Description
During this such a brief information about a newsletter of the entrepreneur and venture capital group.
GSB New Vent ur e New s 1
EVC Group Launches
"GSB New Venture News"
by J eff Webb GSB ‘99
The Entrepreneur and Venture Capital Group is proud to announce
the launching of GSB New Venture News, the GSB’s first newsletter
dedicated to students and alumni involved in entrepreneurial and
private equity careers. This first introductory issue serves as our
“97-98 Year in Review,” and next year the EVC plans to issue one
newsletter each quarter during the school calendar.
What’s the purpose of the “GSB New Venture News”?
We are launching GSB New Venture News to help foster a network
among students and alumni by keeping people “plugged in” to both
news about alumni in industry and major activities/events on
campus. A number of GSB alumni have expressed interest in a
newsletter as a way to improve communication within the segment
of the GSB community focused on entrepreneurial and private
equity professions. The newsletter will feature articles on subjects
including major GSB initiatives, such as the proposed Center for
Entrepreneurship (see next column), campus activities of the
Entrepreneur and Venture Capital Group, and news of alumni
entrepreneurs and private equity professionals.
What is the EVC Group?
The Entrepreneur and Venture Capital Group is a student-led group
that was started at the GSB several years ago. From a membership
of less than 50 in 1995, the group has grown to include over 200
current students. Our mission is threefold:
• Educate students about the world of private equity and
entrepreneurship
• Provide potential opportunities for career placement
• Educate and promote major GSB activities and events to the
entrepreneur and private equity communities.
The EVC Group performs a number of functions on campus
including hosting distinguished guest speakers and coordinating
GSB Launches Drive Towards
Center for Entrepreneurship
by Mark Holroyd GSB '99
Over the past year, the University of Chicago Graduate School of
Business has begun laying the groundwork for the launch of the
Center for Entrepreneurship. Professor Steven Kaplan, who
teaches the perennially popular course on Entrepreneurial Finance
and Private Equity at the GSB, is leading this effort.
Prof. Kaplan envisions positioning the GSB as the premier business
school in the Midwest for entrepreneurship and venture capital,
similar to the reputations Stanford and Harvard enjoy on the West
and East Coasts, respectively. Prof. Kaplan is trying to get the
Center formally established and operational as soon as possible.
Dean Robert Hamada is committed to raising $10,000,000 to start
the Center and hopes to make concrete progress towards its
establishment during the next twelve months.
According to Prof. Kaplan, the goal of the Center is to better
integrate and institutionalize many of the academic and experiential
aspects of entrepreneurship and private equity found at the GSB
today. Specifically, by establishing the Center, Prof. Kaplan
envisions strengthening and building upon such programs as the
New Venture Challenge (see related article on page 2) and ARCH
Ventures, the venture capital firm associated with the University of
Chicago.
The Administration hopes to endow the New Venture Challenge as
part of the Center for Entrepreneurship. Additional initiatives
include developing courses around ARCH, modeled after the New
Product Lab courses offered at the GSB. The Center also aims to
continued on page 2
continued on page 2
Volume 1, Issue 1 Summer 1998
GSB New Venture News
A Newsletter of the Entrepreneur & Venture Capital Group
The University of Chicago Graduate School of Business
=========
... Prof. Kaplan
envisions
positioning the GSB
as the premier
business school in
the Midwest for
entrepreneurship
and venture
capital...
=========
Professor Steven N. Kaplan
I NSI DE THI S I SSUE...
• GSB makes plans for “Center for
Entrepreneurship” (pg. 1)
• Ed Kaplan New Venture Challenge awards
$30K in cash to student venture ideas (pg. 2)
• GSB private equity alumni visit campus to
share thoughts on industry (pg. 4)
• ‘98-99 Preliminary schedule of events (back)
GSB New Vent ur e New s 2
student activities including the EVC resume book and the Ed
Kaplan New Venture Challenge.
Who’s on the mailing list?
Students in the EVC group, campus faculty, and GSB (and non-
GSB) professionals working as entrepreneurs or in the private
equity field.
We are very interested in your feedback. If you have comments or
suggestions on the newsletter, articles you would like to see, or
ideas about the EVC group in general, please e-mail them to:
[email protected].
We look forward to hearing from you.
