Entrepreneurial Finance

Teacher(s)

Betti Raphaël (compensates Thewissen James); Colmant Quentin; Thewissen James;

Language

English

Main themes

Topic 1

• Being an Entrepreneur and Types of Entrepreneurships
• The Finance Paradigm and how Entrepreneurial Finance differs from Corporate Finance
• Business Survival Rates and Reasons that Business Fail
• Challenges regarding the Financing of New Ventures
•  The Different Stages of the Development of a New Venture
•  The Concept of Product Market Fit
• Sequence of New Venture Financing
• Assessing Financial Needs
• The Founder Dilemma
• Information Asymmetry

Topic 2

• Source of Capital: Understanding Debt and Capital Share
• Venture Capital – Structure and Organization
• Valuation Key Drivers. Illustration with the SaaS Funding Napkin
• CaC and CLTV
• Exercises: CAC & CLTV Calculation
• Fund Raising Process: Valuation, Dilution and Evolution of the Capitalization Table

Topic 3

• Basic Information and Incentive Problems
• The Fund-Raising Process
• Economic Terms of a Term Sheet

Topic 4

• The Entrepreneurial Finance ecosystem
• Presentation of the Bootstrapping concept  
• Analysis and case studies of the different types of funding for early stage compagnies with a key focus on:
  • Crowdfunding,
  • Business Angels,
  • Love Money (FFF),
  • Convertible Loans,
  • Bank Loans

Topic 5

• Private Equity/Venture Capital from the entrepreneur and investor’s perspective
• Analysis of the Airbnb case
• Main characteristics of closed end funds
• Introduction to Private Debt: Which are the different strategies? How does Private Debt differ from Private Equity?

Topic 6

• How are returns measured in Private Equity/Venture Capital? Analysis of the main indicators (MoC, Money Multiples and IRR).
• Introduction to the Fair Value concept and presentation of the Fair Value methodologies adopted in the market
• Which are the main risks in Private Equity/Venture Capital?
• Case studies and practical examples 

Learning outcomes

At the end of this learning unit, the student is able to :
1	Having regard to the LO of the programme X, this activity contributes to the development and acquisition of the following LO: 1. Corporate citizenship 1.1. Demonstrate independent reasoning, look critically 1.2.Decide and act by incorporating ethical and humanistic values 1.3. Decide and act responsibly 2. Knowledge and reasoning 2.1. Master the core knowledge of each area of management. 2.2. Master highly specific knowledge  2.3. Articulate the acquired knowledge from different areas 2.4. Activate and apply the acquired knowledge 3. A scientific and systematif approach 3.1. Conduct a clear, structured, analytical reasoning 3.4. Perceptively synthesize' demonstrating a certain conceptual distance  3.5.Produce, through analysis and diagnosis, implementable solutions 4. Innovation and entrepreneurship 4.2. Initiate, develop and implement ideas around a new product, service, process 5. Work effectively in an international and multicultural environment 5.1.Understand the inner workings of an organization  5.2.Position ... the functioning of an organization, in its ...socio-economic dimensions 5.3.Understand and establish their own role and scope for action  8. Communication and interpersonal skills 8.1. Express a clear and structured message

Content

How much is a start-up worth before it generates profits? When should a founder raise capital—and how much? Is it better to give up equity or take on debt? How does dilution really work? What should founders negotiate in a term sheet? And how do Venture Capital and Private Equity investors decide where to invest and whether an investment has been successful?
This course explores the financing of entrepreneurial ventures from both the entrepreneur’s and the investor’s perspective, combining financial concepts with the practical realities of building, financing and investing in high-growth companies.
Students will follow the financing journey of a venture from its earliest stages through growth and exit, examining how financing needs evolve as uncertainty decreases, product-market fit emerges and companies scale. The course covers the main sources of entrepreneurial finance, including bootstrapping and founders' money, Friends & Family (FFF), crowdfunding, Business Angels, bank financing, convertible loans, venture debt, Private Debt, Venture Capital and Private Equity.
A strong emphasis is placed on the mechanics behind fundraising decisions. Students will learn how to assess financing needs and determine when and how much to raise; understand equity versus debt; pre-money and post-money valuation; the key drivers of start-up valuation; CAC and Customer Lifetime Value (CLTV); dilution; capitalization tables; employee option pools; and successive financing rounds.
The course also takes students inside a VC/PE transaction. We study the fundraising and investment process, information asymmetry and incentive problems, due diligence, and the economic and control provisions that shape the relationship between entrepreneurs and investors. Students will learn to understand and analyse a term sheet, including valuation and investment amount, liquidation preferences, founder vesting and good/bad leaver provisions, anti-dilution mechanisms, conversion rights, Board representation, reserved matters, pre-emption rights, drag-along and tag-along rights.
Students are also introduced to the investor and fund perspective: the organisation and economics of Venture Capital and Private Equity funds, General and Limited Partners, closed-end fund structures, investment and exit strategies, Private Debt, and the measurement of investment performance through Fair Value, MoIC, IRR, TVPI, DPI, RVPI, the J-Curve and benchmarking.
The course is deliberately practical and interactive. Concepts are illustrated through exercises, fundraising simulations and real-world cases involving successful ventures as well as spectacular failures. Students are expected to participate actively in discussions, challenge investment decisions and put themselves alternately in the shoes of a founder, Business Angel, VC or PE investor. Experienced entrepreneurs, investors or finance professionals may also join the course as guest speakers.
By the end of the course, students should be able to understand how entrepreneurial ventures are financed, build and interpret a cap table, analyse the economics of a fundraising round, understand and challenge the key provisions of a term sheet, and evaluate a VC/PE investment from both sides of the negotiating table.
This is not a general course on how to become an entrepreneur or how to write a business plan. It is a course about the financial decisions, incentives, negotiations and investment mechanisms that can ultimately determine who finances a venture, who controls it, who owns it—and how value is shared when it succeeds.

