FINANCE & WEALTH MANAGEMENT

VENTURE
CAPITAL
 Overview
Venture capital is the fuel that drives emerging
companies and ambitious entrepreneurs
worldwide. But for every successful, disruptive,
trailblazing startup, there are dozens of other
businesses that fail, even after receiving multiple
infusions of capital.

Venture Capital, a new program from Wharton
Executive Education, will lift the veil on one of
the most exciting and perhaps least transparent
areas in finance. Designed for investors and
entrepreneurs alike, participants will come away
with a greater understanding of how venture
capital works; how the best venture capitalists
source, screen, and value deals; and how to design
contracts that protect both investors and founders.
The program will also explore how successful
entrepreneurs manage their startup finance needs
to support their innovative processes.
Venture Capital Highlights & Benefits
•  Learn how VC funds are structured; how they operate; and why organizational
structure matters to limited partners, general partners, and even founders
•  Understand how to raise capital from limited partners, including the design of
partnership agreements that enable effective relationships
•  Develop a systematic way to screen, analyze, and value high-growth
investment opportunities in nascent industries
•  Discover effective ways to manage innovative processes
•  Acquire a framework to negotiate, price, and structure the best investor terms
and navigate the shareholder’s agreement to avoid costly mistakes

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VENTURE
CAPITAL
Experience & Impact
Venture capitalists generally take a leap of faith
on a business idea or founder when choosing to
invest in a startup. They have to value a company
whose future financial success hinges on an
unproven technology or product that hasn’t been
fully commercialized or has yet to generate any
revenue. And because of the longer time horizon
Venture Capital starts with a discussion on how VC funds are organized, how
to profitability and a greater degree of uncertainty
investments are selected, and how due diligence is conducted. Participants
of achieving success, venture capital has a risk-
will examine case studies that detail a transaction from beginning to end. In
return profile that is significantly different from
this manner, participants will see how a deal is structured, learn more about
that of a conventional, established business with
the differing incentives of a VC fund and entrepreneurs, and gain a deeper
predictable revenues. As a result, the tools and
understanding of venture investing. This program will provide participants a
valuation methods venture capitalists use to
rigorous framework both to evaluate investment opportunities and to manage a
assess a business without any tangible assets is
multi-stage investment process in an innovative firm.
different too.

Session topics may include:

•  Limited Partner/General Partner Negotiation and Contracting
•  The VC Business Model: Sourcing, Screening, and Selection
•  Venture Capital Valuation Method
•  Term Sheets: The Venture Capitalist’s and Entrepreneur’s Perspectives
•  Deal Sourcing
•  Managing Innovative Processes
•  Later-Round Financing
•  Preferred Stock Valuation
•  Exit Strategies
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VENTURE
CAPITAL
 Participant Profile
Venture Capital is designed for those who
invest capital, such as angel investors as well
as institutional investors and their advisors;
entrepreneurs seeking funding for their companies
in their early stages of growth; and government
leaders looking to encourage entrepreneurship in
local markets.
Some of the job functions and roles include:
Participants may include: •  Asset managers for large public and private institutions such as pension
funds, university endowments, foundations, and corporations
•  Venture capitalists
•  Entrepreneurs who may seek VC funding •  International economic development officials

•  Investment managers and finance industry •  Sovereign wealth fund professionals

professionals who are responsible for finding •  Family office representatives and other private wealth advisors to ultra-high-
and selecting VC funds in which to invest net-worth individuals and families
•  Professional services providers, such as
CPAs and attorneys, who work frequently Additionally, the program provides an excellent opportunity for ultra-high-net-
with VC firms worth investors who are looking to make investments in venture capital funds.
•  Angel investors
•  Executives leading corporate M&A and
business development
•  Economic development and other
To further leverage the value and impact of this program, we encourage companies
government officials responsible for attracting
VC activity to a municipality or state to send cross-functional teams of executives to Wharton. We offer group enrollment
benefits to companies sending four or more participants.

