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University of Colorado-BoulderPRIVATE Leeds School of BusinessESBM 4570Sanjai BhagatEntrepreneurial FinanceOffice: KOBL S431Fall 2019Office Hours: M (3:15 pm – 5:15 pm)TuTh 3:30 pm – 4:45 pm, CASE E230sanjai.bhagat@colorado.eduI.Course ObjectiveThe objective of the course is to provide the student with a state-of-the-art understanding of valuation of small and mid-cap public and private firms, and the economics of contracts as it applies to new venture finance,financing sources (venture capital, crowdfunding, other); and exit strategies (initial public offering, other). II.Course MaterialsCourse materials consist of Entrepreneurial Finance (Stanford University Press, by J.K. Smith and R.L. Smith and R.T. Bliss, 2011) and Damodaran On Valuation (Second Edition, Wiley Online, by A. Damodaran, 2015), ()and scholarly journal articles and working papers. Lecture notes/overheads can be accessed from my home-page: check your ---@colorado.edu email frequently for emails from me regarding updates to class lectures, recent relevant articles in the financial media, and class announcements.Articles from the Wall Street Journal will be used to motivate some of the class discussion. Leeds students have free online access to the Wall Street Journal. Outline and ReadingsValuationA. Damodaran, “Valuation Approaches and Metrics,” 2005, Foundations and Trends in Finance. Valuation Chapter 1, Introduction to Valuation. [ “Books & Support” “Damodaran On Valuation (Second Edition)” “Website for book”]Valuation Chapter 2, Estimating Discount Rates. Chapter 3, Estimating Cash Flows.Valuation Chapter 4, Estimating Growth and Terminal Value.Valuation Chapter 6, Firm Value DCF Models.Valuation Chapter 9, Firm and Enterprise Value Multiples.Valuation Chapter 12, The Value of Intangibles.Valuation Chapter 14, The Value of Liquidity.Entrepreneurial Finance Chapters 8, 9, 10, New Venture Valuation.Damodaran, Aswath, Valuing Young, Start-Up and Growth Companies: Estimation Issues and Valuation Challenges (June 12, 2009). Available at SSRN: or , NYU.Damodaran, A., Valuing Users, Subscribers and Customers, 2018, NYU.ValuingNegativeEarningsGornall, Will and Strebulaev, Ilya A., Squaring Venture Capital Valuations with Reality (April 2019). Journal of Financial Economics forthcoming. Available at SSRN: . Bhagat, "Real Options in the Telecommunications Industry," in Real Options: The NewInvestment Theory and its Implications for Telecommunications Economics (1999), Kluwer Academic Publishers, Boston, MA. Options Real OptionsL. Courteau, J.L. Kao and T. O’Keefe, “Gains to Valuation Accuracy of Direct Valuation Over Industry Multiplier Approaches,” 2003, University of Alberta working paper. [ValuationAccuracy.pdf]A. Schreiner and K. Spremann, “Multiples and their Valuation Accuracy,” Yale University working paper, 2007.J. Liu, D. Nissim, and J. Thomas, “Is Cash Flow King in Valuations?” Financial Analysts Journal 63, Number 2, 2007.H.J.Seppanen, “Financial Statement Information and Evaluation of Newly Listed High-Technology “Nano Caps”” Aalto University (Finland) working paper, 2010.S. Sievers and J. Klobucnik, “Valuing High Technology Growth Firms,” Journal of Business Economics, December 2013, Volume 83, Issue 9, pp 947–984. , Vikas and Barber, Brad M. and Cheng, Si and Hameed, Allaudeen and Yasuda, Ayako, Private Company Valuations by Mutual Funds (December 21, 2018). Available at SSRN:?. S. Armstrong, A. Davila, G. Foster, and J.R.M. Hand, “Market-to-revenue multiples in public and private markets,” Australian Journal of Management 36, 15-57, 2011. Goedhart, Tim Koller, and David Wessels. February 2016.Private Equity1. S. N. Kaplan and P. Stromberg, “Leveraged Buyouts and Private Equity, NBER paper, 2008. . Steven J. Davis , John Haltiwanger , Ron S. Jarmin , Josh Lerner and Javier Miranda, “Private Equity and Employment,” US Census Bureau Center for Economic Studies Paper No. CES-WP-08-07R, 2014. Private Equity3. Paul Gompers, Steven N. Kaplan and Vladimir Mukharlyamov, “What Do Private Equity Firms Do?” 2014, Harvard University working paper.4. Paglia, John and Harjoto, Maretno Agus, The Effects