ENVC - Entrepreneurship and Venture Capital

Academic Year & Term: 2019-20: Term: 7 (Hyderabad) / 8 (Mohali)

Instructor: Francis D. Kim Office Hours: By appointment

Affiliation: Indian School of Business
Harvard Law (Visiting Scholar, Fall 2019)
Email ID: francis_kim@isb.edu

Course Overview:

This course is intended for the PGP students interested in a particular segment of knowledge –
the strategic partnership between high growth start-ups and venture capital – that has been vital
to fueling the disruptive innovation, a profound phenomenon of our time in the global business
landscape. Many of the most successful entrepreneurial companies have been substantially
influenced by professionally managed venture capital in the States, and venture-backed start-
ups are rapidly emerging in Asia.

This course may be ideal for those of us, however, who intends first to land on a professional
career after the ISB year (at consulting, banking, or high-tech, etc.), rather than ones who are
thinking to start up immediately after. There seems this social perspective that, if you are 24,
you should start up now or you will be drifted away from the prospect of becoming an
entrepreneur. You may rethink that safely because that is simply not true; a recent study (MIT,
2018) illustrates that average age of founders at the time of foundations for the top 1% growth
firms in the US is 42, not 24. In other words, great ideas can come at any age, but it takes
experiences to craft your ideas into business possibilities.

Hence, this elective will be offered to you in Terms 7/8 (Hyderabad / Mohali), once after you will
have completed core training (Terms 1-4) and landed on a job (Term 5/6); then, you may have a
degree of freedom to explore the nature of high-tech entrepreneurship better - as your real option at
a later point in your professional career. Not only the course will invite you to think about
underlying forces behind the high-tech entrepreneurship; how you may want to start crafting
ideas while you go through your top professional career over the next few years; but will also
discuss cases wherein to observe how junior consultants, bankers, tech employees have
transformed their professional experiences, to ride on the high-tech entrepreneurship as key
players – be they entrepreneurs or venture capitalists – in this fascinating business landscape.

As such, ENVC will help shift your mode of learning, from acquisition of additional knowledge
to critical thinking with acquired knowledge. The first part is lecture-based, where we will
employ simple analytic frameworks to understand the underlying forces and incentives for
control/ownership behind the ecosystem of Entrepreneurship and Venture Capital. The second
part is the EN:VC Simulation, wherein each team of two student - entrepreneurs will work to
craft the same idea yet into different business possibilities; and student - venture capitalists will
evaluate the worthiness of ideation than earnings as a Micro-VC associate. In Session 9, high
profile Partners from a top VC firm will be invited to referee our simulation at GP Review
on the short-listed business possibilities for both EN and VC student teams, and to network.
Scope of the Course:

This course is a cross-listed elective and intends to offer something for everyone. It fulfills the
disciplines of Entrepreneurship, Finance, and Strategy, and it has NO prerequisite and NO final
exam.

Scope of Entrepreneurship / Business Technology / Strategy: for students interested in the

Entrepreneurship / Business Technology / Strategy, you may be well grounded with the related
concepts and chaotic process in transforming an idea into a venture. Your skill set may be
especially valuable as you lead your team to deal with venture capitalists in the simulation,
wherein you may form an EN team of two. After consultation with General Partners of a top VC,
the course will elect an idea for the year. Each EN team will then work on the same idea yet into
different business possibilities over the simulation. Some of you who elect to form an EN team
will be exposed to diverse opportunities, to assume a role of an Angel Investor / VC’s Limited
Partner as the EN:VC Simulation will reinforce your learning with multiple perspectives
throughout the course. This approach is premised on that ideas are cheap unless they are crafted,
and that the learning opportunity is rare to cross-examine processual variations in crafting an idea.

Scope of Finance: for students less familiar with Finance, be assured that there is NO prerequisite
that stands between you and the great performance in this course. A valuation method we hire is
very simple and self- containing that you will master the necessary skills as we go over all the
basics in class. Be noted that the focus of this course is not to putting a number to a venture with
unfound assumptions but rather geared to developing your insights on qualitative features of
early-stage startups (a key quality required to be a Micro-VC); that is, to consider a variety of tacit
factors: the founders, the team, the market, firm strategy, and other intangible issues.

At the end of the day, however, how should we perceive the worthiness of an idea and choose to
invest? To accomplish learning in this context, the course will not only explore the working
theories and practices by partners in top Micro-VC firms; provide the simulation for you to
practice investing across different business possibilities that grew from the same idea; but also
hold a GP review session from partners of a top VC to hear the real rationales behind such
decisions.

For students in the Finance track, you may learn what it takes to bridge the standard knowledge
and experience in the finance sector with the required skill set for the VC industry in your future.
The in-person session with high-profile partners from a top VC will offer real insights in bridging.
As you identify yourself (in expectation or preference) as a venture capitalist than an entrepreneur
down the road of your career, you may elect to form a VC team of two in the EN:VC Simulation.

Learning Goals:

• Articulate the strategic partnership between entrepreneurs and venture capitalists.

• Practice the negotiation dynamics between entrepreneurs and venture capitalists.
• Apply knowledge as one sharp point – a business decision that shapes a definitive path
• In addition to the course learning goals listed above, students should expect to develop the
following PGP goal of ISB by the end of the course: Critical and Integrative Thinking
- Clearly identifies the problem / issue & Develops own perspective /position
Teaching Methods & Readings:

The course uses a mixture of short lectures on frameworks, select case discussions, moderate
assignments, and simulation exercises. The course pack will provide reading materials for
each session, and the schedule of reading, unless specified in the course schedule section
below. NO textbook or software is required.