Sincerely,
EVC Group Co-Chairs:
Gretchen Frary GSB '99([email protected])
Gautam Patel GSB '99([email protected])
Rahul Sachdev GSB '99([email protected])
Frank Truong GSB '99([email protected])
J eff Webb GSB '99([email protected])
continued from page 1
Ed Kaplan New Venture Challenge
Awards $30,000 in Cash Prizes
by Frank G. Truong (NVC Chair) GSB '99
A distinguished panel of 11 judges heard business plan
presentations from six finalist student teams in the second Ed
Kaplan New Venture Challenge on Friday, May 29 at the
downtown Gleacher Center. The Ed Kaplan New Venture
Challenge (NVC) is a competition in which students develop
business plans in hopes of winning cash prizes to launch high-
potential new ventures.
Winning teams this year were:
FIRST PLACE (Grand Prize of $20,000) J ake Crampton, Everett
Truitt, Gary Seelen, Zia Imran, and Tomasz Durzynksi, all
members of MBA Class of 1998.
SECOND PLACE ($7,000 Prize) J ulie Diop, Kamaljit Bagga,
Soujanya Bhumkar, Michael Walkley, and Mark Anglin, all
members of MBA Class of 1999.
THIRD PLACE ($3,000 Prize) Darrell Cronan, Evening
Program.
(Specific business plan ideas have been initially requested to
remain confidential.)
Aside from cash prizes, winning teams receive free value-added
consulting advice from Bain & Company. This is the second year
that the EVC Group has sponsored the NVC. The panel of 11
judges for this year’s NVC, 10 of whom are GSB alumni, included
five very successful entrepreneurs, five venture capitalists, and one
Bain & Company consultant. The contest is managed by a
committee of five first year EVC Group members.
This year’s NVC included three sponsors: Ed Kaplan (GSB
Alumni and CEO of publicly-traded Zebra Technologies); John
Davies of the Bishopric Foundation; and Bain & Company. Bain
& Company contributed cash and provided 500 hours of consulting
services to 16 teams that advanced to the second round. Over 30
consultants from Bain assisted the 16 teams in the preparation of
their complete business plans.
Each team, which must have at least one member from the GSB,
submits a five-page Executive Summary in the first round and
complete business plans in the second round. If selected as
finalists, the teams present to a panel of 11 judges. This year, four
teams were from the full-time program and the remaining two were
from the evening and weekend programs.
As a testament of the quality of business ideas generated, one team
from last year’s competition, led by GSB student Hayes Batson,
obtained one million dollars in funding to start an internet software
company which was recently featured in the March 1998 edition of
Inc. magazine. Mr. Batson worked as a McKinsey & Co.
consultant and William Blair & Company investment banker
before attending the GSB.
In the first two years of competition, 67 teams submitted Executive
Summaries in the first round. This year, 33 teams (total of 94
members including MBA’s from the full-time, part-time, and
endow chairs for tenured faculty positions in entrepreneurship and
to provide funding for research grants and projects in the field of
entrepreneurship and private equity. The Center will also oversee
curriculum development for the concentration in Entrepreneurship,
created this past year.
Toward this end, two new classes will strengthen the
entrepreneurship concentration next year. Professor Toby Stuart
will teach a course on "Technology Strategy" and Jim Schrager
will teach a course entitled “Entrepreneurship in Organizations.”
These courses will be in addition to Entrepreneurial Finance and
Private Equity (B338), New Enterprise and Small Business
Management (B484), New Venture Strategy (B485), Special
Topics in Entrepreneurship (B585), and Structuring Venture
Capital and Entrepreneurial Transactions (L530) taught by Jack
Levin at the law school.
The GSB is looking for an Executive Director for the Center and
Prof. Kaplan encourages alumni interested in this position to get in
touch with him or Dean Hamada. Of course, Prof. Kaplan is quick
to point out that other forms of alumni interest and support
(particularly, financial contributions) furthering this cause are, of
course, welcome.
GSB New Venture News
Center for Entrepreneurship
continued from page 1
continued on page 3
GSB New Vent ur e New s 3
On Thursday, April 9th, the Entrepreneur and Venture Capital
Group along with the Advanced Technology Management Group
hosted Tom Huseby, Managing Director of Seapoint Ventures.
Seapoint Ventures, founded in 1997, is a venture capital firm
located in Seattle that specializes in wireless communications and
Internet-related businesses.
Mr. Huseby spoke before a standing room only crowd in Stuart
Hall and gave a sixty-minute presentation titled “Lessons Learned
in the Pursuit of Venture Capital.” Mr. Huseby has spent
considerable time on both sides of the venture capital table. He was
the founder of three wireless equipment companies prior to his
latest endeavor at Seapoint Ventures and has a great deal of
experience in selling an idea to a venture capitalist.
