Entrepreneurial Finance

On June 6, 2011, in Business School, by Jeremy C Wilson

This quarter, I’ve probably had one of the most most interesting sets of classes that I’ll have in my JD-MBA career.  Not only are the classes interesting and useful but they’re also taught great professors and are a lot of fun. Among others, the classes include Leadership Coaching, Media and Interactive Marketing (i.e. Social Media), and Perspectives on Leading a Sports Entity among others. But perhaps the most interesting of all is Entrepreneurial Finance class, taught by Professor Steven Rogers.

Entrepreneurial Finance is exactly the kind of class I came to business school for.  First because I don’t necessarily now a lot about finance yet, so this class has been a solid way to learn more. Second, because I have a very strong interest in entrepreneurship, not only academically but also professionally.  And as I learned the first day of class, back in April, I wasn’t the only one here at Kellogg that felt this way.

In fact, I remember the first day of class quite clearly. I went to class a bit early to make sure I got a good seat.  And to my surprise dozens of others had already done the same thing. Upon entering the room, I noticed that the classroom was packed from side to side.  And right away you could tell that Professor Rogers thrived in that type of setting. He was lively, engaging, and energized. Definitely skilled at the art of running the classroom.

Fortunately, he’s brought his skill and experience to every class this quarter. Throughout the quarter we’ve answered questions like should I join this start-up? How much equity should I negotiate for? How would I finance this company? And last but not least, what is the value of this business? If nothing else, he’s pounded into us that valuation is a central theme for entrepreneurs.

Twenty five million said one student. Twelve million says another. And forty million was the number I had in my head. At times none of us were right. But at other times, we were all right. That’s because valuation is as much an art as it is a science. And often times there are no right answers. After going through that, he then asks us to evaluate the industry. Then the company. Then the acquirer to determine whether it is a good deal.

You could probably imagine a group of 104 people with different views about what’s valuable and what goes into a good decision. Likewise, each of us has our own level of preparation, both quantitatively and qualitatively. So our viewpoints are often pretty different.

And the professor loves all the different viewpoints. He has a natural enthusiasm for hearing what we all will bring to the case. The challenge of pushing a classroom to bring out more ideas and understand the case better and better.  In some cases, he’ll challenge your assumptions. He’ll ask you why or why not? He’ll force you to respond more clearly and more decisively. No matter what it is you believe.

Because ultimately we’re learning that there’s not always one right answer. That whatever criteria we use to buy a business can work well. And that whatever way we choose to value, can work too – whether using revenues, EBITDA, or Price to Earnings.

And in the end, we see that entrepreneurship is not about being right or wrong, but instead about figuring out how to spot opportunity, deal with uncertainty,  and create value.  And that it was also about how you can gather more information to make better decision and persuade others to believe in you and your idea.

Like I said, this is the kind of class I came to Kellogg for.  Only one problem. Our final exam for the class is due tomorrow. So back to studying and finishing up the case I have to write up.

 
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