2013 Fellow Handbook (Fellow Name Here)

[Type the company address]

Table of Contents
Overview.......................................................................................................................... 4
How to use this document ...................................................................................................................... 5

Venture for America ......................................................................................................... 6

History ................................................................................................................................................... 6 Mission and Credo ................................................................................................................................. 6 Value Creation as a Value ..................................................................................................................... 7 Organizational structure ......................................................................................................................... 8 Staff ................................................................................................................................................... 8 BOD/Advisors .................................................................................................................................... 9 Finances .............................................................................................................................................. 10

Soft Skills & The Matching Process ..................................................................................11

Partner Cities/Companies .................................................................................................................... 11 Business Communication .................................................................................................................... 11 The VFA Interview Process .............................................................................................................. 13 Email................................................................................................................................................ 14 Structuring and Receiving Feedback ................................................................................................... 16 Business Attire ..................................................................................................................................... 16 Soft Skills Feedback ............................................................................................................................ 16

Business Basics & Technology Tools ................................................................................17

Accounting & Finance .......................................................................................................................... 17 Introductory Managerial Accounting ................................................................................................. 18 Introductory Financial Accounting .................................................................................................... 27 Debt v. Equity .................................................................................................................................. 29 Business Basics Feedback .................................................................................................................. 31 Microsoft Office .................................................................................................................................... 32

New Fellow Handbook

Excel ................................................................................................................................................ 32 PowerPoint & Public Speaking ......................................................................................................... 32 Intro to Web Development ................................................................................................................... 32 Javascript ........................................................................................................................................ 32 HTML ............................................................................................................................................... 32 Adobe Photoshop ................................................................................................................................ 33 Search Engine Optimization (SEO) ...................................................................................................... 33 Intro to Computer Science ................................................................................................................... 33 Hardware ......................................................................................................................................... 34 Software .......................................................................................................................................... 34 Tools Feedback ................................................................................................................................... 34

New Fellow Handbook

Overview
Congratulations on being selected as a 2013 Venture for America Fellow. Take a look at the bios of your class and the fellows before you: each person has shown qualities and skills that VFA looks for in an incredibly competitive application process. This year over ### students from top universities and professional programs applied to be in the 100 spots that you now occupy. Over the course of the next two years these people will form a powerful network that will be uniquely positioned to change our economy by driving innovation.

This is a document broken up into three sections that each fellow should thoroughly read. The first two sections are immediately relevant to the process of matching you with a VFA partner company and should be completed as soon as possible. The final Business Basics and Technology Tools is a brief overview of skills and concepts that should be completed before you arrive at VFA boot camp this summer.

Depending on your familiarity with the material, it can take up to 3 hours to read through each section and complete the corresponding assignments, so plan your time accordingly. As this is meant to be a living document there are forms for feedback at the end of each section that are sent to the appropriate VFA staff member. Please be thoughtful when evaluating the content, as this will allow training to improve throughout the years.

Workshops in training camp are based on the assumption that each fellow has full comprehension of the fundamentals in each subject area, so having a strong grasp New Fellow Handbook 4

of the material will go a long way towards ensuring that you are able to make the most out of your time at Brown. Additionally, many of the assignments and challenges you will be asked to complete will build upon the basics introduced here more on this later.

How to use this document

Clicking on a page number in the table of contents will take you to the corresponding section. Many of the activities are either web based or require Microsoft Office, so make sure that you have an active Internet connection and access to these programs before beginning. Many of the terms, concepts, events and people are linked to online content that provides more information and context. Text that is bolded contains action items that require completion and submission of a deliverable. Some of the activities will require outside research, so feel free to go outside of the resources provided to complete each activity. As with nearly everything at VFA these exercises are going to be as valuable as the time and effort you put into them. As some of this material may be repetitive to those of you who have taken finance, accounting, computer science and business computing courses, it is important to make sure that you focus your attention to the material you are least familiar with.

New Fellow Handbook

Venture for America

History
The idea behind Venture for America was formed out of an interaction between Andrew Yang and Charlie Kroll on an entrepreneurship panel at Brown University in 2008. At the time Andrew was the CEO of Manhattan GMAT, a test prep company that was acquired by the Washington Post/Kaplan in 2009 a move that allowed him to start laying the foundation for VFA out of the same office building that he built

Mission and Credo

Venture for America is an organization that obsesses over values. Everything we do is evaluated in the context of how it helps further the mission and whether or not it satisfies the requirements in the credo. Take some time to familiarize yourself with both and think about how they relate specifically to you.

