1. 1 MSc in Investment Management Elective in Private Equity: Objectives, structure & outline Course leader: Prof. Robert Cressy Cass Business School London

2. Copyright © Robert Cressy, 20032 Haui Networks On Tuesday 4 th March, 2003, at 0930 hours, Beijing time, David Tang, CFO of Haui Networks, a Chinese Telecomms startup company based in the Virgin Islands, along with 6 other Co-Directors, will sign a contract for US$2m with a Taiwanese Venture Capitalist as part of the first round of funding

3. Copyright © Robert Cressy, 20033 The business expects its first commercial contract for the supply of network software at the end of June with a major China network provider

4. Copyright © Robert Cressy, 20034 Currently, it employs 17 programmers 11 other staff members These people are working flat out to deliver promised software meet the milestones set by the VC

5. Copyright © Robert Cressy, 20035 History Some 2 years ago, David Tang was a modest, impecunious young student on the MSc Finance course at City University (now Cass) Business School David had graduated from the famous Beijing University along with his present colleagues and co- Directors

6. Copyright © Robert Cressy, 20036 History cont’d David, a tutee of mine, had done the course in Entrepreneurial Finance, at course-end he presented a version of his business plan to a panel of venture capitalists academics He wanted to raise venture capital for his startup company He presented us with many charts showing why it was a good investment

7. Copyright © Robert Cressy, 20037 Finally, after a search of scores of potential VCs in the US, UK and China, somebody believed him!

8. Copyright © Robert Cressy, 20038 History cont’d Now his, along with his colleagues’ net worth is expected to be measured in many millions of US dollars

9. Copyright © Robert Cressy, 20039 Questions How did this transformation take place? Is it repeatable? This course will help to provide some answers!

10. Copyright © Robert Cressy, 200310 Learning objectives of the course To understand the nature, role and mechanisms of venture capital in The funding of fast growth businesses The restructuring of existing corporations To be able to successfully raise venture capital for a potentially fast growth startup company or a management buyout

11. Copyright © Robert Cressy, 200311 Teaching format Structure of teaching Lecture sessions Academic presentations Practitioner presentations Invited speakers from the VC industry Student presentation of business plans Panel of academics and VCs will evaluate proposals

12. Copyright © Robert Cressy, 200312 Coursework Team presentations Either Startup VC funding proposal Or MBO VC funding proposal 20 minutes per team Written up business plan Word limit! Marking Both equally weighted in final mark

13. Copyright © Robert Cressy, 200313 Topics The context of venture capital investment The structure of venture capitalist and investor relationships: the limited partnership Selection criteria and monitoring Staging & syndication Exit routes Financial structure of Early Stage deals Case study: Haui Networks (China startup) Cumulative convertible preference shares Ratchet mechisms

14. Copyright © Robert Cressy, 200314 Company valuation: the 5 methods VC, NPV,ANPV,Option,Comparables Financial structure of Later stage deals: Management buyouts incentive mechanisms risk Case study: Arthur Anderson leveraged buyout

15. Copyright © Robert Cressy, 200315 Reading list Main texts Gompers and Lerner, The Venture Capital Cycle, MIT press, 1999 (Main text) Smith and Smith, Entrepreneurial Finance, Wiley, 2000 (Additional text) Gompers and Sahlman, Entrepreneurial Finance, Wiley, 2001 (Case studies) Wright and Robbie, Survey of management buyouts, JBFA

16. Copyright © Robert Cressy, 200316 Course website The URL for this is http://www.staff.city.ac.uk/~cressy/teaching/ The site contains other course information including: Full list of references Course outlines Full set of lectures notes Past coursework presentations Last-minute changes to visiting speaker arrangements