Introductory Class - Logistics

Early Stage Capital Introduction and Logistics � Discussion: how can you raise early stage capital today? � Structure of Classes � The Simulation Rounds 1 How can you raise early stage capital today? Talking with graduates and current students, they say we need: � More discussion of how to raise money in a difficult funding environment � More on the practical details of how to negotiate early stage funding � More development of our network with venture capitalists and other early investors 2 Course goals � A course that demystifies the VC investment process � A course that deciphers legalese and term sheet jargon � A course that gives you the tools to negotiate effectively (on either side of the table) � A course that brings in high level outside speakers who fund startups and who have been funded: � as “live cases” that focus on term sheets � NOT a prosem format Course Structure (see syllabus) �Today: introduction and logistics �Course overview and expectations �Detailed review of rounds 3 Classroom Ground Rules �1/3 course grade is class participation �Prepare for class �"Friendly cold calling" �Informal small group coffees/beers after class: �what works for you? Classroom Ground Rules (continued) �This is a very intensive course with highlevel outside guests: �No Laptops/Palm Pilots in operation when we have guests, please �No lunches when we have guests, please �No walking in and out when we have guests, please 4 Turning to the Simulations . . . �The General Idea �Teamwork: �1 Warm-Up Exercise �2 Simulation Rounds �Tips, Requests and Mechanics The General Idea: Term Sheets �The simulations are focused on learning how to negotiate more effectively in a venture capital setting 5 The General Idea: Term Sheets �The class sessions are intended to support the simulations, by giving you a chance to discuss “live cases” about term sheet negotiation and strategy Teamwork: 1. Form a team: 4 people; pick a name; must be formed by end of class, Thursday, October 30 2. Find a lawyer: Warm up exercise only; short and focused, don’t obsess 6 Teamwork: (continued) 3. Strategize with a lawyer: Nobody is born knowing how to use a lawyer 4. Negotiate with a VC: Demystify the ritual when it’s only for a grade “Find a lawyer” conclusions due Goal: identify a shortlist of appropriate lawyers for your new startup. Steps: � Agree on a simple, fictional fact set for your new startup for this exercise only (the simulations have their own standard fact packet) � Perform a legal services needs assessment for your startup with your teammates � Find out about lawyers (network) � Short write-up 7 Lawyer strategy sessions �Sessions take place at law firms’ offices, typically in the evenings. �Teams will sign up on the Sloan server for rounds by 8pm, Thursday, October 30 �Teams should rank 3 slots Lawyer strategy sessions (continued) � TA will contact you �Each session: �1 hour simulation �30 minutes Q&A/feedback �Either TA or I will attend for grading purposes 8 Lawyer strategy sessions (continued) � 24 hours prior to meeting, teams will send to the TA: 1. written meeting agenda 2. firm profile 3. filled-in term sheet � Within 48 hours after meeting, teams will send TA written summary and evaluat ion of round. Venture Capitalist negotiation sessions � Sessions take place at VC firms’ offices � Sign up on Sloan server by 8pm, Thursday, October 30 • Same scheduling process 9 Venture Capitalist negotiation sessions (continued) �Each session: 1 hour round; 30 minutes Q&A/feedback. TA or I will attend �24 hours prior to meeting, teams will send to the TA: 1. formal meeting agenda 2. strategic internal agenda—this document is a lot of work Venture Capitalist negotiation sessions (continued) �Within 48 hours after meeting, teams will send TA written summary and evaluation of round and terms of their final “deal.” �We will compare deal terms and VC practices at last class. 10 Tips and Requests for Both Rounds �Schedule enough time between your 2 rounds to allow adequate preparation �Go in character. Talk in character. �No role-playing during Q&A/feedback session Tips and Requests for Both Rounds �We will give you the term sheet you have been offered. �We will give you the fact pattern about your firm. It is deliberately vague. Do not obsess about this. It’s essentially irrelevant to the goal and value of the rounds 11 Things you cannot do (mistakes earlier teams have made) �Don’t negotiate valuation — it’s too factspecific �Don’t contact your VCs or lawyers; the TA will forward your documents to them �Don’t make your own company/idea the subject of the round Things you cannot do (mistakes earlier teams have made) �Don’t be late and don’t get lost! Some VC offices are hard to find; rush hour traffic is miserable; plan accordingly Check with me if you have any questions about what constitutes unprofessional behavior. 12 The networking is very important �Be open to feedback �We include associates as participants to facilitate and foster peer relationships: �Make friends �Figure out how you can help them Mechanics �Check Sloan server frequently • ppt and handouts will be posted there regularly • round schedules will be posted • send breaking news/interesting stories or deals to course TA to post �Attendance will be taken. Let us know if you must miss a class. 13 Mechanics (continued) �Make sure TA has your correct e-mail-especially if you are adding. �Remember, when we have guests and during your simulations, you are the face of MIT and Sloan. 14