New Fellow Handbook

Mission
To revitalize American cities and communities through entrepreneurship. To enable our best and brightest to create new opportunities for themselves and others. To restore the culture of achievement to include value-creation, risk and reward, and the common good.

Credo
My career is a choice that indicates my values. There is no courage without risk. Value creation is how I measure achievement. I will create opportunities for others and myself. I will act with integrity in all things.

Value Creation as a Value

Assignment 1 (Due on day 1 of VFA training): What is something that you have made? How did it create value and how did you measure the value it created? Create a 2-minute presentation adhering to the guidelines in the Powerpoint and public speaking sections. These presentations will be given on the first day of training camp.

New Fellow Handbook

Organizational structure
Staff
The following list shows the staff in the order that they joined VFA and how their role fits into the matching and training process. Click through to get to their profiles on the VFA website.

Andrew Yang, Founder and President Andrew is responsible for the strategic direction of VFA and managing relationships with the many supporters of the program. Throughout training camp he will largely be in observation mode, but will occasionally step in to give advice and training in key areas.

Eileen Lee, COO Eileen was the first official hire (and first paid employee) of FA. She came on board in the fall of 2009 and has been in charge of many of the critical aspects of VFA operations including fundraising, recruitment, and training. Throughout training Eileen will assist fellows with finding housing in their assigned cities and help in solving any other problems that may arise.

Mike Tarullo, Director of Corporate Development Mike is primarily responsible for managing the relationships with VFA partner companies. You have likely spoken with him already, as he will be guiding you through the matching process. A startup veteran himself, Mike is also a great resource for any practical questions and will be responsible for providing feedback on challenges during training.

New Fellow Handbook

Eddie Shiomi, VP of Programs Eddie is the master of all things training related throughout your time as a fellow. He is a veteran at creating training programs, and will be the primary contact throughout your time at Brown. After training camp is finished he will remain active in planning development events for fellows in the city they are placed in.

Megan Hurlburt, Admin and Development Associate Megan works closely with Eileen and Mike to ensure the ongoing operational success of VFA. She will be a contact for fellows to arrange travel and accommodations during the interview process, and can answer any general administrative questions about the program.

Lynne Guey, Recruitment and Social Media Associate Lynne is primarily responsible for managing VFAs online presence and coordinating the recruitment effort particularly in coordinating current fellow involvement in the process. She will also be involved with documenting the training process by conducting interviews with fellows and managing a Venture for America meta-blog. Check it out at http://vfafellows.tumblr.com/ .

BOD/Advisors
Take the time to read through the bios of the people who have contributed to the formation of VFA - they form the core network of advocates for the organization in the business and nonprofit world. Many of these people will donate their time during the training camp, and they are all part of VFA because they believe in the mission. When

New Fellow Handbook

Finances
VFA is a 501(c) nonprofit organization. It was founded with money provided by initially by Andrew Yang and several other key donors who allowed the organization to recruit the first class of fellows and partner companies.

From the beginning VFA has been a lean organization. The 2012 fellows were recruited and trained for an average of $15,000 each. For comparison, Teach For America operates at about $22,000 per fellow. Leveraging the network surrounding the program to provide goods and services has played a large part in getting VFA to where it is today with limited resources.

Your eventual employer pays the expenses for VFA training camp. Each partner company must commit to $2,500 per fellow hired in addition to your salary for the first two years. VFA uses this money for renting dorm rooms, paying for food costs, and reimbursing fellows for travel costs to and from Brown.

Overview/Intro to VFA feedback

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Soft Skills & The Matching Process

Acceptance into VFA is not the final hurdle to cross before becoming a fellow. You are about to begin the process of interviewing with partner companies in your desired city to determine where you will work after training camp is over. This is a process that should be treated as seriously as any job interview, although you will have more tools and support to leverage along the way (including this document!).

Partner Cities/Companies
Familiarize yourself with this list. These are the companies that you will be interviewing with over the coming months. They have been handpicked and vetted using rigorous standards and an application process. After a series of conversations with Mike Tarullo you will agree upon a set of companies to interview with, and you can begin the first round of conversations.