In the first part of his presentation, Mr. Huseby discussed what he
considers the four steps to coming up with a successful business
plan: solve an important problem, solve it for companies that have
money to spend on the solution (he feels that the financial payoff is
too unpredictable if your idea solves problems for individuals),
solve it convincingly (if possible have an exclusive on the idea),
and finally, solve it with a great team effort (he emphasized that
already having a capable team assembled is important to venture
capitalists).
In the second part of his presentation Mr. Huseby discussed what
an entrepreneur or a VC should be cognizant of after a financial
agreement has been reached. He likened the relationship between
the parties to a marriage. In order to avoid future conflicts, the two
parties should be careful when signing contracts, which he likened
to a pre-nuptial agreement. A good agreement (for both parties)
will not have performance price formulas (which gives the VC a
larger percentage of the company if the expected return is not met),
ratcheting anti-dilution agreements (which gives the VC the ability
to buy stock at the lowest price any share of stock is sold for) or
many managerial conflicts or super majority voting agreements.
Any of these provisions could cause a great deal of anguish for
both parties in the future.
Equally important, an entrepreneur should remember that there is
no honeymoon after the contract is signed. The venture capitalist
expects results. Thus, it is important for both sides to know each
other’s expectations and to be in constant communication. One
must also remember that conflict is part of the process.
During the question and answer period, a student asked how much
money an entrepreneur should be willing to invest in his/her own
idea. While acknowledging the fact that VCs definitely feel more
comfortable working with someone who has a personal stake in the
idea, Mr. Huseby stated that it is not always necessary.
Tom Huseby of Seapoint Ventures speaks at the GSB
Moreover, he discussed how some people will sell everything they
have and take out a second mortgage on their home in pursuit of
their goal. People get emotionally involved in a project and in Mr.
Huseby’s experience, for an entrepreneur, a cost “ain’t sunk until
you’re in the poorhouse.”
Mr. Huseby also gave a little personal advice to those individuals
who are thinking about approaching a venture capitalist. First, you
should ask yourself if you are willing to give up total control of
your company. Once you sell stock to a VC, you sold your
company. Second, VCs may put some unpleasant strings on any
financial backing. For instance, a VC may ask you to restructure
your team. This may mean telling your best friend or brother that
they will have to give up their role as C.F.O.
weekend programs, 18 outsiders, and 1 J D/MBA) participated in
the first round. At the end of the second round, Professor Steve
Kaplan, faculty advisor for the NVC, stated that “…quality of
this year’s business plans was exceptional.”
One factor that contributed to the quality of business plans was
the inception of Business 585: Special Topics in
Entrepreneurship-Seminar in Developing a Business Plan, taught
by Professor Kaplan. This class was offered in Spring Quarter
1998 to over 30 students who advanced to the second round.
For further details regarding the New Venture Challenge please
see our website gsbwww.uchicago.edu/student/nvc/. The NVC
Committee is currently in the planning phase to significantly
increase the level of participation for the Third Annual Ed Kaplan
New Venture Challenge. If you would like your firm to be a
corporate sponsor or have any questions/comments, please e-mail
Frank Truong (MBA99), NVC Chair and EVC Group Co-Chair,
at:
[email protected].
continued from page 2
Venture Capital Firm Founder, Tom Huseby, Speaks at GSB
by Steve Resnikoff GSB '98
New Venture Challenge
GSB New Vent ur e New s 4
Proxicom CEO and VC Investors
Share Insights to Launching and
Funding Internet Business
by Michelle Burchfiel GSB '99
On J anuary 14th, while a few inches of snow blanketed campus,
students interested in entrepreneurship and venture capital braved
the weather to hear about the venture capital industry and the
success of Proxicom. Proxicom was founded by its current CEO,
Raul Fernandez, in 1991 and has been a pioneer in the internet-
based business solutions arena. Proxicom received the first Gold
Clio award for Web site design in 1996 and was awarded
KPMG’s 1997 High Tech Entrepreneur Award.
Mr. Fernandez has grown this high-tech phenomenon to a 205-
employee, $17 million company, with 100% annual revenue
growth, even though he does not have a standard technical
background. He claims his start with technology was “doing
spreadsheets for Senator Jack Kemp,” for whom he worked
from 1984 to 1988.
The spirit of Proxicom’s founding father is represented by the
fact that Mr. Fernandez invested his own savings to start
Proxicom. He says having your own money invested instills the
mentality that everything is on the line—it’s fourth and ten at the
end of the game and you’re out of time-outs. And even with
Proxicom’s stunning growth, this mentality still exists and
continues to contribute to the success of the company.
