Professional Documents
Culture Documents
COURSE OBJECTIVES:
This course has been designed to provide an overview of the entrepreneurship process by focusing on new venture
creation from idea generation and opportunity recognition to feasibility analysis and business formation. The course
will require you to integrate your current knowledge of business functions and apply techniques of business analysis
from other courses to the analysis of venture opportunities.
The readings will provide a framework for understanding the entrepreneurial process and evaluating new venture
opportunities, exploring the sources and processes of innovation, and developing an understanding of the various
methods and techniques available for evaluating new business opportunities. Case studies will be used to explore the
various steps involved in evaluating, creating and launching a new business venture, including assessing and
acquiring the required resources, structuring the business, arranging financing, and managing the growing enterprise.
We will also explore the identification, evaluation and acquisition of existing businesses, and the important activity
of harvesting the value created by the entrepreneurial venture.
The two most important economic issues to be addressed with respect to a new venture idea are: (a) what is it worth
(today and at some future point in time)?; (b) how much cash will it take to get to that future point? The ability to
analyze historical financial information, develop multi-year financial projections in MS Excel, and conduct various
valuation analyses is essential to the case analysis process.
Both group and individual assignments will be required, with individual assignments and class participation
comprising half of the final grade, and group projects accounting for the remainder. A group project focused on the
identification and evaluation of a new business opportunity will comprise a major part of the course.
REQUIRED COURSE MATERIALS:
• Stevenson, H.H.; Roberts, M.J.; Grousbeck, H.I. and Bhide, A.V. 1999. New Business Ventures & the Entrepreneur. Irwin-
McGraw Hill, New York. ISBN 0-256-20477-2
• Drucker, P.F. 1993. Innovation and Entrepreneurship. HarperBusiness, New York. ISBN 0-887-306-187. (paperback)
• Bhide, A. 1996. The Questions Every Entrepreneur Must Answer. Harvard Business Review Nov-Dec 1996 (HBR 96603)
• Zider, B. 1998. How Venture Capital Works (HBR Reprint 98611)
Students will have the opportunity to form their own groups during the first two weeks of the course, based on
common interests and preferred group interaction times (see Self Introduction above). It is important that you select
your groups to include a diverse set of skills and make sure that at least one member is proficient in accounting and
spreadsheet analysis. A list of the members of each group (with name, email and telephone contact information)
should be turned into the instructor by the beginning of class on February 2nd. Anyone who has not joined a group
prior to that time will be assigned to a group by the instructor.
LECTURE NOTES
The MS Powerpoint slides used in lectures and case discussions will be available on WebCT
(http://webct.utdallas.edu) under course ID BPS 6370. You should be able to access WebCT with your UTD Unix ID
and password. Call computer services at (972) 883-2911 if you need assistance.
COURSE REQUIREMENTS & GRADING:
The course requirements are summarized in the Course Outline section below. Supplemental materials may be
provided or posted electronically. Advance preparation and enthusiastic participation in class discussions is an
important part of the learning experience in this course and will be evaluated.
The course has been designed to allow flexible management of your time. There will be no quizzes or exams. Your
grade will be based on group and individual written assignments, your contributions to class discussions, and a major
group project, the Business Opportunity Identification and Analysis. These assignments, their due dates and page
limits, and their relative weights in determining your final grade are summarized in the table below:
Due Group or Outline Length
Assignment Date Individual or Essay (pages) Weight
WA#1 – Case Analysis: SplatterMatter Paintguns, Inc. 1/26/05 Individual Outline 3-4 + 10%
Worksheet
WA#2 – Opportunities for Innovation 2/9/05 Individual Essay 4-5 10%
WA#3 – Case Analysis: Ice Delights 2/16/05 Group Project Outline 5-7 10%
WA#4 – Business Opportunity Identification and Presentation 2/23/05 Group Project Essay 7-10 5%
WA#5 – Case Analysis: Commercial Fixtures, Inc. 3/2/05 Individual Outline 3-4 + 10%
Worksheet
WA#6 – Case Analysis: Onset Ventures 3/23/05 Group Project Outline 5-7 10%
WA#7 – Case Analysis: Allen Lane 4/6/05 Individual Outline 5-7 10%
WA#8a – Business Opportunity Analysis 4/25/05 Group Project Essay 25-30
20%
WA#8b – Business Opportunity Presentation 4/27/05 Group Project Powerpoint 15 mins
questions provided; (b) critical evaluation and effective insights into the case situation; (c) demonstrated
ability to apply the course concepts and frameworks in your analysis; (d) logical conclusions and
effective recommendations as required; and (e) effective communications.