Business Communication
The first and arguably most important part of any communication is considering your audience. Throughout this section, it will be helpful to put yourself in the mind of a start-up CEO or executive (which most of you aspire to be). Each day, you wake up and try to move the business forward while dealing with numerous concerns that college students do not have. Your concerns include your customers, prospective customers, investors, staff, colleagues, advisors, continuous process and product improvement, and maybe even your personal life.

Somewhere in those concerns lies the task of hiring new employees. For the most part, prospective employees fall into 3 categories: New Fellow Handbook 11

1) Solves an immediate need. This is the best situation, and makes a founder quite happy. This occurs when theres a pain point in my business needs to be addressed, or there are certain things that are taking up time that need to be given to someone talented enough to execute. For example, I need to build a product, and I need an electrical engineer or programmer. Or I spend a lot of my day preparing and evaluating financial projections, and if I had an Excel jock I could give it to him/her. Or, Ive had a senior exec shouldering too many sales and account management responsibilities, and its time for a personable go-getter to inherit them. This can also be when Ive had a growth opportunity on the backburner that Ive wanted to address, but havent had the bandwidth to take on. In this case, Im happy to hire the person with some vetting for skills, relevant experience, and personality and cultural fit. 2) Doesnt address a need, but seems like a value-add. Here, someones not a perfect fit for one of my immediate needs, or I dont have an immediate need that is pressing (which can be the case if, for example, I have a rough sales month or two and I get less aggressive). However, the person seems like they could be helpful. Depending on various factors, I might want to add the person to the team and figure that theyll find the right role as we grow. I may hire the person, I may become gun-shy and pass, or I may want to wait and see if someone in category one steps forward. 3) Doesnt address a need. In this case, I decide that this person isnt the right person to fulfill the need that I have in mind, or doesnt seem high value-add enough for me to try and stretch to find the right role. This also applies to the vast number of people who are incompetent, seem high maintenance, havent done their New Fellow Handbook 12

homework/research about me or the company, cant articulate how they will help my company in the day-to-day, or dont seem motivated to work here or help the company succeed.

An important factor in the above is whether the person likes you and would want to work with you or invest in developing you. People in start-ups tend to be very driven by cultural fit. Seeming like a good person to be around is a huge part of being successful in this context. This is where the interview comes in.

The VFA Interview Process

Your written VFA application will be sent to each partner company you interview with. Take some time to review it as you may have written it some months ago this document has already shaped their initial (positive) impression of you and has suggested to them that you are likely in category 1 or 2 from the previous section.

The most important thing to remember about the interview process - particularly in the startup world is that it is not primarily about what your skills are, it is about whether or not you can address the current need of the organization. While your specific skills certainly are a part of that, it is more important to understand the business and how you can best position yourself to help it succeed. When interviewing, you should be familiar with all information from a companys: 1. Website 2. Publicly available info/press 3. LinkedIn accounts and online bios of relevant personnel 4. Founder or company blog if applicable (its amazing how quickly you get a sense of what a person thinks about if you read their blog, makes great material to quote New Fellow Handbook 13

from) 5. Major industry landscape (i.e. who theyre looking to dislodge or disrupt)

Email
You will likely be introduced to your contact at each company by email. This interaction (and all other professional email interactions) should be handled in the same way as interviews. Read through these guidelines from Inc. Magazine below for some general tips on how to structure electronic communication:

Your e-mail is a reflection of you. Every e-mail you send adds to, or detracts from your reputation. If your e-mail is scattered, disorganized, and filled with mistakes, the recipient will be inclined to think of you as a scattered, careless, and disorganized businessperson. Other people's opinions matter and in the professional world, their perception of you will be critical to your success.

Use exclamation points sparingly. The maximum number of exclamation points in a business e-mail? One. Otherwise, you risk looking childish and unprofessional.

Briefly introduce yourself. Do not assume the person receiving your e-mail knows who you are, or remembers meeting you. If you are uncertain whether the recipient recognizes your e-mail address or name, include a simple reminder of who you are in relation to the person you are reaching out to; a formal and extensive biography of yourself is not necessary.

Respond in a timely fashion. Unless you work in some type of emergency capacity, it's not necessary to be available the instant an e-mail arrives. Depending New Fellow Handbook 14

on the nature of the e-mail and the sender, responding within 24 to 48 hours is acceptable.

