IVEY BUSINESS SCHOOL

ENTREPRENEURIAL FINANCE
BUSINESS 4439

COURSE SYLLABUS Fall 2017

David Simpson Tara Grzegorczyk Assistant

Office: 2320 Office: 2315
Phone: (519) 661-3080 Phone: (519)850-2901
Email: dsimpson@ivey.ca Email: tgrzegorczyk@ivey.ca

NATURE OF THE COURSE

The Focus

The primary focus of the Entrepreneurial Finance course is on the financial challenges
confronting small and medium sized businesses that are growing rapidly or aspire to rapid
growth. In particular we will concentrate on (1) understanding the nature of the financing
problem, (2) becoming familiar with the many sources of funds for these firms with particular
emphasis on banks, angel investors, private placements, institutional venture capital and public
issue of equity (3) becoming familiar with the tax and regulatory environment within which such
financing is obtained, and most importantly, (4) learning the key elements that enter into the
structuring of the deal between demanders and suppliers of funds. A key decision facing
investors is how to harvest the benefits of growth. Growth companies can come from any sector
of the economy and as a result we will consider firms in a variety of industries.

Methodology

We will utilize a combination of cases, guest entrepreneurs and/or financiers and in class exercises
including role play. We try to create an environment of decision making under uncertainty and
emphasize differing perspectives of the entrepreneur and the providers of capital. Students should
be able to freely argue a deal or case from each perspective. Most importantly, I believe in
entrepreneurs and the class is designed to encourage potential entrepreneurs to establish or acquire
businesses. Finance is the entrepreneurs tool to establish, acquire and grow businesses. My
philosophy as a practicing entrepreneur is that business must be fun and profitable. I expect the
class reflects this philosophy.
ENTREPRENEURIAL FINANCE BUSINESS 4439

The Text

There is no formal text for this course. I highly recommend a very practical guide called Money
Magnet by J.B. Loewen. This book offers a great summary on how to secure capital for your
entrepreneurial venture.

Spreadsheets

Spreadsheets employing Excel have been created for a number of the cases. The goal of the
course is not to teach you how to create such spreadsheets but to familiarize you with their use in
structuring deals. You will find these spreadsheets to be quite elaborate but if you work through
them carefully they will provide a lot of learning. In general you should feel free to download
the spreadsheets for your own use. The spreadsheets are provided in e-Zone. This emphasis
on spreadsheets is largely motivated by the fact that employers tell us that a key skill coming
out of a business program is the students facility with modeling.

Course Grading

Contribution 30%

Between 12 and 17 of our classes will have opportunities to evaluate class contribution. This
will be discussed thoroughly on our first day of class but will be generally described as follows:
Your fellow classmates will provide a contribution score in each class which will describe
activity and their impression of the significance of your comments. I will review each class
and will weight my interpretation of significance. After every four or five classes, I will create a
list on a four point scale and will cluster students in a category with four being top contributors
and one being bottom. This will allow me to scale participation relative to the entire class as
we will discuss on day 1. We also have two excel opportunities which allows students to
contribute by leading an excel class and showing their skills in this area. Two in-class exercises
will make up 10% of this contribution grade

The Final Exercise 40%

The final exercise will be written over the last two class periods and will involve crafting a deal
for a potential investment. Access to the Internet for the final is not permitted.

The Term Paper 30%

Groups of 4 to 6, or individuals will write a paper on a finance related topic of their choosing
and a HARD COPY is due on December 4th in class. The paper topics do not have to be
approved in advance. The paper should be a maximum of five double spaced typewritten pages
(12 point font) plus any additional appendices. The purpose of this assignment is two-fold. First,
it is an opportunity for you to get into more depth on a topic of interest to you. Second, it
provides me with some extra data points to gauge your understanding of entrepreneurs and their
financial decision making.

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For your guidance, some of the potential topics are as follows:

Describing a particular entrepreneurand the financial innovations he/she used to

get where they are
Role of angels in financing the early stage firm
Financing a startup
Strategic financial planning
Special valuation problems of a startup
Advantages and disadvantages of preferred shares as a
financing vehicle
Effective use of Employee Shareholder Option
Programs (ESOPS)
Designing the capital structure for a growth company
How to make effective use of financial models in
financing decisions
The regulatory environment in a country other than
Canada
The US (or some other country) venture capital
industry
The merits of flow through shares
**- you may also write a short case describing a financial transaction that an entrepreneur
is contemplating.
***-this class is also coordinating a crowd funding strategy which may be used as a final
term paper

The term papers will be graded based on such criteria as:

Apparent effort
Clarity of presentation
Originality of thoughts

Attendance
You are required to attend all sessions in this course. However, circumstances may arise
which make it impossible for you to attend (e.g., health-related reasons). As a matter of
professional courtesy, you are expected to inform the appropriate party about your absence in
advance. If you fail to do so, your absence will be considered as a negative contribution to the
class. There will be no way to make up your contributions for a missed class, although you may
be asked to complete an additional assignment to ensure you are keeping up with the assigned
work.
To be considered an excused absence, absences must be reported to your section faculty using
the following address: hba1awaysectionX@ivey.ca. Emails sent directly to faculty members
are not acceptable.

