The NEN course on VC - Sep 19-21, 2011 - Part II

A two minute taxi drive inside the IIT Bombay campus in Powai was enough to prove IIT Chennai was not much in comparison - this campus was soooooooooooo much more beautiful!! (This is the place right outside our classroom)

The participants mix included women entrepreneurs (many of them working in the field of education) , entrepreneur consultants and faculty from b-schools who teach the subject in class. Some quick registrations later by Smija, our sweet host from NEN, we were introduced to Prof. John Mullins. Special mention to Prof. Mullins here - he was very patient with us, encouraging questions, however basic they were. We had already been assigned pre-reading lessons to us and I had gone reasonably well prepared for the discussions. The session started off with a great case study on Teamlease . The best part of Prof. Mullins' approach was that he would generate a discussion, put forth a lot of different types of questions and make us think of an answer ourselves. The first day, we discussed the types of financing, a company would need at different stages, risk reward calculation and choosing financing options.

The most important lesson for me from the first day, was this learning: "A company should start by finding out a problem. Noone will pay you to solve a non-problem.". Also, he mentioned "it is very fanciful these days to say a company has sought and received VC, but boot strapping should be priority and VC should be left as the last resort - the later you seek money, the better. The best source of capital, is your customer".

{All "rapt-attention-in-class" pictures courtesy the NEN photographer who patiently clicked away for all three days of the session :-) }

Another case study on online gifting store Myntra.com later in the afternoon showed how many successful companies started with a totally different idea first and then smartly changed their core business to fit customer needs. "Getting to Plan B ", is what counts and not "Having a plan B" - is how Prof. Mullins beautifully puts it. Then , we had the VC's perspective live - Nandini Mansinghka of the Mumbai Angels gave a straight-on-the-face session on how VCs look at a company before investing. I liked her answer when someone asked "Do you give preference if a woman was to seek funding?" - she said "we only really care if it is a good b-plan".

Dinner that night was hosted by the Cherie Blair Foundation for Women, which connects women entrepreneurs to experts in the field and offers them active mentoring. We had a nice round table, where a bunch of us got together and discussed our stories, background, businesses, life plans and more.. :-)

I came back to my room in the IIT guesthouse to read what was left of the next days pre-reading. My roomie was Prof. Sayalee from Pune - an extremely enthusiastic and vivacious lady with a never ending smile, who made my stay memorable. Through the three days, we shared a lot on our families and work life .

The next day, we went a little ahead of class time and clicked pictures by the beautiful lake side.

The day was back to back lessons in Valuation of companies and Deal Structuring. The first case for the day posed an interesting question - "one company wants to acquire another, should they go for it?". We learnt looking at the value of a company using PE and Sales multiples, rations and other parameters. We also learnt to do the "Dreaded D" in valuation, the Discounted Cash Flow to arrive at the value of a company. It was taught in a very easy to understand matter-of-fact way, which I have not seen regular text books attempt to do. We were made to think on various factors, like what rate should be used for discounting, which are the items to be included in debt, what are cash flows worth etc..

It was a striking point that the Prof mentioned "70% of all Mergers and Acquisitions destroy shareholder value as the buyer overpays".

The next case study was another interesting lesson : "How do we calculate the value of a company at different rounds of raising funds?". We learnt that if VC funding is at various time frames, then they should be treated as different rounds and the valuation done in each should be considered separately.

The story the Deep Sea World aquarium made a lovely case foe deal structuring. Like Prof. mentioned, each case study was like a soap opera - automatically urges us to know what happened next. And once we had done discussing half the case, the next part would be revealed to us - what a great way to learn! :-)

Post class , I got to know some more of the entrepreneurs in the room , listening to the challenges they faced along the road and their plans for the future. Prof. Sayalee and I decided to go explore the campus that evening after classes. We took a long walk into what looked like a lonely road in the midst of a forest, chatting away like two ladies typically would . Along the beautiful path was a spot that showed the Hirandandani layout's skyline, somewhat reflective of the irony: a protected green area on one side and how the other has changed with time and urbanization.

The hot cream-of-brocolli soup at the restaurant was absolutely delicious, adding warmth to a cool evening. Baked veggies and rotis with dal tasted even better with Prof Sayalee's hospitality. She gave us a treat, telling the dinner gang "you are all guests to our state, this one is on me".