Avoid using shortcuts to real words, emoticons, jargon, or slang. Words from grown, business people using shortcuts such as "4 u" (instead of "for you"), "Gr8" (for great) in business-related e-mail is not acceptable. If you wouldn't put a smiley face or emoticon on your business correspondence, you shouldn't put it in an e-mail message. Any of the above has the potential to make you look less than professional.

Be clear in your subject line. With inboxes being clogged by hundreds of e-mails a day, it's crucial that your subject line gets to the point. It should be reasonably simple and descriptive of what you have written about. Expect that any e-mail with a cute, vague, or obscure subject will get trashed. Also, proof your subject line as carefully as you would proof the rest of the e-mail.

Always include a signature. You never want someone to have to look up how to get in touch with you. If you're social media savvy, include all of your social media information in your signature as well. Your e-mail signature is a great way to let people know more about you, especially when your e-mail address is does not include your full name or company.

Follow Up. Take notes during your interview so you can construct a thoughtful and unique follow-up letter. There is no point in following up with some generic canned response. That being said, you should always follow an interview with an email or handwritten note.

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Structuring and Receiving Feedback

An important part of the interview process (and your VFA experience in general) will be giving and receiving feedback. Try to objectively evaluate your perception of each interaction you have throughout your interviews and generate a few pieces of thoughtful feedback to give to Mike each time. In turn, Mike will compile feedback from the companies and provide you with their thoughts on how things went. For specific advice on giving and receiving feedback read this.

Business Attire
Pay close attention to the culture of the place you are interviewing at and try to dress at least on the nicer side of whichever domain they fit into, if not one level above. It is always better to arrive better dressed than underdressed. Business Formal Men - Suit and tie Women Suit (skirt or pants) and blouse Business Casual Men Shirt and slacks, jacket optional Women Dresses, skirts, shirts or slacks Startup Casual Men Shirt (if t-shirt no logo) and slacks or non-ripped jeans Women - Dresses, skirts, shirts or slacks

Soft Skills Feedback

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Business Basics & Technology Tools

Accounting & Finance
The ultimate scorecard, accounting is the most basic language of business. Developing an accurate vision of how much money an entity has and how much it will need in the future is critical to any venture. The following section has been broken up into two distinct parts, financial and managerial accounting. The diagrams below describe their relationship:

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Introductory Managerial Accounting

Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organizations strategy. Management accounting as practice extends to the following three areas:

Strategic ManagementAdvancing the role of the management accountant as a strategic partner in the organization.

Performance ManagementDeveloping the practice of business decisionmaking and managing the performance of the organization.

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Risk ManagementContributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization.

The Institute of Certified Management Accountants (ICMA), states: "A management accountant applies his or her professional knowledge and skill in the preparation and presentation of financial and other decision oriented information in such a way as to assist management in the formulation of policies and in the planning and control of the operation of the undertaking". Management Accountants therefore are seen as the "value-creators" amongst the accountants. They are much more interested in forward looking and taking decisions that will affect the future of the organization, than in the historical recording and compliance (score keeping) aspects of the profession. Management accounting knowledge and experience can therefore be obtained from varied fields and functions within an organization, such as information management, treasury, efficiency auditing, marketing, valuation, pricing, logistics, etc.

Management accounting can help to answer such important strategic questions such as: Who are our most important customers, and how do we deliver value to them? What substitute products exist in the marketplace, and how do they differ from our own? What is our critical capability (our competitive advantage)? Will we have enough resources cash and other to support our strategy?

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Managerial Accounting Assignment Complete the following problems below in a separate document. Feel free to skip ahead to the Microsoft Excel Tutorial if you would like to brush up on your excel skills before starting.

Problem 1.

The following monthly budgeted data are available for a wholesale company:
Product L Product Z Product C Sales .............................................................................................................. $400,000 $200,000 $800,000 Variable expenses.......................................................................................... 240,000 140,000 640,000 Contribution margin ...................................................................................... $160,000 $ 60,000 $160,000

Budgeted net operating income for the month is $130,000.