• Identification of Assignments. All submitted assignments should be identified as follows: (a) a header on each
page of the paper or spreadsheet should include your name and/or Group ID; (b) if submitted electronically, the
file name should identify the course, assignment number and your name and/or Group ID. For example, “BPS
6370_2_JSmith.doc” would identify John Smith’s Written Assignment #2. Failure to properly identify your
work will impact your grade.
• Format. Written assignments will be submitted in MS Word, MS Excel or MS Powerpoint format, as
appropriate. Each assignment should comply with the specified page length guidelines specified. The use of
charts and exhibits is encouraged, to the extent that they help you make your points. Cover pages, charts or
exhibits, and lists of references will not be included in the page count. Charts and exhibits should be numbered
and appropriately referenced in the body of the document. A list of references should be attached as required.
The manuscript should use 11-12 point type, double-spaced, with 1” margins all around. Appropriate titles and
section headings should be used. Number the pages and put the course number and your name(s) and group ID
in a header at the top of each page.
• Outline Form Response. Some assignments specify an outline form response. I will expect a statement of the
question followed by a bulleted or numbered list of the key items in your response.
• Essay Form Response. Some assignments specify an essay form response. I will expect a well organized paper
that addresses the case questions and uses section headings, bulleted lists, charts and exhibits as appropriate to
clearly communicate your message.
• Assignment Submission Instructions: Written assignments are to be submitted in hard copy form, with the
exception of MS Excel spreadsheets, which are to be submitted by email. Do not submit assignments
through WebCT. If you are unable to attend class, you may email the assignments to me, to arrive before the
beginning of class. Group assignments are to be submitted only by one member of the group. This group
member will receive the results and feedback on the assignment and will be responsible for sharing them
with the other members of the group.
• Due Dates and Late Paper Policy: Written assignments are due on or before the beginning of class on the date
assigned. Individual late papers turned in at or before the next class session following the due date will be
graded, but 10 points will be deducted from the grade. Late papers turned in at or before the second class
session following the due date will be graded, but 15 points will be deducted from the grade. Late papers not
received by the beginning of the second class session following the due date will receive a zero. No late
paper flexibility will be allowed on group papers or projects
Effective written and oral communications are critically important in the business world. It is equally important that
students "put their best foot forward" in classroom presentations and written assignments. Poor organization,
convoluted sentence structures, mangled grammar and misspelled words have no place in effective communications,
and will be considered in the evaluation of your work and ideas.
CASE ANALYSIS GUIDELINES
Many of the written assignments and class discussions will require the analysis of case situations. Case analysis
assignments are designed to evaluate and develop your skills in:
• identifying key strategic or operational issues (decisions or actions required in a given situation)
• analyzing business situations (understanding the organizational and environmental context, identifying and
analyzing situations, opportunities, risks and constraints; and identifying and evaluating options)
• recommending specific strategies and actions (to address the identified issues).
Discussion questions for each case are provided below to help you to focus your analysis. You are encouraged to
work together in your study groups to discuss the cases, including the individual written assignment cases, with the
understanding that individual assignments (including tables and figures) are to be prepared and written by yourself.
The following general approach to case analysis is recommended:
• Read the case quickly. Identify the key issues and decisions/actions required (the case preparation questions will
help you to focus on the key issues). Prioritize the issues in terms of urgency and importance.
• Decide what kind of recommendations should be made (and to whom)
analyses in exhibits or appendices and provide a list of the references and information sources utilized in your
research.
• Present your business opportunity and findings in a 15-20 minute oral presentation to the class and a panel
of outside experts on April 27, 2005. Provide 5 extra copies of the Executive Summary for the judges.
• The Business Plan Evaluation Form to be used for the report and presentation is available on WebCT.
• One or more business plans may be selected to represent UTD in one of a series of Business Plan competitions held
each year. Winners of these competitions receive substantial cash prizes.
f. Assume that an outside investor is looking for a 50% return on investment. What percentage of the equity should
Heather expect to give up to attract an investor under each of the scenarios c-e?
4. List, in priority order, the top five issues or questions that must be answered or resolved to your satisfaction before you
would commit to investing in the Company.
5. Given the responses to these questions as an indication of investor interest, if you were Heather Evans, how would you
evaluate the proposed joint venture with Helen Neil Fashions as a financing option?
