

• Recognize, evaluate, and select situation-appropriate techniques that help the entrepreneur ‘get to the close’ when fundraising

Instructor

Professor Craig E. Armstrong, Ph.D. | Alston 155 | MGT481BAMA@gmail.com for "formal" course communications | Group.me for informal communications - quick answers and sudden announcements - I will invite you to the group by the first day of class.

Modules

Approach

I have organized this course into modules that present topics in "bite-sized" portions. A module usually covers a well-defined topic over a short period with defined objectives and graded activities. You should refer to this section of the course web site a few times a week to keep up with updates and to prepare yourself in advance for upcoming activities and assignments.

Schedule, Activities, and Points

You will turn in a graded activity nearly every week of the semester beginning the week of Sept 5-8 (the week in which Labor Day occurs). I generally offer practice quizzes, which are not required, for each module. I provide practice quizzes because it's proven to to help reinforce what you've learned. After viewing the assigned readings and videos and attending lectures in class, you'll have a graded assessment activity. This could be in the form of a written analysis, a brief case write-up, or an additional quiz. All assignments are due by 11:59 pm, Sunday evenings. The points I've assigned to each module are intentionally set so that messing up on any one particular assessment won't crush your grade (or your soul). Ten assignments each each worth 10 points - usually as quizzes - all add to 100 total points for the course.

Since we're talking schedules, here's a link to the UA academic calendar page.

This section last updated: September 12, 2023

Course Ice Breaker with Game Mechanisms (NOT Proof Eyewear)

1. Review syllabus, set up course  August 24 For those of you who like to program everything into your calendar for the whole semester, I'll be changing the dates below over this weekend (Aug 26-27)

2. August 29 and 31: No lecture due to Covid

3. September 4, no lecture; September 6 yes lecture - navigate to Ridge

4. September 12, Financial Analysis Assessment, and; on Thursday, 

5. September 14 we will not have lecture. Work on the Autoshop and Build-A-Bear Workshop assignment to prepare for lecture on September 19.

6. September 19; do a graded in-class activity using financial analysis for Autoshop and Build-A- Bear Workshop, 10 points, on Bb as "financial analysis" (Financial Analysis Assessment)

7. September 21, begin Pro Forma Financials Assessment with Beatbox Beverages, 

8. Sep 26 graded activity IN CLASS is the Pro Forma Financials with Beatbox Beverages (10 points; on Bb as "pro formas")

9. September 28: Working Capital Management lecture

10. October 3: in-class activity on Crimson Espresso working capital (10 points; on Bb as "Working Capital Mgt").

11. October 5: Overview of Sources of Financing, Take-Home Quiz due by midnight, Sunday, October 8 (10 points). 

12. October 8: Turn in quiz on sources of financing

13. October 10 & 12: Cap Tables, In-class team assessment October 12 or QUIZ October 15, 10 points, on Bb as "Cap Tables" (usually I teach cap tables after introducing the different stages of financing; not this time)

14. October 17, Founders; here is our October 17 in-class activity (not graded), Bonus reading: Crunchbase Explainer: How To Sell Your Stock Options On A Secondary Market (Crunchbase, 2/6/23)

15. October 19 and 24, Friends and Family, In-class activity, October 24, 10 points (On Bb as "F&F"). Here is a practice quiz to help you with convertible debt issues and calculations (google doc with questions and annotations)

16. October 31 and November 2: Early Stage Valuation In-class team assessment on November 2 OR out of class due November 5, 10 points (on Bb as "Early Stage Val") 

17. November 7 and 9: Angel Investors, Here is your graded assignment: In-Class Graded Activity due in class Nov 9 or out of class by midnight Nov 12, Watch these instructions if you were not able to be in class on November 9 10 points (on Bb as "Angel")

18. November 14 and 16: Venture Capital, In-class team assignment Nov 16 (here is an example of how the mechanics work) (if you miss class, turn in by Nov 19, 10 points (On Bb as "Venture Capital"). 

19. November 28 and 30: Term Sheets (Nov 28) in-class assignment (Nov 30) (open this form and view this spreadsheet); (see the pie below; if you miss class you have until Tuesday end-of-class to turn it in)

20. Dec 5 & 7: Make-up missed work (Dec 5); no class on Dec 7.

Resources

Resources you can (should) use in addition to assigned readings and activities, but not required for this course. 

The pmarca blog archives

Select posts by Marc Andreessen 2007-2009; peer into the thoughts of one of the most influential entrepreneurs over the past three decades (not you, Bill G, Elon, or Pillow Guy) on a variety of topics. 

US Small Business Association (SBA.gov): Financing Options for Small Businesses (45-minute course). 

This self-paced training exercise is an introduction to financing options for your business. Topics include; determining your financial needs, loans, grants, venture capital, angel investors, crowd funding and other financial options available to small businesses. 

Content

• Course

• Course Transcript

• Worksheets