Another reason for Proxicom’s success is its broad product
offering. It offers three traditional skill sets that are typically
provided to corporations by three different suppliers. First,
Proxicom offers internet strategy consulting—how a company
can take their business to the internet and develop a competitive
advantage. Second, Proxicom offers strategic marketing and
advertising to clients. Third—the largest of the three according to
Proxicom’s revenues and number of employees—is application
development and systems integration.
Ms. Eleana Gordon, Proxicom’s Director of Corporate
Development offered a unique perspective, as she previously
worked at venture capital firm General Atlantic on the deal to
invest in Proxicom. She said VC prepared her for the corporate
development role as she did a lot of mergers and acquisitions
work. Also, she spent a lot of time interviewing customers during
her due diligence at General Atlantic and recognized the strength
of that source of information. In fact, she currently speaks to
Proxicom customers at least once per week to find out the
company’s strengths and weaknesses and where customers think
the company should venture in the future.
continued on page 5
GSB Private Equity Alumni
Address Students in Panel
by Dhurander Bhatawadekar GSB ‘98
In mid-April, the EVC Group hosted the “GSB Private Equity
Alumni Panel” consisting of three people currently working in the
venture capital and leveraged buyout community.
The three speakers were: Keith Yamada (GSB '95), currently
working at Continental Illinois Venture Corporation; Karen
Kerr, from ARCH Venture Partners, a graduate student of the
University of Chicago’s Chemistry Department; and Ray
Rabindran (GSB '93), of Domain Associates.
The goal of the meeting was for the three panelists to discuss their
experiences and to provide insights on how to launch a career in the
field. The three discussed their backgrounds, the various career
decisions they’ve made in their professional life, and how they
developed the skills and experience necessary to land positions in
the industry.
In addition, Ms. Kerr and Mr. Rabindran, both of whom were
Kauffman Fellows, described the Kauffman Fellows program and
encouraged students to apply. Briefly, the Kauffman Fellows
Program is a two-year paid fellowship in which selected individuals
get the opportunity to work at a venture capital firm. Individuals
apply for the fellowship, and those who reach the last round
participate in a two-day series of interviews with numerous VC
firms to find the right “match.”
Please see the Kauffman web site at www.emkf.org if you are
interested in applying. Note that applications for this year’s
selection process are due September 11.
Panelist Keith Yamada, who started with CIVC eight years ago
before attending the GSB, and subsequently returned to the firm
after graduating in 1995, offered some insights to what types of
professional experience might be applicable to private equity. He
mentioned that a lot of people get into venture capital and private
equity from management consulting and investment banking.
Investment banking helps in the finance area, but the range of
experiences working in different industries in a consulting
environment is also important. At CIVC, Mr. Yamada focuses
primarily on niche businesses generating cash flows of fifty to two
hundred million dollars.
Ray Rabindran received a Ph.D. in Biochemistry from MIT and
received a six-month Kauffman fellowship. When asked if there
were any courses that helped the panelists in their careers, Mr.
Rabindran mentioned that he had taken a “Cases in Entrepreneurial
Finance and Management” class that was extremely useful. He still
refers to some of the cases when sorting through various issues.
Karen Kerr started working for Arch Venture partners after it was
spun off from Arch Derivatives Corporation. Her clients include the
University of Chicago and Argonne National Labs. She focuses
on biotech and high tech firms. Her firm has raised over twelve
billion dollars, which has been put into over three thousand venture
capital projects. Ms. Kerr also credited the Kauffman fellowship for
helping her get into private equity and venture capital.
One student questioned the panel about any setbacks they had
experienced when trying to enter the industry. Mr. Rabindran
mentioned that the hardest thing for him was gaining access to the
VC community. He emphasized that “access is key. Who you know
is really important in the business.” Keith Yamada commented that
people in venture capital and private equity “are really notorious
about not returning phone calls.”
GSB New Vent ur e New s 5
VCs Fund Proxicom
continued from page 4
When Proxicom received its first venture capital in 1996, it had
revenues of $8 million and was doubling its revenues each
year. Mr. Fernandez explained why Proxicom brought in VC as
a simple cost-benefit analysis. The amount of expertise that
came with the VC was greater than the equity position
surrendered.
Proxicom chooses venture capitalists that have dealt with
issues it is, or expects to be, facing and who can otherwise add
value to Proxicom. Proxicom has had the luxury to choose its
venture capitalists as it has received an unsolicited offer of
funds about once every two weeks for the last two years,
according to Mr. Fernandez.
