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.