Required:

a. Calculate the break-even sales for the month. b. Calculate the margin of safety in sales dollars. c. Calculate the operating leverage for both budgeted and actual data. d. Actual total sales for the month were the same as the budgeted sales-$1,400,000. However, the sales mix changed so that sales by product were: L, $560,000; Z, $280,000; C, $560,000. Calculate the expected net operating income with this new sales mix. Explain why this net operating income figure differs from the original budgeted net operating income of New Fellow Handbook 20

$130,000.

Problem 2.

Data concerning Breedon Company's operations last year appear below:

Units in beginning inventory ......................................................................... -0Units produced .............................................................................................. 12,000 Units sold ...................................................................................................... 11,250 Selling price per unit ..................................................................................... $90 Variable costs per unit: Direct materials .......................................................................................... $20 Direct labor ................................................................................................ 10 Variable manufacturing overhead .............................................................. 8 Variable selling and administrative............................................................ 5 Fixed costs in total: Fixed manufacturing overhead ................................................................... $180,000 Fixed selling and administrative ................................................................ 150,000

Required:

a. Compute the unit product cost under both absorption and variable costing. b. Prepare an income statement for the year using absorption costing. c. Prepare an income statement for the year using variable costing. d. Prepare a short (1-2 paragraph) report reconciling the difference in net operating income between absorption and variable costing for the year. Problem 3. New Fellow Handbook 21

Maher Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price .................................................................................................. $129 Units in beginning inventory ......................................................................... 0 Units produced .............................................................................................. 3,700 Units sold ...................................................................................................... 3,600 Units in ending inventory .............................................................................. 100 Variable costs per unit: Direct materials .......................................................................................... $37 Direct labor ................................................................................................ 38 Variable manufacturing overhead .............................................................. 6 Variable selling and administrative............................................................ 5 Fixed costs: Fixed manufacturing overhead ................................................................... $103,600 Fixed selling and administrative ................................................................ 50,400

Required:

a. What is the unit product cost for the month under variable costing? b. What is the unit product cost for the month under absorption costing? c. Prepare an income statement for the month using the contribution format and the variable costing method. d. Prepare an income statement for the month using the absorption costing method. e. Reconcile the variable costing and absorption costing net operating incomes for the month. Problem 4.

Hatch Hardwood Floors installs oak and other hardwood floors in homes and businesses. The company uses an activity-based costing system for its New Fellow Handbook 22

overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system:

Overhead costs:
Production overhead ...................................................................................... $160,000 Office expense ............................................................................................... $160,000 Total .............................................................................................................. $320,000

Distribution of resource consumption:

Activity Cost Pools Installing Job Floors Support Other Total Production overhead ...................................................................................... 45% 35% 20% 100% Office expense ............................................................................................... 10% 60% 30% 100%

The Other activity cost pool consists of the costs of idle capacity and organization-sustaining costs.

The amount of activity for the year is as follows:

Activity Cost Pool Annual Activity Installing floors ............................................................................................. 800 squares Job support .................................................................................................... 160 jobs Other .............................................................................................................. Not applicable

A square is a measure of area that is roughly equivalent to 1,000 square feet.

Required: a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:
Installing Job Other Total

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Floors Support Production overhead ...................................................................................... Office expense ............................................................................................... Total ..............................................................................................................

b. Compute the activity rates (i.e., cost per unit of activity) for the Installing Floors and Job Support activity cost pools by filling in the table below:

Installing Job Floors Support Other Total Production overhead ...................................................................................... Office expense ............................................................................................... Total ..............................................................................................................

c. Compute the overhead cost, according to the activity-based costing system, of a job that involves installing 2.4 squares.

Problem 5.

Randall Company is a merchandising company that sells a single product. The company's inventories, production, and sales in units for the next three months have been forecasted as follows:
October November December Beginning inventory ..................................................................................... 10,000 10,000 10,000 Merchandise purchases ................................................................................ 60,000 70,000 35,000 Sales ............................................................................................................. 60,000 70,000 40,000 Ending inventory .......................................................................................... 10,000 10,000 5,000

Units are sold for $12 each. One fourth of all sales are paid for in the month of sale and the balance is paid in the following month. Accounts receivable at September 30 totaled $450,000.