Gene Riechers, Managing Director in charge of Venture
Investments at the investment banking firm of Friedman,
Billings & Ramsey, and Roger Horwitz, a Director in GE
Capital’s Corporate Technology Ventures Group, are
representatives of two VC firms chosen by Proxicom in the last
two years. These gentlemen shared insights into the VC
industry. According to Mr. Horwitz, “Raul is a seasoned CEO
and could take Proxicom into the public market as an IPO. That
is rare; many young companies fail to have this [a seasoned
CEO] taken care of. “
Mr. Riechers offered advice and some startling statistics. He
said, “VC is much more a time management game than a
money management game. You have to look for deals where
no one else is looking, and you have to make quick decisions.”
Last year, he spent less than ten minutes reviewing 90% of the
business plans that crossed his desk. Out of 400 proposals he
received last year, he did 6 deals.
He also gets 5-10 resumes per week from people looking to get
into the VC industry. He said there are three ways to get into
the VC industry. First, receive an undergraduate, technical
degree, then work for a few years in industry, return for your
MBA at a top school, and then try to get into a VC firm. This is
a very competitive route. Alternatively, one could work for
years in industry, get a lot of great experience, and then enter
the VC industry. The final alternative is to start your own
venture fund.
As for a job that will lead to the VC industry after two years
out of business school, Mr. Riechers offered some sobering
advice. Go into a job because you are passionate about it, not
because you think it is a stepping stone to VC, because all jobs
are stepping stones. Find something you believe in and want to
be in and do it.
Finally, all the panelists gave some tips for would-be
entrepreneurs. First, you need some work experience, though it
may have been before entering the GSB. Second, give the
venture capitalists a clue that you know you do not know
everything—for instance, bring in outside board members, hire
a good attorney and a good accountant. Third, you must be
willing to fail. Finally, if you have the drive to do it, then do it.
THE STUDENT’S CORNER ===============
A Web Gui de For t he Buddi ng
Vent ur e Capi t al i st
by Davi d C. Mc Cl el l an, GSB ‘98
For students interested in learning more about
the private equity industry, jump-start your
education by checking out the following web
pages:
• www.v1.com: Venture One provides
“ critical investment information on the
nation’s most promising venture-backed
companies.” Includes quarterly VC
industry statistics and news and online
resources for entrepreneurs.
• www.redherring.com: Red Herring
provides fun yet insightful info on venture
capital firms and the entrepreneurs who
they back.
• www.upside.com: Upside Online provides
the latest Silicon Valley news and gossip.
• www.pw.com/vc: Price Waterhouse
publishes a quarterly venture capital
survey that includes statistics, trends and
a listing of virtually every VC firm. The
latter contains a “ skinny” for each VC firm
and often a link to the firm’s web site.
• www.once.com/gcg: The Growth
Company Guide to Investors, Deal
Structures, and Legal Strategies. A 302
page online book on the industry,
organized by topic.
• www.ideacafe.com/getmoney/FINANCING.
shtml: Idea Cafe provides info for the
entrepreneur seeking VC funding.
• pubweb.acns.nwu.edu/~sra858/entrep.html
: The Kellogg “ resources for
entrepreneurs” page offers links to several
handy sites, including other MBA clubs
such as HBS, MIT, Berkley, and Stanford,
and to networking organizations.
GSB New Vent ur e New s 6
Entrepreneur & Venture Capital Group
c/o Office of Career Services
University of Chicago Graduate School of Business
1101 E. 58
th
Street
Chicago, IL 60637
ADDRESS CORRECTION REQUESTED
Fall Quarter
• Kauffman Fellow applications due: September 11
• EVC New Membership/Kick-off Event with Prof.
Steven Kaplan—Week of Sep. 28
• EVC Pub Night—October 8
• 3rd annual Ed Kaplan New Venture Challenge
Official Kick-Off Event with Distinguished Guest
Speakers—Week of November 9
• NVC: Teambuilding Events among GSB, University
of Chicago graduate schools, and Illinois Institute of
Technology undergraduate engineering
students—TBD
• EVC Distinguish Speaker Event—Week of November
16
• EVC & ARCH: Workshop with ARCH CEO’s
Business Plans—TBD
Winter Quarter
• GSB Entrepreneurship & Private Equity
Conference—tentatively scheduled for Jan/Feb 1999
• NVC Guest Speakers: How to create a business plan
& lessons learned from previous winning
teams—TBD
• NVC: Phase I Summary Business Plans due —Week
of February 22
• Private Equity Alum Panel—TBD
Spring Quarter
• NVC: Phase II business plans due—Week of May 10
• Speaker Series Event—TBD
• NVC: Phase III presentations—May 28
PRELIMINARY SCHEDULE OF EVENTS
1998-99 School Year
=======================================================================
doc_248190160.pdf
During this such a brief information about a newsletter of the entrepreneur and venture capital group.
