EE204: Business Management for
Electrical Engineers and Computer Scientists

Venture Capital

Read

1. How Venture Capital Works (HBS materials)
2. Alternate Sources of Funding
3. Nantero (HBS materials)

Case Summary

This case describes a decision confronting the founder of Nantero, a company developing a new semiconductor technology. The company needs to raise additional venture capital. Potential investors have competing visions for the company, and its business model. Some investors want the company to license its technology to semiconductor companies. Others want the company to become a "fabless" semiconductor company producing and selling its own products. The question for the team at Nantero is, what model makes sense and which investor offers the most attractive terms?

Discussion Questions

1. Respond, as Nantero, to the following questions posed by the venture capitalists:
   • What do you want the money for?
   • How much do you want?
   • What are the most compelling points for a venture capitalist to invest in Nantero?
2. As a venture capitalist, how do you assess the opportunity with Nantero? Consider timing, competition, opportunity, time to liquidity, and magnitude of return.
3. Compare the term sheets from Zeus Capital Ventures and Saturn Ventures. As CEO of Nantero, which one would you accept? Are there any terms you would like to negotiate?
4. How much capital do you see Nantero needing before reaching a liquidity event? Where might additional capital come from?
5. What are the possible liquidity strategies for Nantero shareholders? Which is best from the company, employee, and investor perspective?
6. Using the Druker reading, "The Discipline of Innovation", what category of innovation best describes Nantero? How does this affect your willingness to invest?

Extra Credit

You represent the CEO and executives of Nantero. Create and present to the class a 5-slide pitch on why Zeus and Saturn should invest in your company.

• Three volunteer teams will be given time to present at the start of class.
• Each team will have five minutes to present their slides.
• Preference will be given to teams who did not present slides in class previously (for the first written assignment).
• Interested teams should notify Blair via email, blairbo_at_stanford_dot_edu, by 5pm on Monday, 5/7/12.
• Teams will be selected on a first-come, first-served basis, subject to eligibility/preference stated above.

SCPD Students

See the SCPD Resource Page for general information on assignment submission, team building, expectations, and getting help. See the SCPD Grading Page for evaluation procedures for daily written assignments.

Written work should be submitted using SCPD Homework Processing procedures.

All times listed below are PDT (California time).

1. Complete the assigned readings and submit answers to the Discussion Questions in Writeup 1 (1 page) by 9am Tuesday 5/8/2012.
2. The videotaped class meeting should be available via SCPD by 2pm, Tuesday 5/8/2012.
3. Watch the video of the class meeting and meet with your team to discuss.
4. Submit Writeup 2 (1-2 pages) by 9pm Sunday 5/13/2012. This writeup should include the following:
   • A summary of the main points of the class discussion
   • Any points from the discussion that you found particularly enlightening or disagreed with
   • A discussion of how your initial responses did or did not align with the direction of the class discussion
   • A revised go-forward strategy for Nantero