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Merchandise is purchased for $7 per unit. Half of the purchases are paid for in the month of the purchase and the remainder is paid in the month following purchase. Selling and administrative expenses are expected to total $120,000 each month. One half of these expenses will be paid in the month in which they are incurred and the balance will be paid in the following month. There is no depreciation. Accounts payable at September 30 totaled $290,000. Cash at September 30 totaled $80,000. A payment of $300,000 for purchase of equipment is scheduled for November, and a dividend of $200,000 is to be paid in December. Required:
a. Prepare a schedule of expected cash collections in good form for

each of the months of October, November, and December.

b. Prepare a schedule showing expected cash disbursements for

merchandise purchases and selling and administrative expenses for each of the months October, November, and December.
c. Prepare a cash budget in good form for each of the months October,

November, and December. There is no minimum required ending cash balance.

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Problem 6. A sales budget is given below for one of the products manufactured by the Key Co.:
Sales Budget in Units January .......................................................................................................... 20,000 February ........................................................................................................ 35,000 March ............................................................................................................ 60,000 April .............................................................................................................. 40,000 May ............................................................................................................... 30,000 June ............................................................................................................... 25,000

The inventory of finished goods at the end of each month must equal 20% of the next month's sales. On December 31, the finished goods inventory totaled 4,000 units. Each unit of product requires three specialized electrical switches. Since the production of these specialized switches by Key's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year. Required: Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March and in total for the quarter.

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Introductory Financial Accounting

Financial accounting is a specialized branch of accounting that keeps track of a company's financial transactions. Using standardized guidelines, the transactions are recorded, summarized, and presented in a financial report or financial statement such as an income statement or a balance sheet.

Companies issue financial statements on a routine schedule. The statements are considered external because they are given to people outside of the company, with the primary recipients being owners/stockholders, as well as certain lenders. If a corporation's stock is publicly traded, however, its financial statements (and other financial reportings) tend to be widely circulated, and information will likely reach secondary recipients such as competitors, customers, employees, labor organizations, and investment analysts.

It's important to point out that the purpose of financial accounting is not to report the value of a company (more on that later). Rather, its purpose is to provide enough information for others to assess the value of a company for themselves.

Because external financial statements are used by a variety of people in a variety of ways, financial accounting has common rules known as accounting standards and as generally accepted accounting principles (GAAP). In the U.S., the Financial Accounting Standards Board (FASB) is the organization that develops the accounting standards and principles. Corporations whose stock is publicly traded must also comply with the reporting requirements of the Securities and Exchange Commission (SEC), an agency of the U.S. government.

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At the heart of financial accounting is the system known as double entry bookkeeping (or "double entry accounting"). Each financial transaction that a company makes is recorded by using this system.

The term "double entry" means that every transaction affects at least two accounts. For example, if a company borrows $50,000 from its bank, the company's Cash account increases, and the company's Notes Payable account increases. Double entry also means that one of the accounts must have an amount entered as a debit, and one of the accounts must have an amount entered as a credit. For any given transaction, the debit amount must equal the credit amount. (To learn more about debits and credits, see Explanation of Debits & Credits.)

The advantage of double entry accounting is this: at any given time, the balance of a company's asset accounts will equal the balance of its liability and stockholders' (or owner's) equity accounts. (To learn more on how this equality is maintained, see the Explanation of Accounting Equation.)

Financial accounting is required to follow the accrual basis of accounting (as opposed to the "cash basis" of accounting). Under the accrual basis, revenues are reported when they are earned, not when the money is received. Similarly, expenses are reported when they are incurred, not when they are paid. For example, although a magazine publisher receives a $24 check from a customer for an annual subscription, the publisher reports as revenue a monthly amount of $2 (one-twelfth of the annual subscription amount). In the same way, it reports its property tax expense each month as one-twelfth of the annual property tax bill. By following the accrual basis of accounting, a company's profitability, assets, liabilities and other financial information is more in line with economic reality. (To New Fellow Handbook 28

learn more on achieving the accrual basis of accounting, see the Explanation of Adjusting Entries.)

Debt v. Equity
There are two main ways to structure financial relationships: debt (obligation), and equity (ownership). While there are many different ways to structure each type of agreement, we will consider the most basic forms of each in this handbook.