of Private Equity and Venture Capital on Sales and Employment Growth in Small and Medium Sized Businesses (June 5, 2014). Journal of Banking and Finance, Vol. 47, pp. 177-197, 2014.5. J. Haltiwanger, R. Jarmin, J. Miranda, “Who Creates Jobs?” Review of Economics and Statistics 95, May 2013, 347-361.Financial ContractingEntrepreneurial Finance Chapters 11, 12, 13. VentureCapital-Yearbook S. N. Kaplan and P. Stromberg, "Venture Capitalists as Principals: Contracting, Screening, and Monitoring," 2001, American Economic Review 91(2 May), 426-430. ImpliedReturn SampleCapitalizationTable S.N. Kaplan and Per Stromberg. "Financial Contracting Theory Meets The Real World: An Empirical Analysis Of Venture Capital Contracts," Review of Economic Studies, 2003, v70(2,Apr), 281-315.S. N. Kaplan, B. A. Sensoy, and P. Stromberg, “Should Investors Bet on the Jockey or the Horse? Evidence from the Evolution of Firms from Early Business Plans to Public Companies,” Journal of Finance 64, 2009, 75-115.P.A.Gompers,W.Gornall, and S.N.Kaplan etal., How do venture capitalists make decisions? Journal of Financial Economics, 2019.. Bengtsson and B. A. Sensoy, “Changing the Nexus: The Evolution and Renegotiation of Venture Capital Contracts,” Journal of Financial and Quantitative Analysis / Volume 50 / Issue 03 / June 2015, pp 349-375.DOI:? O. Bengtsson and B. A. Sensoy, “Investor Abilities and Financial Contracting: Evidence from Venture Capital,” Journal of Financial Intermediation 20, 477-502, 2011.Brian Broughmana and Jesse Fried, “Renegotiation of cash flow rights in the sale of VC-backed firms,” Journal of Financial Economics 95, Issue 3, March 2010, Pages 384-399.Bernstein, Shai and Giroud, Xavier and Townsend, Richard R., The Impact of Venture Capital Monitoring (April 16, 2014). Journal of Finance, Forthcoming. Available at SSRN: or , Paul A. and Gornall, Will and Kaplan, Steven N. and Strebulaev, Ilya A., How Do Venture Capitalists Make Decisions? (June 27, 2016). Harvard Business School. Available at SSRN: , Yael V. and Serrano, Carlos J. and Ziedonis, Rosemarie Ham, Patent Collateral, Investor Commitment, and the Market for Venture Lending (October 7, 2014), Rice University. Available at SSRN: or . Davis, A. Morse, X. Wang, The Leveraging of Silicon Valley: Venture Debt in the Innovation Economy, April 2018.E. Epstein, Why Governance Matters for Your Startup, April 2018, Stanford University.Coyle, John F. and Green, Joseph, The SAFE, the KISS, and the Note: A Survey of Startup Seed Financing Contracts (August 13, 2018). 103 Minnesota Law Review Headnotes 42 (2018); UNC Legal Studies Research Paper. Available at SSRN:? Financing SourcesEntrepreneurial Finance Chapter 14.S. Bhagat, “Why Do Venture Capitalists Charge Such High Discount rates?”Journal of Risk Finance, 2014. venture-discount-rates.doc VentureCapital.pptDenes, Matthew and Wang, Xinxin and Xu, Ting, Financing Entrepreneurship: Tax Incentives for Early-Stage Investors (September 1, 2019). Available at SSRN:?. Nanda and M. Rhodes-Kropf, “Investment Cycles and Startup Innovation,” Harvard University working paper, 2011.Kerr, William R. and Nanda, Ramana, Financing Innovation (November 5, 2014). Harvard Business School Entrepreneurial Management Working Paper No. 15-034. Available at SSRN: or , J. Piet and Korreck, Sabrina, A Systematic Review and Research Agenda on Incubators and Accelerators (January 2018). Available at SSRN:?, University of Osnabrueck.Bernthal, Brad, Investment Accelerators (August 11, 2015). Silicon Flatirons Center, 2015. Available at SSRN:?, University of Colorado Law School.Hallen, Benjamin L. and Bingham, Christopher and Cohen, Susan, Do Accelerators Accelerate? If So, How? The Impact of Intensive Learning from Others on New Venture Development (April 2018). Available at SSRN:?, University of Washington.Fehder, Daniel C. and Hochberg, Yael V., Accelerators and the Regional Supply of Venture Capital Investment (September 19, 2014). Available at SSRN:?, MIT.CrowdfundingRau, P. Raghavendra, Law, Trust, and the Development of Crowdfunding (December 1, 2017). Available at SSRN: , University of Cambridge.Giga, Aleksandar, Firm Financing Through Equity