GSB New Vent ur e New s 1
EVC Group Launches
"GSB New Venture News"
by J eff Webb GSB ‘99
The Entrepreneur and Venture Capital Group is proud to announce
the launching of GSB New Venture News, the GSB’s first newsletter
dedicated to students and alumni involved in entrepreneurial and
private equity careers. This first introductory issue serves as our
“97-98 Year in Review,” and next year the EVC plans to issue one
newsletter each quarter during the school calendar.
What’s the purpose of the “GSB New Venture News”?
We are launching GSB New Venture News to help foster a network
among students and alumni by keeping people “plugged in” to both
news about alumni in industry and major activities/events on
campus. A number of GSB alumni have expressed interest in a
newsletter as a way to improve communication within the segment
of the GSB community focused on entrepreneurial and private
equity professions. The newsletter will feature articles on subjects
including major GSB initiatives, such as the proposed Center for
Entrepreneurship (see next column), campus activities of the
Entrepreneur and Venture Capital Group, and news of alumni
entrepreneurs and private equity professionals.
What is the EVC Group?
The Entrepreneur and Venture Capital Group is a student-led group
that was started at the GSB several years ago. From a membership
of less than 50 in 1995, the group has grown to include over 200
current students. Our mission is threefold:
• Educate students about the world of private equity and
entrepreneurship
• Provide potential opportunities for career placement
• Educate and promote major GSB activities and events to the
entrepreneur and private equity communities.
The EVC Group performs a number of functions on campus
including hosting distinguished guest speakers and coordinating
GSB Launches Drive Towards
Center for Entrepreneurship
by Mark Holroyd GSB '99
Over the past year, the University of Chicago Graduate School of
Business has begun laying the groundwork for the launch of the
Center for Entrepreneurship. Professor Steven Kaplan, who
teaches the perennially popular course on Entrepreneurial Finance
and Private Equity at the GSB, is leading this effort.
Prof. Kaplan envisions positioning the GSB as the premier business
school in the Midwest for entrepreneurship and venture capital,
similar to the reputations Stanford and Harvard enjoy on the West
and East Coasts, respectively. Prof. Kaplan is trying to get the
Center formally established and operational as soon as possible.
Dean Robert Hamada is committed to raising $10,000,000 to start
the Center and hopes to make concrete progress towards its
establishment during the next twelve months.
According to Prof. Kaplan, the goal of the Center is to better
integrate and institutionalize many of the academic and experiential
aspects of entrepreneurship and private equity found at the GSB
today. Specifically, by establishing the Center, Prof. Kaplan
envisions strengthening and building upon such programs as the
New Venture Challenge (see related article on page 2) and ARCH
Ventures, the venture capital firm associated with the University of
Chicago.
The Administration hopes to endow the New Venture Challenge as
part of the Center for Entrepreneurship. Additional initiatives
include developing courses around ARCH, modeled after the New
Product Lab courses offered at the GSB. The Center also aims to
continued on page 2
continued on page 2
Volume 1, Issue 1 Summer 1998
GSB New Venture News
A Newsletter of the Entrepreneur & Venture Capital Group
The University of Chicago Graduate School of Business
=========
... Prof. Kaplan
envisions
positioning the GSB
as the premier
business school in
the Midwest for
entrepreneurship
and venture
capital...
=========
Professor Steven N. Kaplan
I NSI DE THI S I SSUE...
• GSB makes plans for “Center for
Entrepreneurship” (pg. 1)
• Ed Kaplan New Venture Challenge awards
$30K in cash to student venture ideas (pg. 2)
• GSB private equity alumni visit campus to
share thoughts on industry (pg. 4)
• ‘98-99 Preliminary schedule of events (back)
GSB New Vent ur e New s 2
student activities including the EVC resume book and the Ed
Kaplan New Venture Challenge.
Who’s on the mailing list?
Students in the EVC group, campus faculty, and GSB (and non-
GSB) professionals working as entrepreneurs or in the private
equity field.
We are very interested in your feedback. If you have comments or
suggestions on the newsletter, articles you would like to see, or
ideas about the EVC group in general, please e-mail them to:
[email protected].
We look forward to hearing from you.