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Under University regulations, the instructor can determine at what point absenteeism has become
excessive and thus can prevent you writing the final exam
(www.uwo.ca/univsec/handbook/exam/attendance.pdf). For this course, you will be not
be permitted to write the final exercise when you miss five or more classes (that is 25% or more
of the course).

See also Westerns Policy on Accommodation for Medical Illness at

http://www.uwo.ca/univsec/handbook/appeals/accommodation_medical.pdf. In the event of an
illness requiring medical documentation, please see the HBA Program office for specific instructions.

Prohibited Information

Unless explicit instructions are received from your instructor to the contrary, your preparation
must be limited to the information provided by your instructor(s), plus your own experience and
that of your class peers. Class contributions should be based exclusively on your preparation and
discussions with members of your learning team or section classmates, and not augmented with
information obtained anywhere else. Information related to cases that have
been obtained from sources other than your instructor in paper, electronic or verbal form is not
permitted to be used for class contribution purposes. Such prohibited information includes, but is
not limited to, the following:

Hand-outs, including follow-on ("B") cases

Exam or report feedback (related to a particular case) for other students or provided in
other sections or years
Notes, spreadsheets, etc. specific to cases (obtained before the case has been taught)
prepared by students in other sections or years
Company information that is not provided in the case (and that is not derived from your
own experience)
Teaching notes

If it is determined that such prohibited information is used in class discussions, such an incident
will be deemed to be a violation of Ivey's Student Code of Professional Conduct.

Schedule

Our class schedule and assignments by session appears on eZone and is the most up-to-date
version of our course. Please check the course site regularly for this information and other course
news.

Plagiarism

Students must write their essays and assignments (at Ivey this includes case exams and reports) in
their own words. Whenever students take an idea, or a passage from another author, they
must acknowledge their debt both by using quotation marks where appropriate and by proper
referencing such as footnotes or citations. Scholastic offenses are taken seriously and students

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are directed to read the appropriate policy, specifically, the definition of what constitutes a
Scholastic Offense, at the following website:
http://www.uwo.ca/univsec/handbook/appeals/scholastic_discipline_undergrad.pdf

All required papers (at Ivey this includes case exams and reports) may be subject to submission
for textual similarity review to the commercial plagiarism detection software under license to the
University for the detection of plagiarism. All papers submitted will be included as source
documents in the reference database for the purpose of detecting plagiarism of papers
subsequently submitted to the system. Use of the service is subject to the licensing agreement,
currently between The University of Western Ontario and Turnitin.com (www.turnitin.com).

Please contact the course instructor if you require material in an alternate format or if any other
arrangements can make this course more accessible to you. You may also wish to contact
Services for Students with Disabilities (SSD) at 661-2111 ext. 82147 for any specific question
regarding an accommodation.

Students who require accommodation through SSD must contact SSD office well in advance (it is
in the students best interest to register with SSD at the start of each academic year) of their
exams for appropriate documentation and instructions. Failure to complete the steps required by
SSD will mean that the student must write the exam at the regularly scheduled time without any
specific accommodation.

Support Services

Students who are in emotional/mental distress should seek assistance from the HBA Program
Office. As well, Mental Health@Western (http://www.uwo.ca/uwocom/mentalhealth/) provides
a complete list of options about how to obtain help.

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ASSIGNMENTS

THE FOLLOWING ASSIGNMENTS ARE TENTATIVE. R THE MOST UP TO

DATE ASSIGNMENTS SEE LEARN.

September 11, 2017 Details (Session 1)

Topic: Course Overview

Objectives: The purpose of this class is to provide an overview of the course content and
grading.
Reading materials: N/A

September 13, 2017 Details (Session 2)

Topic: Corporate Finance vs. Entrepreneurial Finance, Thoughts on Valuation

Objectives: This class sets the overall groundwork for how students are to look at all cases in the
course. We will emphasize key financing concerns from the Entrepreneurs perspective. We
will review valuation concepts.
Reading Materials: N/A

September 18, 2017 Details (Session 3)

Case: RW Deliveries
Lecture/Discussion:Using Financing Instruments to make a Deal
Read:
Note on Deal Making
Negotiation of a New Investment
Learning Objectives: The case will be used to discuss the concept of value. The
purpose of the lecture/discussion is to review our
understanding of the nature and role of the various types of financing
instruments available to the suppliers of capital (common, preferred, debt, instruments with
equity kickers) and when it may be appropriate to use each one. The perspective of both the
supplier of capital and the borrower will be investigated.
Assignment: In preparation for the class you may review your knowledge of:
1. What is a common share? What rights and privileges does it convey? What are the advantages
and disadvantages of this instrument for the borrower? The lender?