Crowdfunding (June 2017). Available at SSRN: or , University of Southern California.Armour, John and Enriques, Luca, The Promise and Perils of Crowdfunding: Between Corporate Finance and Consumer Contracts (September 11, 2017). ECGI - Law Working Paper No. 366/2017. Available at SSRN: or , University of Oxford.Knyazeva, Anzhela and Ivanov, Vladimir I., Soft and Hard Information and Signal Extraction in Securities Crowdfunding (November 17, 2017). Available at SSRN: , U.S. Securities and Exchange Commission.Belleflamme, Paul and Omrani, Nessrine and Peitz, Martin, The Economics of Crowdfunding Platforms (March 20, 2015). Available at SSRN: or , Université Catholique de Louvain.Agrawal, Ajay and Catalini, Christian and Goldfarb, Avi, Are Syndicates the Killer App of Equity Crowdfunding? (February 25, 2015). MIT Sloan Research Paper No. 5126-15; Rotman School of Management Working Paper No. 2569988. Available at SSRN: or , Anja and Goldfarb, Avi and Bonatti, Alessandro and Ghose, Anindya and Goldstein, Daniel G. and Lewis, Randall A. and Rao, Anita and Sahni, Navdeep S. and Yao, Song, How Do Firms Make Money Selling Digital Goods Online? (March 6, 2014). London Business School. Available at SSRN: or , Joshua and McMullin, Jeff L., Economic Consequences of Risk and Ability Disclosures: Evidence From Crowdfunding (June 25, 2018). Available at SSRN:?, Stefano and Correia, Maria M. and Tamayo, Ane HYPERLINK "" , Does Consumer Protection Enhance Disclosure Credibility in Reward Crowdfunding? (July 3, 2018). Available at SSRN:?. Jagtiani and C. Lemieux, FinTech Lending, 2018, Federal Reserve Bank.Berg, Tobias and Burg, Valentin and Gombovi?, Ana and Puri, Manju, On the Rise of FinTechs – Credit Scoring Using Digital Footprints (October 31, 2018). Michael J. Brennan Irish Finance Working Paper Series Research Paper No. 18-12. Available at SSRN:?, Gordon and Gupta, Diwakar and Martin, Paola, Referral Timing and Fundraising Success in Crowdfunding (June 8, 2019). Available at SSRN:?ère, Jean-Fran?ois and Gehman, Joel, The Legitimacy Threshold Revisited: How Prior Successes and Failures Spill Over to Other Endeavors on Kickstarter (March 22, 2019). Academy of Management Journal, Forthcoming. Available at SSRN:? Chiesa, Carolina and Dekker, Erwin, Crowdfunding in the Arts: Beyond Match-Making on Platforms (March 18, 2019). Available at SSRN:?, Sandra Isabel and Sousa, Miguel and Brand?o, Elísio Fernando Moreira, Drivers of Fundraising Success in Equity Crowdfunding (March 17, 2019). Available at SSRN:?, Jascha-Alexander and Siering, Michael, Crowdfunding Success Factors: The Characteristics of Successfully Funded Projects on Crowdfunding Platforms (April 4, 2015). Proceedings of the 23rd European Conference on Information Systems (ECIS 2015); Muenster, Germany 2015. Available at SSRN:? Exit StrategiesEntrepreneurial Finance Chapter 16.Michelle Lowry, Roni Michaely and Ekaterina Volkova, “Initial Public Offerings: A synthesis of the literature and directions for future research,” March 2017.IPO.ppt R. Aggarwal, S. Bhagat and S. Rangan, HYPERLINK "" “Impact of Fundamentals on IPO Valuation,” Financial Management, 2009, 253-284. IPO Valuation.pptIPO Valuation: The International Evidence, S. Bhagat, J. Lu, and S. Rangan, in The Oxford Handbook of IPO Valuation, Oxford University Press, 2018.. Ewens and J. Farre-Mensa, The Deregulation of the Private Equity Markets and the Decline in IPOs, 2018, CalTech.Craig Doidge, Kathleen M. Kahle, G. Andrew Karolyi, René M. Stulz, Eclipse of the Public Corporation or Eclipse of the Public Markets?, 2018, Cornell University.Chernenko, Sergey. Lerner, Josh. Zeng, Yao. “Mutual Funds as Venture Capitalists? Evidence from Unicorns.” SSRN:? . October 2017, Harvard University.Agarwal, Vikas and Barber, Brad M. and Cheng, Si and Hameed, Allaudeen and Yasuda, Ayako, Private Company Valuations by Mutual Funds (December 21, 2018). Available at SSRN:? TopicsCatalini, Christian and Gans, Joshua S., Some Simple Economics of the Blockchain (September 21, 2017). Rotman School of Management Working Paper No. 2874598; MIT Sloan Research Paper No. 5191-16. Available at SSRN: or , Jonathan and Wright, Aaron, Blockchain-Based