A basic loan or "term loan" is the simplest form of debt. It consists of an agreement to lend a fixed amount of money, called the principal sum, for a fixed period of time, with this amount to be repaid by a certain date. In commercial loans interest, calculated as a percentage of the principal sum per year, will also have to be paid by that date, or may be paid periodically in the interval, such as annually or monthly. Such loans are also colloquially called bullet loans, particularly if there is only a single payment at the end the "bullet" without a "stream" of interest payments during the "life" of the loan. There are many conventions on how interest is calculated see day count convention for some while a standard convention is the annual percentage rate (APR), widely used and required by regulation in the United States and United Kingdom, though there are different forms of APR.

Common stock is a form of corporate equity ownership, a type of security. The terms "voting share" or "ordinary share" are also used in other parts of the world; common stock being primarily used in the United States.

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It is called "common" to distinguish it from preferred stock. If both types of stock exist, common stock holders cannot be paid dividends until all preferred stock dividends (including payments in arrears) are paid in full.

In the event of bankruptcy, common stock investors receive any remaining funds after bondholders, creditors (including employees), and preferred stock holders are paid. As such, such investors often receive nothing after a bankruptcy. On the other hand, common shares on average perform better than preferred shares or bonds over time.

Common stock usually carries with it the right to vote on certain matters, such as electing the board of directors. However, a company can have both a "voting" and "non-voting" class of common stock.

Holders of common stock are able to influence the corporation through votes on establishing corporate objectives and policy, stock splits, and electing the company's board of directors. Some holders of common stock also receive preemptive rights, which enable them to retain their proportional ownership in a company should it issue another stock offering. There is no fixed dividend paid out to common stock holders and so their returns are uncertain, contingent on earnings, company reinvestment, and efficiency of the market to value and sell stock. Additional benefits from common stock include earning dividends and capital appreciation.

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For a more applied perspective on the tradeoffs associated with both debt and equity, read this article from Venture Hacks, a well-known tech startup blog.

Valuing a Company
Conclusion and Assignment 3: To put all of this into perspective, take a look at the Financial modeling for entrepreneurs PowerPoint deck by Taylor Davidson and the corresponding complete excel model. These have been provided free of charge to all VFA fellows and can be powerful tools for thinking about how to manage resources within a growth company.

Far from an exact science at the early stage, determining how to value a company is often the result of the application of several different disciplines. Using the articles below as a reference, write a short summary on how you would have valued a business that has been recently acquired or funded. The Venture Capital section of DealBook is a good place to start looking.

How to Value a Young Company: Martin Zwilling, Forbes Valuing Young, Start-Up and Growth Companies: Aswath Damodaran How to Set Valuation For a Seed Round: Babak Nivi, VentureHacks

Business Basics Feedback

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Microsoft Office
Excel
Complete the attached Microsoft Excel Primer. This will likely take between 2-3 hours depending on your familiarity with the program. Click here for the Excel_Primer-Data_Analysis.xls file Click here for the Excel_Primer-Basics.xls file Click here for the Geographic Diversification Data Set

PowerPoint & Public Speaking

What makes an effective PowerPoint Presentation

Intro to Web Development

Many of the VFA partner companies have built their businesses to rely heavily (or completely) on their online presence. This is not a coincidence starting and running almost any business today requires a functional understanding of the fundamentals of web development. Fortunately, there is a great free online resource for doing just that Codeacademy.

Javascript
Complete the Getting Started with Programming and Functions in Javascript on Codeacademy.

HTML
Complete the HTML fundamentals exercises on Codeacademy.

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Adobe Photoshop
Basic knowledge of Adobe Photoshop will be helpful at several points throughout the course of training camp. Download a free trial of the program here and mess around with the Venture for America logo. See if you can make a version that you like more, or create a logo of your own. Here are some introductory tutorials and here are some tutorials that show you how to create some more complex designs.

Search Engine Optimization (SEO)

SEO is the practice of improving and promoting a web site in order to increase the number of visitors the site receives from search engines. There are many aspects to SEO, from the words on your page to the way other sites link to you on the web. Sometimes SEO is simply a matter of making sure your site is structured in a way that search engines understand. (Source: seomoz.com) Click here for their comprehensive guide to understanding SEO. You dont have to read the whole thing, but you should skim it at the very least and keep the guide for reference.

Intro to Computer Science

[TO EDDIE] Couldnt get an electronic copy, but I would recommend plugging in the first chapter or two of this book for everyone to read over before camp

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Hardware Software

Tools Feedback

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