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VENTURE
CAPITAL
 Faculty ADDITIONAL FACULTY

Kevin Kaiser, PhD

Bilge Yilmaz, PhD
Academic Director
Wharton Private Equity
Professor; Professor of Finance;
Director, Wharton Alternative
Investments Initiative,
The Wharton School
Bilge Yilmaz is the Wharton Private Equity
Professor and professor of finance at
the Wharton School. Prior to his current
appointment, he was a faculty member at
the Graduate School of Business, Stanford
University. He received his first degrees
in electrical engineering and physics from
Boğaziçi University and his PhD in economics
from Princeton University.
Professor Yilmaz’s research focuses on
corporate finance, alternative investments,
and political economy. Recently, he has
written on corporate governance, credit rating
agencies, hedge funds, private equity, security
design, short-selling constraints, corporate
bankruptcy, and banks’ internal risk models.
His earlier articles appeared in leading
Adjunct Professor of Finance; Senior Director,
Alternative Investments Initiative,
The Wharton School
Serguei Netessine, PhD
Professor of Operations, Information and
Decisions, The Wharton School
Ziad Sarkis
Director of Financial Research,
Wharton Alternative
Investments Initiative,
academic journals including the top three in The Wharton School
the field: Econometrica, American Economic
David Wessels, PhD
Review, and Journal of Political Economy. Adjunct Professor of Finance,
The Wharton School
Professor Yilmaz has designed a number of
courses in corporate finance and alternative
investments. He currently teaches courses
on mergers and acquisitions, private equity,
corporate bankruptcy, and European financial
markets. He also leads the Wharton School’s
Alternative Investments Initiative. Outside
of Wharton, he is actively involved in asset
management.

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VENTURE
CAPITAL
Session Highlights
VENTURE CAPITAL: FRAMEWORK
This session introduces the economic
framework the venture capital industry operates
in. Participants are exposed to standard financial
tools used by VCs, including different stages of
financing and the VC’s role in relation to angel
financing and growth equity.
VENTURE CAPITAL: ORGANIZATIONAL
STRUCTURE AND TRENDS
This session provides an overview of the
basic structure of VC funds as a product
of the incentives of different stakeholders.
It also discusses recent trends in venture
capital markets.
LP/GP CONTRACTING
This session builds on the Organizational
Structure session and discusses common
challenges in fundraising due to the conflict
of interest between GPs and LPs. Participants
will master the economics behind the most
common clauses in fund documents.
NEGOTIATING THE LP/GP CONTRACT
Participants will discuss a case study applying
the concepts mastered in the LP/GP Contracting
session, elevating their ability to better navigate
the fundraising process both as a GP and LP.
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THE VC BUSINESS MODEL: SOURCING,
SCREENING, AND SELECTION
This session kick-starts the discussion
VENTURE CAPITAL
VALUATION METHOD
Valuing a high-growth startup that is
on how VCs make investment decisions. burning cash is no easy task. In this
The session will set the stage for in-depth session, we examine the venture capital
discussion of handling how to evaluate method, which focuses on the critical
startups in a rapidly changing market. elements of startup valuation, including
market size, margin potential, exit
EVALUATING BUSINESS MODELS multiples, and the required dilution to
This session focuses on defining, fund the business. The session will mix
describing, and evaluating business practical tricks of the trade with robust
models. The participants will gain valuation theory. To close the session,
understanding of the different a link will be drawn between limited
components of the business model and partner compensation contracts and
the differences between the business startup valuation in order to assure
model of an established company and investors earn appropriate risk-adjusted
a startup. We will use business model returns, even on a net basis.
canvas to practice description of business
models for several startups and analyze
the most frequently encountered risks
that early-stage startups face when
looking for a product-market fit. We
will then discuss how to address these
risks through experimentation, piloting,
prototyping, and other lean startup
strategies. The overall goal is to cover
issues related to mitigating risks related
to business models.
VENTURE
CAPITAL
Session Highlights
THE TERM SHEET
In arranging early-stage funding for a company,
the venture capitalists and the entrepreneur(s) will
grapple with choices about the amount of money
to be raised, and the terms and conditions of the
financing. These are outlined in a term sheet that
provides descriptions, definitions, and details on
a variety of finance provisions agreed upon by
entrepreneurs and VCs. Participants will gain a
solid understanding of the specific items outlined
in the term sheet, including anti-dilution provisions,
liquidation preferences, dividends, control rights and
board composition, conversion, and participation
rights, among others.
THE TERM SHEET: VC PERSPECTIVE
The investor is concerned with maintaining upside
while protecting downside in the event the business
does not develop as hoped. As the provider of
capital, the VC has a focus on cash, controlling the
amount going in, how it is used, and when it is taken
out. While the hope might be for a public equity
offering with a huge valuation, the investor is also
aware that there are a number of exit alternatives. In
this session we will build on the previous session but
highlight the unique perspective of the investor and
how the term sheet serves the investor’s interests.
We will consider a case to demonstrate how these