Token Sales, Initial Coin Offerings, and the Democratization of Public Capital Markets (October 4, 2017). Cardozo Legal Studies Research Paper No. 527; University of Tennessee Legal Studies Research Paper No. 338. Available at SSRN: or , Dmitri and Sahdev, Navroop K., To ICO or not to ICO – Empirical Analysis of Initial Coin Offerings and Token Sales (July 6, 2018). Available at SSRN:?, Sabrina and Niessner, Marina and Yermack, David, Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales (June 2018). NBER Working Paper No. w24774. Available at SSRN:?, Campbell R., Cryptofinance (January 14, 2016). Available at SSRN: or , Duke University.Werbach, Kevin D., Trust, But Verify: Why the Blockchain Needs the Law (August 1, 2017). Berkeley Technology Law Journal, Forthcoming. Available at SSRN: , Paul P. and Rennertseder, Kathrin and Schr?der, Henning, Token Offerings: A Revolution in Corporate Finance? (March 5, 2019). Available at SSRN:?, Tobias and Burg, Valentin and Gombovi?, Ana and Puri, Manju, On the Rise of FinTechs – Credit Scoring Using Digital Footprints (July 15, 2019). Michael J. Brennan Irish Finance Working Paper Series Research Paper No. 18-12. Available at SSRN:?, Anjan V., Fintech and Banking: What Do We Know? (July 30, 2019). Journal of Financial Intermediation, 2019. Available at SSRN:?. Bhagat, , Buvaneshwaran and Yerramilli, Vijay, Outside Directors at Early-Stage Startups (January 21, 2019). Available at SSRN:? Capital Alternative SourcesRule of LawIV.Course ScheduleAugust 27, 29 Introduction, ValuationSeptember 3, 5ValuationSeptember 10, 12Valuation (Proposal due: September 10)September 17, 19ValuationSeptember 24, 26ValuationOctober 1, 3Financial ContractingOctober 8, 10Financial ContractingOctober 15, 17Financial Contracting (Paper first-half due: October 15)October 22, 24Venture FinancingOctober 29, 31Venture Financing (Midterm Exam: October 31)November 5, 7Venture FinancingNovember 12, 14CrowdfundingNovember 19, 21Exit Strategies November 26, 28Thanksgiving Fall BreakDecember 3Exit StrategiesDecember 5, 10Student Pitches(Paper Due: December 5)December 12Review for Final ExamDecember 18Final Exam, 4:30 pmV.Course PoliciesGradingThe grade breakdown is as follows:ItemWeightA.Class quizzes20%B.Term Paper (proposal, due: September 10)5%C. Term Paper (first half, due: October 15)15%D.Midterm Exam (October 31) 15%E.Term Paper (full, due: December 5) 15%F.Term Paper (pitch)10% G.Final Exam (December 18)20%? No screen policy. Please put your laptop/ipad/smart-phone in your backpack. This class policy has been motivated by the following research findings:Faria Sana, Tina Weston, Nicholas J. Cepeda, “Laptop Multitasking Hinders Classroom Learning for Both Users and Nearby Peers,”?Computers & Education, Volume 62, 2013, Pages 24-31.? Payne Carter, Kyle Greenberg, Michael S. Walker, “The Impact of Computer Usage on Academic Performance: Evidence from a Randomized Trial at the United States Military Academy,”?Economics of Education Review, Volume 56, 2017, Pages 118-132,?. The What Works Clearinghouse has reviewed this study and given it its highest rating:? A.?Mueller and Daniel M. Oppenheimer, “The Pen Is Mightier Than the Keyboard,”?Psychological Science,?Vol 25, Issue 6, pp. 1159 - 1168. First published date: April-23-2014.?? You are encouraged to take notes with pen and paper. Class overheads will be made available to you before class; you can print these and take notes on them if you wish.? If you have an University approved reason for using your laptop/ipad in class, please see me.? Class quizzes will be given unannounced. Please bring your iClicker to every class.? The class will be conducted in a professional manner: Students and the instructor are expected to be prepared for each class, and behave professionally in the class. B.Proposals for the term paper are due on September 10, 2019, before the start of class. The proposal should answer the following two questions: What will the paper be about?Why is this topic interesting and important? You should also include a list of at least four academic papers or book chapters that you intend to read as background for your paper. References should