Effectively Navigating Venture Capital

09:00 - 09:15    Course introduction

In this opening session the course directors, Martin Raditsch and Claus Schulte will outline what to expect from the days ahead and answer any queries you may have before starting out on three days of intense learning.

09:15 - 10:30    What is the VC for? The role of the VC within the finance structure

A venture capitalist (VC) is an investor interested in private equity investments to start-ups that manifest a high-growth ability in exchange for an equity stake. This could be funding start-up ventures or supporting small companies that wish to expand but do not have access and resources to equities markets.

VCs are prepared to take a risk by investing in such companies because there is a big probability to earn a massive return on their investments if invested companies reach success. However, VCs experience high rates of failure due to the uncertainty that is involved with new companies. Understanding this requirement give you the starting point to create a win-win situation.

10:30 - 11:00    Break

11:00 - 12:00    Where is the money coming from?

Committed capital represents money contributed to the investment fund. Committed capital is used to finance investments as well as administrative costs and failure to execute it can have negative consequences, such as the loss of future profits.  This concept is often used with other types of investments, such as VC funds, private equity (PE) funds and hedge funds.

Financing Sources

• Private Equity

Become familiar with the terms of public investments and companies which are opened for public exchange as well as private equity, the opposite term and class, used for investors, funds, and companies that do not want to show up on the public market exchange. All capital raised via private equity can be utilised in different ways, for instance; financing new innovative technologies, increase working capital to boost a private company's operations and profit.

• Convertible Loan

A convertible loan term has been mentioned frequently in the investment procedure. We would like to provide a definition of it for clarity among our young entrepreneurs. When a student start-up obtains investment, an investor will provide a short-term convertible loan indicating maturity date, interest, and the right to convert a loan into an equity stake of this company in the long run. The main advantage for entrepreneurs is that a convertible loan, before being transformed into equity, has the same characteristics as a standard loan. But be aware of the main inconvenience: the investor has a priority right at maturity date to claim all kinds of assets from the start-up (tangible and intangible) to recover the loan and interest.

• Angel Investors

Angel investors are accredited people who look for start-ups, in order to invest in at an early stage with their own money and resources. Most countries have an angel investor network.

12:00 - 13:00    Deal Flow

Deal flow is the estimated proportion of business proposals and investment pitches coming and are being received by investment bankers and venture capitalists.

Deal flow is composed of different types of proposals such as: venture funding, syndication, private placements, initial public offerings (IPO), mergers, and acquisitions. Typically, it follows a cyclical pattern and trends unfold throughout society and economic environments.

13:00 - 14:00    Lunch

14:00 - 15:00    When and how to approach VC

When is the right point in time to Threat Risk Asses (TRA) your scientific project into a company project. What are the needs and the requirements? In this session we will discuss the different possibilities of dilutive and non-dilutive financing.

15:00 - 15:30    Break

15:30 - 16:00    Elevator Pitch

Elevator pitch is a commonly used term to describe a brief speech that summarises an idea for a product, service or project; it typically lasts for just  20-30 seconds. An elevator pitch should include why your product, idea or project is worth investing in by explaining such things as your unique solution, points of differentiation .

Venture capitalists use the quality level of the elevator speech as a way to make a decision whether the idea has profit potential and to continue with the idea or not.

16:00 - 17:00    Group exercise - Elevator pitch

In this group exercise, each group will be tasked to prepare a 3-minute pitch a panel of VCs.

19:45 - 22:00    Networking dinner

09:00 - 09:45    Due Diligence

Now you know the VC environment, today's sessions will dive into the nitty-gritty of finance constructions, valuation, and term sheets.

Due diligence is considered to be a complete examination of the product and transaction before the actual deal-making. Its goal is to determine whether the information provided by the start-up was accurate. The investor can oversee this type of analysis on any stock accessing easily available public information.

Due diligence investigation includes checking the cap table, finances, legal documents, team, clients and finally checking competitors and industries performances.

09:45 - 11:15    Anatomy of a Term Sheet I

Term sheet is a non-binding agreement, mostly associated with start-ups which includes the basic terms and conditions under which an investment will be executed. Entrepreneurs find this document as being crucial for attracting investors, such as venture capitalists (VC) with capital to fund enterprises.

The most common items spelt out in the term sheet include the company valuation, investment amount, percentage stake, voting rights, liquidation preference, anti-dilutive provisions, and investor commitment.

11:15 - 11:45    Break

11:45 - 12:45    Anatomy of a Term Sheet II

The guest speaker will continue unpacking all the requirements of the term sheet.

12:45 - 13:45    Lunch

13:45 - 14:30    Capitalisation Table

Capitalisation table, also called the “Cap Table” is a spreadsheet or table that shows the equity capitalisation for a company. Information provided in a capitalisation table is most commonly utilised for start-ups and early-stage businesses but there are no restrictions in using capitalisation tables by all types of companies.

A basic Cap Table places materials on each type of equity ownership capital, the individual investors, and the share prices. A more complex table may also include details on potential new funding sources, mergers and acquisitions, public offerings, and other hypothetical transactions.

14:30 - 15:30    CAP table group exercise

Participants will work in groups; creating a Cap Table based on the case study of a seed financing round they have been given.

15:30 - 16:00    Break

16:00 - 17:15    Group presentation

Participants will present their Cap Tables and discuss different possible outcomes.

17:15 - 17:30    Round up of day 2

What did we learn today?

09:00 - 10:00    Dilution and its consequences

Dilution is the devaluation of shareholders’ equity positions due to the publication or creation of new shares. We know that a share of stock represents equity ownership in that company. When a firm’s board of directors takes a decision to declare their company public, through an initial public offering (IPO), they authorise the number of shares that will be offered on the stock market. This initial amount of outstanding stock is commonly known as the “float.”

If, at a later date, that company issues additional stock, it has increased the float and therefore diluted current stock; meaning that the shareholders who recently bought the original IPO of stocks now have a smaller ownership stake in the company compared to what they had prior to the new shares being released.

10:00 - 11:00    Valuation methods

Determining the fair market value of a start-up or even a technology project can be a complex task. There are many factors to consider, but it is an important skill KTOs, as well as VCs, need to have.

So, how do finance professionals evaluate assets to identify the pre-money value? 

Are there factors other than objective financial figures playing an important role?

In this session we will provide you with a mix of hard and soft factors, which will define the value of such project. Further insight will be highlighted in the panel discussion that follows. 

11:00 - 11:30    Break

11:30 - 12:30    Panel discussion: Valuation

There are several valuation methods to evaluate the current and the future value of your enterprise. In this session we will introduce some common methods

12:30 - 13:00    Course wrap-up

13:00 - 14:00    Lunch and farewell