terms work, provide participants an opportunity
to apply the learning, and role play the investor’s
perspective in real life.
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THE TERM SHEET: ENTREPRENEURS’
PERSPECTIVE
The entrepreneur is concerned with
financing the business to ensure it can
develop and succeed. They also wish
to ensure that they get the financial
benefit commensurate with their
contribution both as the idea generators
and managers. We will extend the insights
from the previous two sessions, but
now view the term sheets from the
perspective of the entrepreneurs and
consider a case wherein the entrepreneurs
need to select from alternative terms from
competing investors, including running
the numbers to quantify the differences
and assess which deal is best from the
entrepreneur’s perspective.
NEGOTIATING THE TERM SHEET
In this case exercise, participants will play
the roles of entrepreneur and venture
capitalist, and assess competing offers
from potential VC investors. The terms of
control, vesting of entrepreneur’s equity,
pre-money valuation, participation rights,
and other considerations will all come
into play. Each group will need to assess
the importance of alternative terms and
understand the impact of changes in the
terms on their relative position in order
to optimize the trade-offs and negotiate
the best financing possible to satisfy the
interests of both investors
and entrepreneurs.
MANAGING INNOVATIVE PROCESSES
In this session we will discover how
venture capital firms manage the
process of selecting and managing a
pipeline of startups as a portfolio. We
will discuss the process of sourcing
startup ideas, evaluating them, refining
them, and putting business models
around these ideas. We will further
examine the concept of pivoting in a
startup’s business model and how it
ties into tranches of VC financing. The
overarching goal of this session is to learn
how to mitigate risks in the investment
selection process through a carefully
orchestrated approach to managing
innovative processes in startups.
PREFERRED STOCK VALUATION
Venture capitalists receive equity stakes
with special preferences, including
significant optionality. Often the value
with embedded optionality will differ
greatly from the value listed in the term
sheet and capitalization tables. In this
session, we will use cutting-edge options
pricing theory to analyze the payoffs
embedded in the legal contracts that
define preferred stocks. The session will
translate options theory into practice for
typical contracts. We will close with a
discussion of the valuation implications
for founders and their employees.
VENTURE
CAPITAL
Session Highlights EXIT STRATEGIES
Venture capital funds have a limited
window to put money to work. General
partners must have a well-articulated
POST-MONEY FALLACY exit strategy for their investments, and
Are unicorns real? Given the embedded therefore, not every great company is a
optionality in preferred stock, traditional great investment. In this session, we will
valuation methodologies and headlines in the cover the most common exit strategies,
popular press can be extremely misleading. This including strategic acquisitions (M&A),
session builds on the previous session to analyze initial public offerings (IPOs), and
the implication of the embedded optionality in investment reductions. We will examine
preferred stocks on the valuation of startups. the implications of each on the incentives
We will provide the theoretical and practical and economic returns for both founders
underpinnings to compute the real valuation of and investors. The session will close with
a startup—taking into account the difference a forward-looking view on how founders
between preferred stock and common equity. and investors may need to adjust their
The session will close with a practical look philosophies and management styles to
at how much the actual and quoted startup better align their startups with the market
valuations can diverge round by round. and the growing popularity of M&A as an
exit strategy.
LATER-ROUND FINANCING
As companies mature, they may need additional
rounds of financing, involving different contract
terms between the venture capitalists and
the company. These differences may include
liquidation preferences, dividends, board control,
and rights of entrepreneurs. The complexity only
rises with each successive round. This session
analyzes the impact of each subsequent round on
the economic structure for the previous investors
and for the founders. We will use this to define
the key questions and factors that founders and
early-stage investors need to consider with later-
stage financing.

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VENTURE
CAPITAL
Sample Program Schedule* VENTURE
CAPITAL

DAY 1 DAY 2 DAY 3 DAY 4 DAY 5

BREAKFAST

Program Introduction Evaluating Business Models The Term Sheet Managing Innovative Exit Strategies
Processes

The Venture Capital

Framework The Term Sheet: LPs’ Perspective
VC Perspective

Venture Capital:
Organizational Structure
and Trends

LUNCH
LP/GP Contracting Venture Capital The Term Sheet: Preferred Stock Valuation Program Closing
Valuation Method Entrepreneurs’ Perspective
Case: Negotiating the
LP/GP Contract Case: Negotiating The Post-Money Fallacy
the Term Sheet
The VC Business Model: Case: Startup Valuation
Sourcing, Screening, and
Selection guest speaker: Later-Round Financing
Deal Sourcing and and Negotiations
networking reception guest speaker Negotiating the Term Sheet

DINNER OFF-SITE DINNER DINNER

n Executive Event n Group Work n Lecture

SCHEDULE A CONSULTATION:

+1.215.898.1776 (worldwide) | execed@wharton.upenn.edu

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*Program start and end times are subject to change.
Please DO NOT make travel arrangements based on this agenda.

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