be cited properly: author(s) name(s), title of paper, journal name and volume, journal page numbers, year of publication; for unpublished papers: the web-link, author(s) name(s), title of paper, and university affiliation of the authors should be noted. The proposal should be no more than a page.C, E. The first half of the term paper is due on October 15, 2019, before the start of class. The term paper draft should be at least ten pages long, and include the following: What is the paper about? Why is this interesting and important to study/read? A critical survey of the literature. Outline of the original analysis that would be of interest to somebody in the real world: an investment banker, venture capitalist, or entrepreneur. References that includes at least four academic papers or book chapters.The full term paper is due on December 5, 2019.Student (elevator) pitches are scheduled for December 5, and 10, 2019. The paper can be on any topic that will be covered in the course. The paper should include a critical survey of the literature and some original analysis that would be of interest to somebody in the real world: an investment banker, venture capitalist, or entrepreneur. The paper (including exhibits) should be between 20 and 25, double-spaced pages (twelve-point font, one-inch margin all-around). ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------On your paper please note the following:On my honor, as a University of Colorado at Boulder student, I have neither given nor received unauthorized assistance on this paper.A Note on Academic Honesty & Plagiarism: The development of the Internet has provided students with historically unparalleled opportunities for conducting research swiftly and comprehensively. The availability of these materials does not, however, release the student from appropriately citing sources where appropriate; or applying standard rules associated with avoiding plagiarism. Please see . 4 minutes to 5 minutes elevator pitch should cover the following:TopicWhy is this topic of interest to somebody in the real world: an investment banker, venture capitalist, or entrepreneur.Your analysis (3 to 4 minutes).Your conclusions.Please observe the following during your elevator pitchOverheads: No more than three slides.Please place your name card on the podium when you are presenting.Guidelines for the Term Paper Suggested order for the sections:PRIVATE Cover PagePaper Title, Student Names, Course, DateExecutive SummaryNo more than one page. The most important part of your paper! Briefly explain what the paper is about, why this is an interesting and important topic, and your main findings/conclusions. Consider an entrepreneur, investment banker, investor, or venture capitalist as your primary reader of this page.IntroductionWhat is the paper about?Motivation: Why is this interesting and important to study/read?Overview of the paper.(Main Body)Please consider using sub-sections to better organize your paper, and improve its readability.Please check the transition between paragraphs.(Footnotes on same page.)Summary and ConclusionsExhibits (Tables, Graphs, etc.)Captions and legends in the exhibits should make them self-explanatory. Cite data sources.References____________________________________________________________________Check for grammar and spelling.All arguments/assertions should be supported using:logical constructs, and/ortheoretical considerations (cite references), and/orprevious empirical evidence (cite references).Paper should be revised by you at least four times over a period no less than a week.D and G.The exams will consist of essay-type questions, and will be closed-book, closed-notes, and in-class. The exams will be based on study questions that will be handed out at least a week before the exam.Readings We will not be covering all the readings in class. I will indicate in class the readings I will be covering in detail. The readings above would be relevant if you decide to write your term paper on the particular topic.You are advised to read the “critical portions” of the assigned readings for a particular class before that class. The critical portions of a reading include