Sincerely,
EVC Group Co-Chairs:
Gretchen Frary GSB '99([email protected])
Gautam Patel GSB '99([email protected])
Rahul Sachdev GSB '99([email protected])
Frank Truong GSB '99([email protected])
J eff Webb GSB '99([email protected])
continued from page 1
Ed Kaplan New Venture Challenge
Awards $30,000 in Cash Prizes
by Frank G. Truong (NVC Chair) GSB '99
A distinguished panel of 11 judges heard business plan
presentations from six finalist student teams in the second Ed
Kaplan New Venture Challenge on Friday, May 29 at the
downtown Gleacher Center. The Ed Kaplan New Venture
Challenge (NVC) is a competition in which students develop
business plans in hopes of winning cash prizes to launch high-
potential new ventures.
Winning teams this year were:
FIRST PLACE (Grand Prize of $20,000) J ake Crampton, Everett
Truitt, Gary Seelen, Zia Imran, and Tomasz Durzynksi, all
members of MBA Class of 1998.
SECOND PLACE ($7,000 Prize) J ulie Diop, Kamaljit Bagga,
Soujanya Bhumkar, Michael Walkley, and Mark Anglin, all
members of MBA Class of 1999.
THIRD PLACE ($3,000 Prize) Darrell Cronan, Evening
Program.
(Specific business plan ideas have been initially requested to
remain confidential.)
Aside from cash prizes, winning teams receive free value-added
consulting advice from Bain & Company. This is the second year
that the EVC Group has sponsored the NVC. The panel of 11
judges for this year’s NVC, 10 of whom are GSB alumni, included
five very successful entrepreneurs, five venture capitalists, and one
Bain & Company consultant. The contest is managed by a
committee of five first year EVC Group members.
This year’s NVC included three sponsors: Ed Kaplan (GSB
Alumni and CEO of publicly-traded Zebra Technologies); John
Davies of the Bishopric Foundation; and Bain & Company. Bain
& Company contributed cash and provided 500 hours of consulting
services to 16 teams that advanced to the second round. Over 30
consultants from Bain assisted the 16 teams in the preparation of
their complete business plans.
Each team, which must have at least one member from the GSB,
submits a five-page Executive Summary in the first round and
complete business plans in the second round. If selected as
finalists, the teams present to a panel of 11 judges. This year, four
teams were from the full-time program and the remaining two were
from the evening and weekend programs.
As a testament of the quality of business ideas generated, one team
from last year’s competition, led by GSB student Hayes Batson,
obtained one million dollars in funding to start an internet software
company which was recently featured in the March 1998 edition of
Inc. magazine. Mr. Batson worked as a McKinsey & Co.
consultant and William Blair & Company investment banker
before attending the GSB.
In the first two years of competition, 67 teams submitted Executive
Summaries in the first round. This year, 33 teams (total of 94
members including MBA’s from the full-time, part-time, and
endow chairs for tenured faculty positions in entrepreneurship and
to provide funding for research grants and projects in the field of
entrepreneurship and private equity. The Center will also oversee
curriculum development for the concentration in Entrepreneurship,
created this past year.
Toward this end, two new classes will strengthen the
entrepreneurship concentration next year. Professor Toby Stuart
will teach a course on "Technology Strategy" and Jim Schrager
will teach a course entitled “Entrepreneurship in Organizations.”
These courses will be in addition to Entrepreneurial Finance and
Private Equity (B338), New Enterprise and Small Business
Management (B484), New Venture Strategy (B485), Special
Topics in Entrepreneurship (B585), and Structuring Venture
Capital and Entrepreneurial Transactions (L530) taught by Jack
Levin at the law school.
The GSB is looking for an Executive Director for the Center and
Prof. Kaplan encourages alumni interested in this position to get in
touch with him or Dean Hamada. Of course, Prof. Kaplan is quick
to point out that other forms of alumni interest and support
(particularly, financial contributions) furthering this cause are, of
course, welcome.
GSB New Venture News
Center for Entrepreneurship
continued from page 1
continued on page 3
GSB New Vent ur e New s 3
On Thursday, April 9th, the Entrepreneur and Venture Capital
Group along with the Advanced Technology Management Group
hosted Tom Huseby, Managing Director of Seapoint Ventures.
Seapoint Ventures, founded in 1997, is a venture capital firm
located in Seattle that specializes in wireless communications and
Internet-related businesses.
