slidessession 2 fmii bm 2015-17
TRANSCRIPT
7/24/2019 SlidesSession 2 FMII BM 2015-17
http://slidepdf.com/reader/full/slidessession-2-fmii-bm-2015-17 1/19
BM 15-17: FM II
Session 2
Uday Damodaran XLRI Jamshedpur
1
Session 2:Financing Your Start-Up: Magic or Logic?
7/24/2019 SlidesSession 2 FMII BM 2015-17
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Uday Damodaran XLRI Jamshedpur
2
The Dot Com Boom and Bust
Did something actually go wrong? Justify!
Why would it have happened? Who was responsible? If thesystem has to be re-designed what should be done?
Who are the various intermediaries? And what are their roles?
Could some of them gave failed in their roles?
BM 15-17: FM IISession 2
7/24/2019 SlidesSession 2 FMII BM 2015-17
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Uday Damodaran XLRI Jamshedpur
3
The Dot Com Boom and Bust
Who are the various intermediaries? And what are their roles?
Venture Capitalists
Investment Banks
Sell Side Analysts
Buy Side Analysts
Portfolio Managers
Auditors
Did they fail in
discharging theirresponsibilities?Why?
BM 15-17: FM II
Session 2
7/24/2019 SlidesSession 2 FMII BM 2015-17
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India…
MSME Listing
Earlier OTCEI, India’s Nasdaq
Uday Damodaran XLRI Jamshedpur
4
BM 15-17: FM II
Session 2
7/24/2019 SlidesSession 2 FMII BM 2015-17
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New Venture Financing
Text, Chapter 15
Uday Damodaran XLRI Jamshedpur
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BM 15-17: FM II
Session 2
Ud D d
7/24/2019 SlidesSession 2 FMII BM 2015-17
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Uday Damodaran XLRI Jamshedpur
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Order of raising funds
What would the first source of funds for a start-up be?
Own Funds: Why? And in what form?
And then?
BM 15-17: FM II
Session 2
Ud D d
7/24/2019 SlidesSession 2 FMII BM 2015-17
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Uday Damodaran XLRI Jamshedpur
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Order of raising funds
What would the first source of funds for a start-up be?
Own Funds
Friends, Relatives and Associates: Why? And in whatform?
And then?
BM 15-17: FM II
Session 2
Why?Information Asymmetry!
Ud D d
7/24/2019 SlidesSession 2 FMII BM 2015-17
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Uday Damodaran XLRI Jamshedpur
8
Order of raising funds
What would the first source of funds for a start-up be?
Own Funds
Friends, Relatives and Associates
Angels: Why? And what skills should they possess? In
what form will they invest?
And then?
BM 15-17: FM II
Session 2
What do they look
for? What shouldyou give them?What should youhide?
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
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XLRI 09-11: BehFin (BM)
Session 3
Uday Damodaran XLRI Jamshedpur
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A Question From My Behavioral Finance Course
What was your answer to question 4?
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
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XLRI 09-11: BehFin (BM)
Session 3
Uday Damodaran XLRI Jamshedpur
10
Even more intriguing,,,
What was your answer to question 4?
PMIR: ’09 batch/ ’10 batch/ ’11 IR A&C 4/ 2/ 12
A&D 14/ 9/ 33
B&C 2/ 0/ 3
B&D 1/ 2/ 8
? & D 0/2/ 0
BM:
A&C 7/ 2/ 3
A&D 20/ 4/ 19
B&C 3/ 0/ 0
B&D 4/ 0/ 2
Exchange
A&D 5
Focus on these!
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
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Uday Damodaran XLRI Jamshedpur
11
Order of raising funds
What would the first source of funds for a start-up be?
Own Funds
Friends, Relatives and Associates
Angels: Why? And what skills should they possess? In
what form will they invest?
And then?
BM 15-17: FM II
Session 2
What do they look
for? What shouldyou give them?What should youhide?
Information Asymmetry and Ambiguity Aversion!
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
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Uday Damodaran XLRI Jamshedpur
12
Therefore….
Better to blurt than hide?
Today’s Telegraph
BM 15-17: FM II
Session 2
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
http://slidepdf.com/reader/full/slidessession-2-fmii-bm-2015-17 13/19
Uday Damodaran XLRI Jamshedpur
13
Order of raising funds
What would the first source of funds for a start-up be?
Own Funds
Friends, Relatives and Associates
Angels
VC First Stage: What skills should they possess? In whatform will they invest?
And then?
BM 15-17: FM II
Session 2
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
http://slidepdf.com/reader/full/slidessession-2-fmii-bm-2015-17 14/19
Uday Damodaran XLRI Jamshedpur
14
Order of raising funds
What would the first source of funds for a start-up be?
Own Funds
Friends, Relatives and Associates
Angels
VC First Stage
VC Second, And Later Stages: What skills should theypossess? In what form will they invest?
And then?
BM 15-17: FM II
Session 2
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
http://slidepdf.com/reader/full/slidessession-2-fmii-bm-2015-17 15/19
Uday Damodaran XLRI Jamshedpur
15
Order of raising funds
What would the first source of funds for a start-up be?
Own Funds
Friends, Relatives and Associates
Angels
VC First Stage
VC Second, And Later Stages
Mezzanine
And then?
BM 15-17: FM II
Session 2
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
http://slidepdf.com/reader/full/slidessession-2-fmii-bm-2015-17 16/19
Uday Damodaran XLRI Jamshedpur
16
Order of raising funds
What would the first source of funds for a start-up be?
Own Funds
Friends, Relatives and Associates
Angels
VC First Stage
VC Second, And Later Stages
Mezzanine
IPO: ‘Paper gains turn into fungible wealth’
BM 15-17: FM II
Session 2
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
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IPO…
Primary Offering
Secondary Offering
Uday Damodaran XLRI Jamshedpur
17
BM 15-17: FM II
Session 2
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
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New Venture Financing…
Read Bladelogic?
Quiz?
Uday Damodaran XLRI Jamshedpur
18
BM 15-17: FM II
Session 2
Uday Damodaran
7/24/2019 SlidesSession 2 FMII BM 2015-17
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By the way…
What is a ‘unicorn’?
cbinsights.com/research-unicorn-companies
144/ $525 bn
Flipkart $15 bn
Olacabs $5 bn
Snapdeal $2.5 bn
One97 Communications $2 bn
Uday Damodaran XLRI Jamshedpur
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BM 15-17: FM II
Session 2
Contrast with theDot Com Era..These guys wantto remain private!