the abstract, introduction, summary/conclusions of the paper. You might wish to read the main body of the paper after we have discussed it in class.Bloomberg dataThe Bloomberg terminals in Room E-370 have a wealth of financial data. Some of this can be used for the valuation part of your term paper. Having a competency with the Bloomberg terminal and related data makes you very attractive to future employers. Please go to Grading GuidelinesIn March 2019, the Leeds faculty adopted the grading guidelines listed below effective fall 2019. These guidelines are a community norm at Leeds, not a forced curve or mandated distribution. They embody the faculty’s consensus about fairness, level of difficulty, and consistency in the classroom experience across course sections and levels at Leeds.Average course grades should not exceed:3.0 (1000‐2000 level courses)3.0 (3000 level courses)3.2 (4000 level courses)Accommodation for DisabilitiesIf you qualify for accommodations because of a disability, please submit your accommodation letter from Disability Services to your faculty member in a timely manner so that your needs can be addressed. Disability Services determines accommodations based on documented disabilities in the academic environment. Information on requesting accommodations is located on the Disability Services website. Contact Disability Services at 303-492-8671 or dsinfo@colorado.edu for further assistance. If you have a temporary medical condition or injury, see Temporary Medical Conditions under the Students tab on the Disability Services website.Classroom BehaviorStudents and faculty each have responsibility for maintaining an appropriate learning environment. Those who fail to adhere to such behavioral standards may be subject to discipline. Professional courtesy and sensitivity are especially important with respect to individuals and topics dealing with race, color, national origin, sex, pregnancy, age, disability, creed, religion, sexual orientation, gender identity, gender expression, veteran?status, political affiliation or political philosophy. Class rosters are provided to the instructor with the student's legal name. I will gladly honor your request to address you by an alternate name or gender pronoun. Please advise me of this preference early in the semester so that I may make appropriate changes to my records. For more information, see the policies on classroom behavior and the Student Code of Conduct.Honor CodeAll students enrolled in a University of Colorado Boulder course are responsible for knowing and adhering to?the Honor Code.?Violations of the policy may include: plagiarism, cheating, fabrication, lying, bribery, threat, unauthorized access to academic materials, clicker fraud, submitting the same or similar work in more than one course without permission from all course instructors involved, and aiding academic dishonesty. All incidents of academic misconduct will be reported to the Honor Code (honor@colorado.edu);?303-492-5550). Students who are found responsible for violating the academic integrity policy will be subject to nonacademic sanctions from the Honor Code as well as academic sanctions from the faculty member. Additional information regarding the Honor Code academic integrity policy can be found at the?Honor Code Office website.Sexual Misconduct, Discrimination, Harassment and/or Related RetaliationThe University of Colorado Boulder (CU Boulder) is committed to fostering a positive and welcoming learning, working, and living environment. CU Boulder will not tolerate acts of sexual misconduct intimate partner abuse (including dating or domestic violence), stalking, protected-class discrimination or harassment by members of our community. Individuals who believe they have been subject to misconduct or retaliatory actions for reporting a concern should contact the Office of Institutional Equity and Compliance (OIEC) at 303-492-2127 or cureport@colorado.edu. Information about the OIEC, university policies, anonymous reporting, and the campus resources can be found on the OIEC website. Please know that faculty and instructors have a responsibility to inform OIEC when made aware of