This workshop provides a comprehensive and practical overview of the Venture Capital and Private Equity (VCPE) investment businesses, from the perspectives of the private equity investor as well as the entrepreneur seeking funding for his or her company. This four-day workshop will survey the entire VCPE landscape. From the investor’s viewpoint, the workshop will look at the business from fund formation, through the investment process, and on to the “exit”. From the perspective of the entrepreneur, it will examine all aspects of deal negotiation, company valuation, structuring, board relations, succession planning, and, finally, gain realization.
The workshop is targeted at intermediate- and senior-level venture capital and private equity investment professionals, recent college or business school graduates contemplating entering the investment business, entrepreneurs seeking venture capital financing, and mid-level managers in venture-backed companies seeking to advance their professional careers. Lawyers and investment bankers servicing or seeking to service private equity clients also stand to benefit from this comprehensive course.
While the workshop will occasionally introduce some Excel-based modeling, and therefore, some prior knowledge of Excel will prove helpful, it is not a prerequisite. The course will use a number of practical case studies that bring home to the delegate the real-life dynamics of VCPE investing, their principal risks, and their potential rewards, from both the entrepreneur and investor perspective. Many case studies will rely on Harvard Business School material. Where necessary the relevant accounting, tax, and legal background is provided to ensure maximum benefit for practitioners.
This program assumes only a basic existing familiarity with the private equity world, but will progress at a rapid pace from quite simple to reasonably sophisticated concepts. Therefore, delegates will be expected to absorb significant materials of information in a relatively short time, and will be tested periodically through short quizzes to monitor their progress and flag difficulties they are experiencing. Delegates should also expect to spend some time at the end of each day of the program reviewing the materials covered and addressing any difficulties they may have identified. The instructor will be available at all times to assist in this objective.
In addition, because both the investor and the entrepreneur rely so heavily on legal documentation for any transaction, this workshop will give delegates the opportunity to review language often used in such documentation. Therefore, delegates must be fully conversant in English.
COURSE OBJECTIVES
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Provide a thorough and practical overview of the venture capital and private equity investment process, from the perspectives of the investor as well as the entrepreneur seeking funding
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Develop familiarity with the fund formation process, customary terms for VCPE funds, and expectations of investors
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Review deal negotiation strategies, valuation methods in theory and practice, and investment term sheets
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Develop a thorough understanding of the most prevalent securities used by VCPE investors. In particular review all forms of preferred stock typically seen in venture capital or private equity
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Explain the expectation of the board of directors, and how to manage those critically important relationships
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For the entrepreneur, learn how to build a highly motivated management team, manage in a growth environment, and position the company for successful expansion
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Develop familiarity with exit options, pros and cons of each, and hidden landmines
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Learn how to deal with adversity, including how to manage in turnaround situations, without losing control of the company prematurely
Overview of the Venture Capital and Private Equity Markets
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Venture capital
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Private equity
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Expansion capital
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Leveraged Buy-Outs
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Management Buy-Outs / Buy-Ins
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Primary shares / Secondary shares
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Recapitalizations
The Fund Formation Process
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Investment strategies
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Partnership considerations
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Fund structure choices
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Identification of investors
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Fundraising and closing
Deal Sourcing
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Identifying a deal strategy: passive or proactive sourcing
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Syndicated transactions v. sole investor strategies
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Brokered deals, shopped deals, auctions, or exclusives
Deal Negotiation and Valuation
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Company Valuation: multiples, discount rates, expected returns
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The Capital Asset Pricing Model (CAPM): does it apply?
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Practical examples
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Term sheet: what matters, what to negotiate, deal breakers
Large Company Case Study: Technology LBO
This real-life case centers around Seagate, the world-leading hard disk drive manufacturer. Is a technology company a good candidate for an LBO? What does one look for in such a transaction? How does one determine the “right” valuation?
Due Diligence, Documentation and Closing
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What is “due diligence”?
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Strategic, market, accounting, legal, and management due diligence
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Documentation: legal primer for the non-lawyers
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Deal closing: how to make it happen
Early-Stage Company Case Study: This case centers around Zip-Car, an early stage company seeking its first-round of professional private equity financing. How does the venture capitalist conduct due diligence, given the limited company history? The current thinking from the Harvard Business School faculty is examined in detail, through the use of HBS cases and Notes.
Managing in a Growth Environment
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Building a rounded management team, not a one-person show
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Strategic planning for success
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Management control systems
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Determining the company’s key success factors
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Measuring performance
Resource Allocation amid Capital Constraints
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Which projects should the company pursue?
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What is the company’s cost of capital?
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What are investors’ return expectations?
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When should leverage be used to enhance returns?
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What is the company’s “Cost of Financial Distress”?
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What is the proper financial policy for the company?
Case Study: HiJinx, Inc.
Studies the case of this growing, but capital constrained, private equity financed, operator of indoor children’s amusement parks. Which projects should it pursue? Should the company maximize the net present value of its invested dollars, or the internal rate of return (IRR) on its projects?
Corporate Restructuring
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Managing in a turnaround environment
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Achieving profitability against all odds
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Restructuring income statement and balance sheets
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Remaking the entire company for sustained profitability
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Regaining investors’ confidence when all seems lost
Case Study: Jeepers! Inc.
Looks at the various options available to all the stakeholders of this financially distressed private equity financed company. The case also evaluates the situation from the perspective of the management team, the equity investors, the lenders, and potential buyers of this company’s assets.
Management Succession Planning
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When do you contemplate replacing yourself?
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Managing your investors’ expectations
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Cultural fit: Ensuring your own vision becomes reality
Exiting the Investment
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Management motivations for exits
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Investors’ motivations for exits
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Initial Public Offerings (IPOs)
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When is a buy-out feasible?
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Aligning your interests with your investors’
Advanced Security Design for Enhancing Returns
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Preferred Shares: redeemable, convertible, perpetual, participating
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Fluff or economic substance
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Use of stock option plans to align interests
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Use of warrants
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Creative strategies for bridging differences in expectations
Case Study
This case examines the story of an entrepreneur who had far greater expectations for his own company’s success than did his investors. Through several rounds of financing, the two parties always managed to bridge those gaps. How did they do it? Who was right? Who was wrong? Did it matter?
Managing the Portfolio of the Venture or Private Equity Investor
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Respecting the CEO’s “turf”
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Value added relationships, is it all about the capital?
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Board service: a must or an option?
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Evolving role of the private equity investor
Closing Case Studies
The workshop closes with four HBS case studies, covering the entire spectrum of Venture Capital and Private Equity. Cases include US entrepreneur Jim Sharpe’s acquisition of Extrusion Technologies; Onset Ventures’ model for spawning entrepreneurial ventures; and the expansion plans for two food/restaurant chains: Joint Juice and Noodles.