Written Assignment #6: Onset Ventures (Stevenson: 281-310) (Session 09)
1. Focus on the TallyUp decision from the perspective of ONSET Ventures: (a) should ONSET invest an additional $1
million to develop a beta product, or go to the market now to raise $3-4 million and use the money for both product
development and marketing; (b) should the “step-up” assumptions be the same under each scenario?; and (c) if they
decide to go to the market, what is an appropriate valuation for TallyUp?
2. Develop a spreadsheet analysis that reflects the ONSET business model and use it to evaluate the various alternatives.
The model should reflect the pre-and post-money valuations of Tally-up, and the investments and percentage ownership
held by ONSET, its venture capital partners, and Tally-up’s management team as they progress through the various
funding stages projected out through the seed and first two rounds of venture capital financing. Assume a terminal value
equal to the post-money evaluation at the end of the second round. Calculate the cash flows and IRR for ONSET and its
VC partners under each scenario
3. Given the financial return expectations of ONSET and the prospective venture capital partners, plus the desire of the
company to set aside some shares for stock options, how would the ownership be distributed (post funding) under each
alternative?
4. Is this a purely economic decision, or do other factors (risk, consistency with ONSET’s operating philosophy, etc.) come
into play? What risks are involved? How do these other considerations impact the decision?
5. Focus on the decision from the perspective of TallyUp’s management team: (a) would you prefer to have ONSET
increase its commitment now to develop the beta product, or (b) would you prefer to go to the market now to raise $3-4
million? How much ownership would you be willing to give up under each scenario? How would this impact your
anticipated return?
ArthroCare (Stevenson: 543-571) (Session 10)
1. What insights did you gain about the process of innovation from the “Background” section of this case?
2. How would you evaluate ArthroCare’s financial performance to date (as compared to the projections provided in Exhibit
3)? Is this performance fairly reflected in the stock price, or has the market over-reacted?
3. What key assumptions (implicit in ArthroCare’s strategy and business model) have changed materially from the time of
the initial IPO until the end of the case? How have these changes impacted ArthroCare’s strategy and financial
performance?
4. At the end of the case, Dr. Thapliyal faces two strategic decisions: (a) pricing for the controller; and (b) level of
investment in R&D to broaden the Company’s markets. Both involve tradeoffs between short term performance and long
term growth, marketplace viability and financial return. To what extent do the expectations of the marketplace and key
shareholders constrain his options? What would you recommend in each case? Why? (justify your recommendations).
5. In order to answer question (a) above, develop a spreadsheet that calculates the future revenues from the sales of wands
and controllers under various pricing and volume scenarios, recognizing that controllers represent a one-time sale that
provides an installed base that will drive the future sales of wands (the more controllers installed on a cumulative basis,
the more wands that will be sold in each future period).
Written Assignment # 7: Allen Lane (Stevenson: 417-440) (Session 11)
1. Assume that you are Allen Lane’s partner. Prepare a prioritized (in terms of relative importance) checklist of the items
that must be taken into account in valuing the business of PTI. Explain why each of these items is important to the
valuation.
2. Based on the historical financials provided, develop pro forma income statement and balance sheet projections for the
next five years (1982-1986). Explore the implications of various sales growth and purchase price assumptions on
financial performance, financing requirements, and return on equity for the investors.
3. Critically examine the valuation report (Exhibit 4) and the letter from the accountants on contingent liabilities (Exhibit 7).
What issues, questions, or red flags do these reports raise? Why are they important to your valuation? What risks and
contingencies should Lane consider in establishing a purchase price. What risks should he be willing to assume?
4. Use your pro forma model to explore the implications of the various IRS audit scenarios on the transaction (don’t forget
penalties and interest on delinquent amounts). What impact would this risk have on your proposed valuations?
5. Prepare a bid (in the form of an offer letter) for the purchase of PTI, addressing the proposed purchase price, structure and
terms of the deal, exclusions, proposed financing arrangements, etc. Attach a spreadsheet analysis (not part of the offer),
detailing the development and calculation of the purchase price and analyzing the projected return on investment to Lane
and his partner over a period of five years. Explain your assumptions.
COURSE OUTLINE
PEER EVALUATION
WA-3 WA-4 WA-6 WA-8
IceDelights Opportunity Onset Ventures New Venture
Identification Business Plan
15% 15% 15% 55%
Group Member (list alphabetically)
1
Total
COMMENTS
Group
Member Comments (please support and justify any assessment below 90% or above 110%) Continue on reverse if necessary.