incidents of sexual misconduct, discrimination, harassment and/or related retaliation, to ensure that individuals impacted receive information about options for reporting and support resources.Religious HolidaysCampus policy regarding religious observances requires that faculty make every effort to deal reasonably and fairly with all students who, because of religious obligations, have conflicts with scheduled exams, assignments or required attendance.December 5 and 10: Students will be presenting their elevator pitches.5 minutes elevator pitch should cover the following:TopicWhy is this topic of interest to somebody in the real world: an investment banker, venture capitalist, or entrepreneur.Your analysis (should take most of the 5 minutes).Your conclusions.Please rehearse your presentation at home. Please be cognizant of your 5 minutes allotted time.Please place your name card on the podium when you are presenting. No overhead slides (you will not have access to overhead slides in an elevator).Attire: Professional business attire, please.For December 3, we will cover the main insights from: ? Raising Capital Alternative SourcesCorreia, Sandra Isabel and Sousa, Miguel and Brand?o, Elísio Fernando Moreira, Drivers of Fundraising Success in Equity Crowdfunding (March 17, 2019). Available at SSRN:?, Jascha-Alexander and Siering, Michael, Crowdfunding Success Factors: The Characteristics of Successfully Funded Projects on Crowdfunding Platforms (April 4, 2015).Tech-GovernanceVenugopal, Buvaneshwaran and Yerramilli, Vijay, Outside Directors at Early-Stage Startups (January 21, 2019). Available at SSRN:? the online FCQ in your classroomRemind students to visit?colorado.courseeval?using a phone, tablet or computer. They will need to authenticate using their campus user ID. Instructors and TAs must not be present in the classroom while students complete their FCQs.The Final Exam (December 18, 2019; 4:30 pm) will consist of two questions drawn from these. It is expected that the answer to each question would take about 30 minutes.The exam is closed book and closed notes. You will write the answer on the exam itself. You only need a pen for the exam.Describe the various methods of estimating the cost of equity. Discuss the advantages and disadvantages of the various methods of estimating the cost of equity. [value-1.ppt; slides 45-48, slides 6-7]Describe the stable growth, 2-stage growth, and 3-stage growth models. Discuss when each model is appropriate to use. [value-1.ppt; slides 77-80]Describe and discuss how you would value a company that currently has negative earnings. [value-2.ppt; slides 185-186; example in ValuingNegativeEarnings]What is the relation between revenue and free cashflow to equity? (value1.ppt, slide 59)(a) With the help of a schematic diagram, please explain the relationship between general partners, limited partners, and portfolio companies. (b) “Venture capitalists are too focused on their exit.” Using the above schematic diagram, please explain why this might be so. []Gompers, Gornall, Kaplan (2019) and Kaplan and Stromberg (2001, 2003) and note that VC contracts have the following features: antidilution rights, vesting and non-compete clauses. Describe these contractual features. What is the economic justification for including it in a VC contract?? [VC-Contracting.ppt](a) Bengtsson and Sensoy (2009) note that more experienced VCs are less likely to seek downside protection. What is meant by downside protection in a VC contract? Why do more experienced VCs seek less downside protection?(b) Why do VCs usually take convertible preferred stock rather than common stock in the companies they invest in?(c)? As a founder in a company you might get angel investment. It is wise to treat angel (and other) investors fairly. How would you ensure the securities the angel investor receives in your company are fairly priced??? [VC-Contracting.ppt] (a) Why do venture-capitalists use such high discount rates? [venture-discount-class.doc] [“Why Do Venture Capitalists Charge Such High Discount rates”](b) What is the relation between insider ownership and an IPO’s value as discussed by Aggarwal, Bhagat and Rangan (2009). [IPO Valuation.ppt]Why are initial public offerings underpriced? Please be sure to discuss the theories based on a.???????? asymmetric information (both when the issuer is more informed than the investor, and the investors are more informed than issuer), b.???????? theories based on symmetric information, and c.???????? theories focusing on the allocation of IPO shares.