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Michael Olafusi

MIT: Entrepreneurial Finance

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You can register on MIT Opencourseware for Entrepreneurial Finance at https://ocw.mit.edu/courses/sloan-school-of-management/15-431-entrepreneurial-finance-spring-2011/ 

About the course

Entrepreneurial Finance examines the elements of entrepreneurial finance, focusing on technology-based start-up ventures and the early stages of company development. The course addresses key questions which challenge all entrepreneurs: how much money can and should be raised; when should it be raised and from whom; what is a reasonable valuation of the company; and how should funding, employment contracts and exit decisions be structured. It aims to prepare students for these decisions, both as entrepreneurs and venture capitalists. In addition, the course includes an in-depth analysis of the structure of the private equity industry.4

This course will use a combination of case discussions and lectures to study entrepreneurial finance. The course is targeted to budding entrepreneurs and venture capitalists. There are five main areas of focus:

  1. Business Evaluation and Valuation: Here we will give you some tools to valuate early stage business opportunity. We will also review the standard tools of valuation applied to start-up situations and introduce the venture capital method and the real options approach to valuation.
  2. Financing: In this module, we will highlight the main ways that entrepreneurs are financed and analyze the role of financial contracts in addressing information and incentive problems in uncertain environments.
  3. Venture Capital Funds: We will look at the structure of venture capital funds and their fund raising process. This module will include issues of corporate venture capital and private equity funds in emerging market economies.
  4. Employment: We will study the issues of attracting and compensating employees in start-ups.
  5. Exit: We will discuss how founders should exit. Should they sell to another company, take it public, or continue independently as a private company?

Carl Stjernfeldt (General Partner at Castile Ventures) will co-teach a number of sessions. We are very lucky to have Carl participate so please use his time judiciously! We also have a number of additional guest speakers who will discuss recent developments in the industry.

Syllabus

SES # TOPICS LECTURE NOTES
1 Introduction and overview of entrepreneurial finance  
2 DermaCare  
Business Valuation
3 Discounted cash flow (DCF) and the venture capital method (PDF)
4 Netflix  
5 Real option valuation (PDF)
6 Real option valuation (cont.)  
Deal Structure
7 Genzyme/Geltex  
8 Deal structure (PDF)
9 Walnut Venture Associates (A) and (D)  
10 Deal structure (cont.) (PDF)
11 Guest: John H. Chory (Partner, WilmerHale Venture Group)  
12 Metapath  
Team Sheet Negotiation
13 BNI Video
Guests: Conrad Clemson (Founder and CEO, BNI Video) and Carl Stjernfeldt (General Partner, Castile Ventures)
 
14 BNI Video
Guest: Carl Stjernfeldt (General Partner, Castile Ventures)
 
Venture Capital Funds
15 Guest: Dr. William Janeway (Senior Advisor, Warburg Pincus)  
16 Portfolio and partnership
Guest: Carl Stjernfeldt (General Partner, Castile Ventures)
 
17 VC Vignettes
Guest: Carl Stjernfeldt (General Partner, Castile Ventures)
 
18 Grove Street Advisors - September 2009
Guest: Christopher E. Yang (General Partner, Grove Street Advisors)
 
19 Forte Ventures  
Exit
20 Initial public offering (IPO)
Guest: Michael Szeto (Managing Director of Private Equity, WR Hambrecht)
(PDF - 1.0MB) (Courtesy of Michael Szeto. Used with permission.)
21 Grand Junction
Guest: Michael Szeto (Managing Director of Private Equity, WR Hambrecht)
(PDF) (Courtesy of Michael Szeto. Used with permission.)
22 Blackstone  
23 Final review (PDF)

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