Entrepreneurial Finance – Ramana Nanda

ramana_nanda.jpgDay 12, Tuesday 5th Feb: Ramans Nanda is assistant professor of business administration at the Harvard business school. He currently teaches Entrepreneurial Management in the first year of the MBA program.  He has also had teaching experience in Entrepreneurial Finance at MIT’s Sloan School of Management. Ramana went into brilliant detail on how to value new ventures seeking ‘Series A’ VC funding. He was very thorough in detailing VC Term Sheet pitfalls. We went through a case study on start-up valuations and used this as basis to discuss the finer details of valuation techniques & formulae. Some of the obvious techniques for valuation:
– Projections, bottomup – Discounter Cash Flow (DCF)
– Competitors/Comparables
– Whats in the package – team, IP, products etc..
– “VC method”

In relation to the “VC method” Ramana focused on the dynamic relationship between Projected Market Value, Discount Rates, Post Money Valuation and VC investment. After a brief well needed interval Ramana proceeded to discuss Convertible Preferred Stock and Participating Convertible Preferred Stock. This was something covered by Niall O’Donnell last week but Ramana’s version was from a academic stand point whereas Niall’s appeared to be derived more from practical experience as a VC. The seminar then changed to a discussion on the Board of Directors and various issues related to Director selection including:
– Experience – in business, with vast contacts/networks
– Scientific Advisory Board – implies legitimacy (used where appropriate)
– Widespread resources across various Directors
– Odd number of Directors – avoid stalemates
– Authority/conflict of interest issues related to have VPs on board alongside CEO

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