[IPO.ppt] [Lowry et al (2017)](a) Why do we have less IPOs today than, say, in the 1990s?? [Raising Capital Alternative Sources.] (Ewens and Farre-Mensa (2018))(b) Why would a privately-held successful tech startup with, say, $2 million in revenue, care about its corporate governance? [Tech-Governance, slides 2,4,5]a) What are the rewards-based crowdfunding success factors as discussed by Koch and Siering (2015). Raising Capital Alternative Sourcesb) What are the equity-based crowdfunding success factors as discussed by Correia, et al (2019). NEWS EXCLUSIVE BUSINESSWeWork Weighs Slashing Valuation by More Than Half Amid IPO SkepticismCEO Neumann met with SoftBank’s Son last week to discuss more investmentBy Maureen Farrell and Eliot BrownUpdated Sept. 5, 2019 11:22 am ETWeWork’s parent company is weighing a dramatic reduction in its valuation as it aims to go public while facing widespread skepticism over its business model and corporate governance, according to people familiar with the matter.We Co. is considering putting a price tag on its IPO that would value it somewhere in the $20 billion range, potentially at the low end, these people said, less than half of the $47 billion mark where it last raised private capital.What WeWork's WorthSUBSCRIBEAdam Neumann, We’s co-founder and chief executive, flew to Tokyo last week to meet one of the company’s biggest investors, SoftBank Group 9984 1.96% Chief Executive Masayoshi Son, and members of his team, the people said. There, they discussed the possibility of an additional infusion of capital, multiple people briefed on the meeting said.Among the possibilities they discussed was SoftBank serving as an anchor investor in the IPO by buying a significant portion of the roughly $3 billion to $4 billion the company is expected to raise. They also discussed whether SoftBank might invest a chunk of money that would allow We to delay its IPO until 2020, people familiar with the conversations said.It’s unclear whether SoftBank will ultimately put more money into the company, these people said. Some of the conglomerate’s key investors have previously balked at providing more money to We, people familiar with the matter have said.Big Growth and Big LossesWe Co. gave detailed financials in its IPO filing in August.RevenueFirst half$2.0 billion1.51.00.502016201720182019Net lossFirst half$0 billion–0.5–1.0–1.5–2.02016201720182019Source: the companyOver the past year, SoftBank committed to invest $4 billion in We at a valuation of around $47 billion. It also spent $1 billion to buy existing shares from We employees and investors at a valuation of around $23 billion.Since We unveiled the papers for its IPO last month, potential investors have expressed concerns to the company and its underwriters about the company’s steep losses, as well as hundreds of millions of dollars of real-estate deals and past personal loans involving the firm and Mr. Neumann. They’ve also balked at valuations anywhere near the $47 billion mark.That harsh reception has been a surprising wake-up call to We executives, according to people familiar with the deal. Because of that, We and its underwriters have considered raising money at a much lower price tag than initially expected, these people said.We had been planning to debut in September, The Wall Street Journal previously reported, which was earlier than many investors had expected.But the situation remains fluid, and We could still start its roadshow to pitch potential investors on the IPO as soon as Monday, these people said. The company hasn’t yet chosen an exchange to list its shares on, people familiar with the company’s decision-making said.Some investors have questioned how We will hold up if the economy slows down, ................
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