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2. What is a preferred share? What rights and privileges does it convey? What are the advantages
and disadvantages of this instrument for the borrower? The lender?
3. What is a debt instrument? What rights and privileges does it convey? What are the
advantages and disadvantages of this instrument for the borrower? The lender?
4. What are equity kickers (options, warrants, convertibles)? What rights and privileges do they
convey? What are the advantages and disadvantages of these instruments for the borrower? The
lender?

September 20, 2017 Details (Session 4)

Topic: Business Risk and the Effect on Documenting Deals

Preparatory Readings:
Case: The Rolling Stones Divide the Cash (In-Class Handout)
Note on Designing Shareholders Agreements
Note on Contents of a Term Sheet
Objectives:
We will have a complete discussion of the important features of term sheets and shareholders
agreement. This will allow us to complete several deal structures in future cases. We will
allocate the proceeds form a lucrative concert based on an agreed criteria BUT, can we agree?

September 25, 2017 Details (Session 5)

Topic: Pearlman & Co.

Preparatory Reading:
Case: Pearlman & Co.
Note: An integral part of this case is the EXCEL software program Pearlman 2006.xls that can
be accessed under separate distributions.
Objectives:
The objective of this case is to structure a term loan which is being proposed to finance a
leveraged buyout. Students will learn about the role of a specialized financing institution
(RoyNat), how to structure a leveraged buyout including, the financial instrument to be used;
terms of the deal including the term, interest rate, collateral, and covenants; and methods of
monitoring the loan.
Discussion Questions:
1. What criteria does RoyNat apply to loans of this type and (based on your size up of Perlman
and Company) does the company meet these criteria?
2. Assuming RoyNat intends to make the loan and based on the projected financial statements
provided, put together a financing deal for the leveraged buyout. Be sure to include the rate, term
(including a potential cash sweep), collateral and appropriate covenants. As part of this analysis
perform a sensitivity analysis to ensure that the deal can accommodate unforeseen events.

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September 27, 2017 Details (Session 6)

Topic: Pearlman & Co., continued

Preparatory Reading:
Case: Pearlman & Co.

October 2, 2017 Details (Session 7)

Topic: Angel Investing

Preparatory Reading:
Case: Ring a Wing A; Angel Investing, Dragon Investing
Objectives:
The purpose of this class is to provide an overview of the nature and role of angel investors. We
will review a Dragons Den Pitch. We will begin reviewing an angel investment in Ring a Wing.

October 4, 2017 Details (Session 8)

Topic: Angel Investing Continued

Preparatory Reading:
Case: Ring a Wing Acquisition B
Objectives: The entrepreneurial owner of Ring a Wing will offer you the business for sale. The
class will structure a deal for the purchase of this business.

October 16, 2017 Details (Session 9)

Preparatory Readings:
Case: Fabric Super Store A
Note on Franchising
Objectives: We will make a purchase offer for a business (franchise) and will need to decide
both what we can afford, and what we think the business is worth.

October 18, 2017 Details (Session 10)

Preparatory Reading:
Case: Fabric Super Store B

October 30, 2017 Details (Session 11)

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Preparatory Reading:
Case: Sterling Chemicals Case (Handed out in class)
Objectives:
This case involves buying a family business and requires reviewing financial statements to
determine real value. We will also review the deal terms and financing terms.

November 1, 2017 Details (Session 12)

Sterling Case - Continued

November 6, 2017 Details (Session 13)

Preparatory Reading:
Case: The Greenhills Challenge
Objectives:
The owner of a small tennis club faces an existential challenge from a bigger, better funded rival.
How do we meet the challenge?

November 8, 2017 Details (Session 14)

Preparatory Reading:
Case: The Greenhills Challenge
Objectives:
Review the options presented by team to save the University Tennis Club.

November 13, 2017 Details (Session 15)

Preparatory Reading:
Case: Bridgit
Objectives:
Learn the challenge of presenting a valuation while pitching to investors.

November 20, 2017 Details (Session 16)

Topic: The Entrepreneurs Exit Selling

Objectives:
We will review an entrepreneurs options for exiting a business

November 22, 2017 Details (Session 17)

Topic: The Private Equity World

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Objectives:
What do entrepreneurs need to understand about how PE firms look at their businesses.

November 27, 2017 Details (Session 18)

Topic: Review Session

November 29, 2017 Details (Session 19)

Topic: Entrepreneur Pitch

December 4, 2017 Details (Session 20)

Topic: Final Exercise

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