COURSE NUMBER: EWMBA295B.1

 

This course is cross-listed with the Full Time MBA Program

 

COURSE TITLE: Venture Capital and Private Equity

 

UNITS OF CREDIT: 3 Units

 

INSTRUCTOR: Jerome S. Engel, C. Sean Foote, Terry Opdendyk

 

E-MAIL ADDRESS: engel@haas.berkeley.edu, foote@haas.berkeley.edu, terry@onset.com

 

CLASS WEB PAGE LOCATION: https://bspace.berkeley.edu/portal

 

MEETING DAY(S)/TIME: Wednesdays, 6:00 – 9:30PM

 

PREREQUISITE(S): It is strongly recommended that EWMBA295A Entrepreneurship be completed prior to taking this course.  If you haven't taken EWMBA295A your background should include business plan development and opportunity assessment.

 

CLASS FORMAT: The course will be organized in four modules:

Module 1: The Private Equity Cycle - Fundraising
The first module of "Venture Capital and Private Equity" examines how private equity funds are raised and structured. These funds often have complex features, and the legal issues involved are frequently arcane. But the structure of private equity funds has a profound effect on the behavior of venture and buyout investors. Consequently, it is as important for the entrepreneur raising private equity to understand these issues as it is for a partner in a fund. The module will seek not only to understand the features of private equity funds and the actors in the fundraising process, but also to analyze them. We will map out which institutions serve to increase the profits from private equity investments as a whole, and which seem designed mostly to shift profits between the parties.

Module 2: The Private Equity Cycle - Investing
The second module of the course considers the interactions between private equity investors and the entrepreneurs that they finance. These interactions are at the core of what private equity investors do. We will approach these interactions through a two-part framework. We first identify the four critical factors that make it difficult for the types of firms backed by private equity investors to meet their financing needs through traditional mechanisms, such as bank loans. We then consider six classes of financial and organizational responses by private equity investors to these challenges. This module will illustrate these frameworks with examples from a wide variety of industries and private equity transactions, including venture capital, buyouts, build-ups, and venture leasing.

Module 3: The Private Equity Cycle - Exiting
The third module of "Venture Capital and Private Equity" examines the process through which private equity investors exit their investments. Successful exits are critical to insuring attractive returns for investors and, in turn, to raising additional capital. But private equity investors' concerns about exiting investments - and their behavior during the exiting process itself - can sometimes lead to severe problems for entrepreneurs. We will employ an analytic framework very similar to that used in the first module of the course. We will seek to understand which institutional features associated with exiting private equity investments increase the overall amount of profits from private equity investments, and which actions seem to be intended to shift more of the profits to particular parties.

Module 4: Applying the Private Equity Model in Other Settings
The final module reviews many of the key ideas developed in the course. Rather than considering traditional private equity organizations, however, the two cases examine organizations with very different goals. Large corporations, government agencies, and non-profit organizations are increasingly emulating private equity funds. Their goals, however, are quite different: e.g., to more effectively commercialize internal research projects or to revitalize distressed areas. These cases will allow us not only to understand these exciting and challenging initiatives, but also to review the elements that are crucial to the success of traditional venture organizations.

 

REQUIRED READINGS:
Venture Capital & Private Equity: A Casebook; Fourth edition, Lerner and Hardymon, Harvard Business School, John Wiley& Sons, Inc. The text will be supplemented by other cases and readings, which will be posted to the courses web site.

 

BASIS FOR FINAL GRADE:

Final Project: An important component of the course is the final paper. Whether one intends to work for a private equity organization or to accept money from one, careful due diligence is essential. Private equity funds jealously guard their privacy, and distinguishing between top-tier organizations and less reputable concerns is not always easy. The final paper offers an opportunity to become better acquainted with the resources available at the Haas School and elsewhere. An important resource in completing the project will be the VentureSource database of private equity financings, which the firm has generously made available to our class.

The final project will be a group assessment of several investment opportunities, documented by an investment memorandum, including detailed financing proposals [Terms Sheets] where appropriate. Alternative projects will be considered. These may range from traditional papers analyzing trends in private equity markets to case studies of particular investments and funds to draft private placement memorandums for new private equity funds. Group projects, or projects linked to those in other courses, will be considered.

 

ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES:
Venture capital is core to our Silicon Valley hi-tech economy and our country’s strong growth over the past two decades. U.C. Berkeley is located in the ‘Mother Lode’ of this very special and unique investment category. This course is an advanced offering for those who intend to seek, or manage, venture capital funding. Accordingly it is appropriate for students who aspire to become CEO’s of entrepreneurial ventures or general partners of venture capital firms.  While we will lightly touch on the broader topics of Private Equity, of which Venture Capital is a segment, the course is focused on Venture Capital.


The course will make extensive use of case studies and guest lecturers. Industry experts, entrepreneurs, venture capitalists and those who advise them, such as investment bankers and lawyers will be frequent guests. We will make every effort to take advantage of the school’s geographic proximity to Silicon Valley.

Over the past thirty years, there has been a tremendous boom in the venture capital. Yet the past decade has seen unparalleled instability and volatility in valuations and funds flows. Despite this, the long-term potential for future development is even more impressive. The U.S. venture model, and particularly the Silicon Valley experience, remains the ‘gold standard’ to which many aspire. Individual investors, so-called ‘Angels’, have also established increased participation in early round seed investing. International funds, and sovereign funds are playing a big role in setting the pace in later stage investing in some of the biggest deals. Secondary markets are emerging in private company securities providing new financing and liquidity options for all participants, including limited partners, executives and entrepreneurs. Understanding these unfolding developments - and their impact on investor behavior - are critical whether one intends to work for, receive money from, underwrite the offerings of, or invest in or alongside venture capital funds.

