Jan 2015 - Sep 2016
Monday morning was a spectacularly glorious summer day in Palo Alto. A beautiful crisp sunny morning with American style continental breakfast and strong hot coffee at the Garden Court Hotel on Cowper Street set the stage for EMBA-12’s immersion into sources of capital, understanding financing options, strategic financial decision making and valuation theory.
Allen and Tim explored the types of intermediaries that serve as sources of funding, which include: investment companies, limited partnership funds and corporate venture capital firms. The two primary forms of remuneration in venture funding are through management fees and carried interest. We learned a version of a Chinese proverb in class today: “You can’t eat IRR (internal rate of return).”
Jeff Lewis, founder of Guidebook, visited the class and reviewed the conference and events industry, his journey, and evaluating whether to back the jockey or the horse (i.e., an idea or a team). The afternoon entailed looking at actual marketplace cases and being introduced to key venture capital terminology: convertible notes, pre-money, post-money. Three techniques for valuation were examined: discounted cash flows; scenario analysis; and, the venture capital method (aka – rule of thumb!). Colin West from Correlation Ventures, who incidentally was our first Guinness Book of Records presenter (he holds the record for open water rowing in a self-built boat), spoke about how to pick companies and unique approaches to valuation, including doing deals in 24-hours! The day wrapped up with a festive meal at a local Mexican neighborhood restaurant, Reposado. A great way to wind down EMBA style.Back to top of article