Attendance Policy:
http://atrium:14825/Programmes/PGP/ASA/StudentManual/Program
me- Administration/Pages/Attendance-Seating.aspx

Grading:
Grades will be based on:

Lecture
1) A sit-in exam (scheduled in the last class) 25%
2) Two short memos on two cases 20%
3) Attendance 5%

Simulation
4) Three short memos on the simulation 30% - Group
5) Participation in the simulation 10%
6) Performance in the simulation 10% - Group

Extra
7) Extra efforts 5% (maximum)

Grading will follow the ISB’s grade distribution for elective courses. We will grade each
grading component of this course on the curve. To be more specific,

1) A sit-in exam (Course work code - 4N): This sit-in is based on the lectures and will hold
for the second hour in Session 10. There will be no separate final exam.

2) Two short memos on two cases (Course work code - 4N): There are only two case
discussions in the course. Submit your memo 48 hours before each session for which
the case is scheduled. Each submission has two parts to it. First, elect a question from
the posted questions and answer it in 200 words. Second, define your own question for
the case and answer the question in 200 words, explaining why it matters to the case.

3) Attendance: Punctuality on each lecture will be marked 1/0 sharp at the start.

4) Three short memos on the simulation (Course work code - 4N): To be detailed in the
simulation. A pair of 2 will draft these short memos together and within-team discussions
are permitted.

5) Participation in the simulation: Your participation can take a form of either writing
comments on the private blog space or sharing your thoughts in class.
 6) Performance in the EN:VC simulation (Course work code - 4N): This simulation is
designed for you to play a role as either an entrepreneur or a venture capitalist at the
outset. Your performance will be evaluated primarily by the market principle, to be
detailed in the simulation.

Up to two Citations for the Best Performer may be awarded to an entrepreneur group
and/or a venture capitalist, based on 5) + 6).

7) Extra efforts: Opportunities for extra points may be announced during the course.

Please refer to the following link for coding scheme for all course work:
http://atrium:14825/Programmes/PGP/ASA/StudentManual/ISB-
HonourCode/Pages/CodingschemeforALLcoursework.aspx

Course Schedule:

Session 1: Ecosystem of EN:VC

a. Lecture – Introduction
• Video in class – Let Your Ideas Run Naked (Sandy Jen of Honor, 2017)
• Introduce analytic frameworks for the course
b. Simulation 1
• Introduce the EN:VC simulation for the 2019 – 2020 class participants

Session 2: A Perspective of Micro-VC on the Startup’s Proprietary Technology and P/MF

a. Lecture – Three “Laws” & Value Stack
b. Simulation 2
• Discuss the Product/Market Fit / Form an EN or VC team of two classmates
c. Suggested Reading
• Product/Market Fit by Marc Andreesen
• Experimenting in the Entrepreneurial Venture (HBS Core Curriculum Reading)

Session 3: Decision Analysis of VC on the Identification of EN

a. Lecture – Decision Analysis / Application of Three “Laws”
• Decision analysis of the VC in identifying the “Thunder Lizards”
• Application of three “laws” in high-tech ecosystem to the ideation process
b. Simulation 3
• Ideation in class
c. Suggested Reading
• Experimenting in the Entrepreneurial Venture (HBS Core Curriculum Reading)
Session 4: Power Law in the Pattern of EN:VC
a. Lecture – Startup Valuation I
• Basics of Staged Financing – Valuation w/o Dilution
b. Simulation 4
• Presentation by EN / Evaluation by VC

Session 5: Micro-VC in Search of EN for the “Radioactive” Growth

a. Case – Floodgate: On the Hunt for Thunder Lizards (2017, HBS # 617044)
• Why would the most promising entrepreneurs want to work with Floodgate over
all the other early-stage funding options they have available (and how can
Floodgate identify them)?
• Why would prominent LPs decide to allocate capital to Floodgate above all the
other venture-capital funds (and asset classes) they could support?
b. Simulation 5
• Instruction will be shared in the previous simulation

Session 6: Pivoting
a. Lecture – Startup Valuation II
• Basics of Real Options in the Venture
• Basics of Staged Financing – Valuation w/o Dilution
b. Simulation 6
• Instruction for this simulation will be distributed in the previous simulation

Session 7: VC Ownership in the Growth of EN

a. Lecture – Startup Valuation III
• Ownership consideration in the VC stakes
b. Simulation 7
• Instruction for this simulation will be distributed in the previous simulation

Session 8: Dual Class Structure – Entrepreneurial Control over Dilution in the EN

a. Case – Uber vs. Lyft: Who’s at the Wheel? (2019, Harvard Law School Forum)
Case – Facebook, Inc.: A Look at Corporate Governance (2018, UV)
b. Simulation 8
• Instruction for this simulation will be distributed in the previous simulation
c. Suggested Reading
• Reexamining dual-class stock (Govindarajan & Srivastava 2018, HBSP Product #
BH903)

Session 9: The GP Meeting Simulation – Refereed by Invited GP of a Top VC Firm

a. Details will be announced in the previous week

Session 10: Takeaways

a. A simple in-class exam