 

INSTRUCTOR BIOS: 

 

Jerome S. Engel

 

Professor Engel is an internationally recognized expert in innovation, entrepreneurship, and venture capital, lecturing and advising business and government leaders around the world. After a successful business career, he joined the faculty of the University of California at Berkeley in 1991 to found the Lester Center for Entrepreneurship and Innovation, where he currently serves as Senior Fellow and Founding Executive Director Emeritus. At Berkeley he has fostered the creation of an internationally distinguished program that provides entrepreneurship education across the University and its constituent community. Mr. Engel is an Adjunct Professor at the Haas School of Business and instructs in both the School's MBA and Executive Education programs, specializing in Entrepreneurship, Corporate Innovation, New Venture Finance, Venture Capital and Private Equity. He serves on the Advisory Boards of several universities and innovation centers around the world. An author and frequent speaker, he has been cited in the Wall Street Journal, National Public Radio and other global media.

Mr. Engel is active in the private sector. He is a General Partner of Monitor Ventures, LLC, a venture capital firm organized in collaboration with the Monitor Group, a global strategic consulting and private equity management firm. Over his career Mr. Engel has served on the Boards of a number of emerging companies and non-profit organizations. Current Board positions include Adaptive Planning, Jupiter Systems, MedAmerica,  and the National Collegiate Inventors and Innovators Alliance.  He advises major corporations, emerging companies and private equity investors on strategy, innovation, technology commercialization, and capital formation.

From 1979 through 1990, Mr. Engel was San Francisco Bay Area Director of Entrepreneurial Services, a practice group he founded at Ernst & Young, that is globally recognized for the creation of the Entrepreneur of the Year Award. Promoted to Partner in 1982, Mr. Engel specialized in consulting on capital formation, corporate strategy and management organization of entrepreneurial ventures, with an emphasis in software and biotechnology. In 1990, Mr. Engel was appointed Ernst & Young's National Director of Capital Resources, where he directed the firm’s capital formation services for its emerging business clients nationwide. During his career, Mr. Engel helped a number of entrepreneurial firms go public, including Brøderbund, Maxis, Autodesk and Fair Isaac Companies.

From 1992-1995, Mr. Engel served as a member of the Board of Directors of Maxis Corporation, and oversaw the company's financing activities, which included venture capital and a successful initial public offering. In 1995, Mr. Engel was a founding General Partner of Kline Hawkes Capital, a venture capital firm based in Los Angeles that was cited by CalPERS as providing top decile performance. In 1998, Mr. Engel co-founded AllBusiness.com, which he grew to over 150 employees and sold to NBC in March 2000 providing outstanding returns for its investors.

Professor Engel’s awards and recognitions include the National Collegiate Inventors and Innovators Alliance Lifetime Educational Achievement Award, the Global Consortium of Entrepreneurship Centers Award for Outstanding Contributions to Advance the Discipline of Entrepreneurship among others. His most recent research and publications focus on the nature in innovation processes in firms, communities and global networks. He is a CPA and received his undergraduate degree at Penn State University and his master’s degree at the University of Pennsylvania, Wharton School.

 

Sean Foote

Mr. Foote has been a venture capitalist investing in early stage companies for the past 9 years. He is active on the board of directors of Eoplex Technologies, Everyone.net, Integrated Materials Inc., Altierre Corporation and Solaicx. He also serves on the Development Council of Entrepreneurs Foundation, a nonprofit organization that engages high growth companies in corporate citizenship and philanthropic efforts, Silicon Valley Microfinance Network (SVMN), Freedom from Hunger, a nonprofit, international development organization that fights against hunger and poverty, and is founder of Community Promise, an educational focused nonprofit.

Before venture investing, Mr. Foote was a management consultant with Boston Consulting Group, working in a wide range of industries such as telecom, computers, healthcare, banking, and automotive on topics ranging from strategic alliances to Internet strategies. Mr. Foote also worked as a systems engineer for AT&T Bell Laboratories, developing artificial intelligence systems for testing the most complicated telecommunications networks.

Mr. Foote is a lecturer at the University of California's Haas School of Business where he teaches the top ranked venture capital and private equity classes as well as Microfinance.   He has also taught classes on entrepreneurship at the University of Michigan's Business School, University of Virginia's Darden School of Business and University of Pennsylvania's Wharton School of Business

Mr. Foote received his undergraduate degree in Electrical Engineering from the University of Missouri Rolla (1988), and his MBA from the University of Virginia's Darden Graduate School of Business (1993), where he received the Shermett Award granted to the top 3% of students.

Terry Opdendyk

 

Terry Opdendyk has specialized in working with technology based start-ups for more than 30 years. He founded ONSET Ventures, a premier Silicon Valley venture capital firm, in 1984. He is Managing Director and General Partner at ONSET.

 

Prior to launching the firm, Terry was president of VisiCorp, guiding the software publishing company from inception into an industry leader. Early in his career, Terry worked as a technical manager for Hewlett-Packard as a part of the original group of individuals that started HP’s computer business. He later headed Intel Corporation's microcomputer systems business, microprocessor architecture activities, several international ventures and human resources.

 

At ONSET Ventures, Terry maintains a broad spectrum of investment interests including software, communications and new drug delivery technologies. He serves on the boards of both public and private companies, such as Adaptive Planning, Arcot, Blue Vector, NetSeer, Sentilla, and Truviso.

 

One of Terry’s passions is teaching. He works with students each year at the leading business schools, focusing on the fundamentals of building successful businesses. He currently is a Fellow at the Lester Center for Entrepreneurship and Innovation at the Haas School of Business, University of California.

 

Terry received a B.S. from the Michigan State University Honors College and a M.S. from Stanford University.