Teaching methods

The course is primarily delivered through traditional university lectures in an auditorium, combining the presentation of key concepts and theoretical frameworks with a strong emphasis on their practical application.
Throughout the course, students are regularly invited to apply the concepts through in-class exercises, practical simulations and the analysis and discussion of real-life entrepreneurial and investment cases. These examples are used to illustrate how financing, valuation, fundraising and investment decisions are actually made in practice, including the trade-offs and uncertainties faced by entrepreneurs and investors.
The teaching is further enriched by pragmatic examples drawn from the experience of seasoned entrepreneurs and finance professionals. External speakers may also be invited to share first-hand experience of fundraising, investing and building entrepreneurial ventures, providing opportunities for direct interaction and discussion with students.
The objective is therefore to combine the academic rigour of a university course with a highly practical exposure to entrepreneurial finance, encouraging students not only to understand the concepts but also to apply them to realistic situations and develop their own judgement.

Evaluation methods

The final grade is based exclusively on a written examination held during the official examination period. There is no continuous assessment, group project or individual assignment contributing to the final grade.
The examination covers the full content of the course and assesses both the students’ understanding of the theoretical concepts and their ability to apply them in practice. It therefore includes a combination of conceptual questions and quantitative exercises or calculations, such as those related to valuation, financing rounds, dilution, capitalization tables, convertible instruments, term sheets and investment performance.
The objective is to evaluate not only whether students have understood the key principles of entrepreneurial finance, but also whether they can use these concepts to analyse and solve practical financial situations similar to those discussed and exercised during the course.

Other information

The course has a strong international and corporate perspective. It is entirely taught in English, and the written examination is also conducted in English, reflecting the predominantly international environment and terminology of entrepreneurial finance, Venture Capital and Private Equity.
Internationalisation is embedded throughout the course content. Financing practices, investment structures and entrepreneurial ecosystems are examined from an international perspective, with particular attention to European and Anglo-Saxon practices. The course draws extensively on international real-life cases and companies, using examples of start-ups, scale-ups, major technology companies, fundraising transactions and investment funds from different countries to illustrate how entrepreneurial finance operates in practice.
The course also has a strong corporate and practitioner-oriented dimension. Numerous real-life case studies, transactions and practical exercises are analysed and discussed during the lectures, allowing students to apply theoretical concepts to situations faced by founders, investors and companies. Topics such as fundraising, valuation, dilution, capitalization tables, financing instruments, term-sheet negotiations and investment performance are approached using concrete business situations.
Finally, the academic content is complemented by first-hand insights from seasoned entrepreneurs and finance professionals. Corporate or entrepreneurial guest speakers may be invited to share their experience of building, financing or investing in companies and to discuss their practical experience directly with students.

Online resources

Optional reference book
Students wishing to explore the topics covered in the course in greater depth may consult:
Entrepreneurial Finance: Venture Capital, Deal Structure & Valuation — Janet Kiholm Smith & Richard L. Smith.
The book is provided solely as an optional reference for further reading. Students are not required to purchase or read the book to successfully complete the course or prepare for the examination. All material required for the course and the examination is covered during the lectures and made available to students through the course slides on Moodle.

Teaching materials

• **Optional reference book** Students wishing to explore the topics covered in the course in greater depth may consult: *Entrepreneurial Finance: Venture Capital, Deal Structure & Valuation* — Janet Kiholm Smith & Richard L. Smith.

Faculty or entity

> CLSM