MBA Online

ICS , Graduate School of International Corporate Strategy

[Term 4] Venture Capital (M. Korver) (2009/Term 3&4 (Spring&Summer))

The objective of this course is to provide an overview of entrepreneurial finance from the differing perspectives of institutional investors, venture capitalists, and entrepreneurs. By “entrepreneurial finance” (or venture capital), we mean the provision of growth capital in the form of an investment in the equity (stock) of privately-held companies at various stages of development. The term “entrepreneurial finance” is used in the course title to distinguish this course from “corporate finance.” Corporate finance is commonly taught with reference to the markets for publicly traded securities. The major difference between corporate finance and entrepreneurial finance is that the former deals with markets that are more efficient than the private equity market. Accordingly, our analysis must reflect the fundamental inefficiencies of the private equity market and will raise many issues that are not considered in standard courses on corporate finance.

Venture capital is a major source of growth capital for new ventures. Since its origins in the U.S. after World War II, the size of the venture capital market has grown substantially on a global scale and become increasingly institutionalized. For example, at its peak annual venture capital investments exceeded $141 billion worldwide in 2000. However, this amount is still quite small in comparison to the market for publicly traded stocks. Furthermore, the bursting of the stock market “bubble” has had a significant impact on the venture capital market. In Japan, the venture capital market is still small and immature relative to the U.S. but is viewed as a positive force for the transformation of the economy by providing necessary capital to new ventures and re-vitalizing established firms.
Course Structure

The course covers the “venture capital cycle” which comprises (1) fundraising and structuring of the venture capital fund; (2) investment origination, due diligence, and valuation; (3) negotiating investment terms and making the investment decision; (4) strategies for post-investment value creation and investment management; and (5) investment exit strategies. The course is divided into two modules. The first module focuses on investment in venture companies. The second module focuses on venture capital funds. Topics expected to be covered include the following:

(1) Ventures and entrepreneurs
• Due diligence
• Valuation
• Understanding the term sheet
• Negotiating the investment
• Entrepreneur compensation
(2) Venture capital funds
• Institutional investors
• Fund portfolio management
• Fundraising and structure
• Exit
• Managing the VC firm
Teaching Method

This course will be taught using a mixture of lectures and class discussion of assigned cases. Students are required to come to classes for which a case has been assigned thoroughly prepared by reading the cases and studying the attached exhibits. This will enable them to take part in the class discussion and better understand and respond to the comments made by other students in the class. In addition, students are required to read the assigned readings which will expose them to the basic concepts and analytical frameworks required to fully understand the cases.

ICS , Graduate School of International Corporate Strategy

[Spring Break] Field Study (2009/Term 3&4 (Spring&Summer))

The objectives of the course are to give students practical experience (a) solving a real-life strategic problem facing a company, (b) acting like consultants in identifying the underlying problem, conducting analyses, and developing options, and (c) making recommendations to the top management team of the company.

Each year, a number of companies each submit a real-life strategic problem that they would like a team of students to work on and resolve. The faculty will interface with the companies, narrow down the number of proposals, and determine the most appropriate projects for that year.

Sponsoring companies will allow the student team full access to internal data, as well as arrange the necessary interviews with relevant internal and external resources. They will also pick up all out-of-pocket expenses associated with the project (e.g., travel and accommodation expenses, telecommunication expenses, etc.).

A faculty member will be assigned to each student team. He or she will serve as the advisor/coordinator, as well as the sounding board for the project, but will not be expected to add much intellectual content or value. The project will be initiated, managed, and implemented by the students in a self-organizing manner. Self-governance will be the mode of operation.

Students earn four credits for participating in an intensive four-week course, which will take place during the spring break. The course will require a full-time commitment from the students who decide to take it.
Course Structure

During Term 1 (Fall) or early Term 2 (Winter), students will be presented with the projects for that year. By the end of January, they will be asked to submit their No. 1 and No. 2 choices among the projects. Students will be assigned to different projects by the faculty based on (a) their preferences, and (b) the maximum number of students allowed per project. Thus, it is possible that a student may not be assigned to his or her No. 1 choice. The assignment notice will be posted by the end of January.

The duration of the course is from March 3 through March 28. Students are expected to be at the premises of the sponsoring company for most of the time on weekdays. If the sponsoring company is located quite a distance away from Tokyo, students may also have to spend the weekends at the location of the sponsoring company.

On March 3 (Monday), project teams will meet with representatives of their respective sponsoring companies and determine (a) the exact nature of the problem, (b) the scope of the project, (c) the expected output, and (d) the overall schedule. Each project team should also (a) select a team leader, (b) identify the key issues and required analyses, (c) assign specific tasks to different team members, and (d) draft a flow chart that combines both the list of activities that need to be accomplished and the timing/date by which they should be completed.

Each team will present its recommendations to the top management of the sponsoring company during the final week. The final presentation, however, should not be a one-way communication process. Each team should ascertain the receptivity of top management to the suggested plans of action and the chances of having them actually implemented.
Teaching Method

This course will be based entirely on field research. However, some library research as well as on-line research may be necessary to acquire background information about the industry, the company, the problem at hand, competition, etc., especially at the front-end. Each team is expected to manage the research process on its own, acting like a consultant team to the sponsoring company, which should be treated as the “client.”

Application
A master’s degree holder who has excelled in the entrance examination can be accepted by Guanghua’s four- year program. A bachelor’s degree holder who has excelled in the entrance examination can be accepted by Guanghua’s five-year program. Only students who have excelled in the entrance examination are eligible for the second round exam. The second round examination may be an interview, a written test, or a combination of the two. The students who excel in both the entrance examination and the second round exam can be accepted by Guanghua’s Ph.D. program. A master’s degree holder who is qualified for exemption from the entrance examination can also be recommended for Guanghua’s Ph.D. program.

Entrance requirements:

a) A Master’s degree with at least 1 to 2 years of work experience.

b) Good undergraduate and graduate school grades, strong references, and some research experience, with a clear interest in pursuing a scholarly career at a research oriented university.

c) A GMAT test score of 680 or higher, or a GRE test score of 1300 minimum for verbal and quantitative sections combined and a minimum of 4 for analytical writing. Scores lower than these requirements may be considered on a competitive basis.

d) Applicants who undertook their studies in a language other than English are required to demonstrate English language proficiency by providing TOEFL scores of no less than 600.