Mr. Huseby spoke before a standing room only crowd in Stuart
Hall and gave a sixty-minute presentation titled “Lessons Learned
in the Pursuit of Venture Capital.” Mr. Huseby has spent
considerable time on both sides of the venture capital table. He was
the founder of three wireless equipment companies prior to his
latest endeavor at Seapoint Ventures and has a great deal of
experience in selling an idea to a venture capitalist.
In the first part of his presentation, Mr. Huseby discussed what he
considers the four steps to coming up with a successful business
plan: solve an important problem, solve it for companies that have
money to spend on the solution (he feels that the financial payoff is
too unpredictable if your idea solves problems for individuals),
solve it convincingly (if possible have an exclusive on the idea),
and finally, solve it with a great team effort (he emphasized that
already having a capable team assembled is important to venture
capitalists).
In the second part of his presentation Mr. Huseby discussed what
an entrepreneur or a VC should be cognizant of after a financial
agreement has been reached. He likened the relationship between
the parties to a marriage. In order to avoid future conflicts, the two
parties should be careful when signing contracts, which he likened
to a pre-nuptial agreement. A good agreement (for both parties)
will not have performance price formulas (which gives the VC a
larger percentage of the company if the expected return is not met),
ratcheting anti-dilution agreements (which gives the VC the ability
to buy stock at the lowest price any share of stock is sold for) or
many managerial conflicts or super majority voting agreements.
Any of these provisions could cause a great deal of anguish for
both parties in the future.
Equally important, an entrepreneur should remember that there is
no honeymoon after the contract is signed. The venture capitalist
expects results. Thus, it is important for both sides to know each
other’s expectations and to be in constant communication. One
must also remember that conflict is part of the process.
During the question and answer period, a student asked how much
money an entrepreneur should be willing to invest in his/her own
idea. While acknowledging the fact that VCs definitely feel more
comfortable working with someone who has a personal stake in the
idea, Mr. Huseby stated that it is not always necessary.
Tom Huseby of Seapoint Ventures speaks at the GSB
Moreover, he discussed how some people will sell everything they
have and take out a second mortgage on their home in pursuit of
their goal. People get emotionally involved in a project and in Mr.
Huseby’s experience, for an entrepreneur, a cost “ain’t sunk until
you’re in the poorhouse.”
Mr. Huseby also gave a little personal advice to those individuals
who are thinking about approaching a venture capitalist. First, you
should ask yourself if you are willing to give up total control of
your company. Once you sell stock to a VC, you sold your
company. Second, VCs may put some unpleasant strings on any
financial backing. For instance, a VC may ask you to restructure
your team. This may mean telling your best friend or brother that
they will have to give up their role as C.F.O.
weekend programs, 18 outsiders, and 1 J D/MBA) participated in
the first round. At the end of the second round, Professor Steve
Kaplan, faculty advisor for the NVC, stated that “…quality of
this year’s business plans was exceptional.”
One factor that contributed to the quality of business plans was
the inception of Business 585: Special Topics in
Entrepreneurship-Seminar in Developing a Business Plan, taught
by Professor Kaplan. This class was offered in Spring Quarter
1998 to over 30 students who advanced to the second round.
For further details regarding the New Venture Challenge please
see our website gsbwww.uchicago.edu/student/nvc/. The NVC
Committee is currently in the planning phase to significantly
increase the level of participation for the Third Annual Ed Kaplan
New Venture Challenge. If you would like your firm to be a
corporate sponsor or have any questions/comments, please e-mail
Frank Truong (MBA99), NVC Chair and EVC Group Co-Chair,
at:
[email protected].
continued from page 2
Venture Capital Firm Founder, Tom Huseby, Speaks at GSB
by Steve Resnikoff GSB '98
New Venture Challenge
GSB New Vent ur e New s 4
Proxicom CEO and VC Investors
Share Insights to Launching and
Funding Internet Business
by Michelle Burchfiel GSB '99
On J anuary 14th, while a few inches of snow blanketed campus,
students interested in entrepreneurship and venture capital braved
the weather to hear about the venture capital industry and the
success of Proxicom. Proxicom was founded by its current CEO,
Raul Fernandez, in 1991 and has been a pioneer in the internet-
based business solutions arena. Proxicom received the first Gold
Clio award for Web site design in 1996 and was awarded
KPMG’s 1997 High Tech Entrepreneur Award.
Mr. Fernandez has grown this high-tech phenomenon to a 205-
employee, $17 million company, with 100% annual revenue
growth, even though he does not have a standard technical
background. He claims his start with technology was “doing
spreadsheets for Senator Jack Kemp,” for whom he worked
from 1984 to 1988.
The spirit of Proxicom’s founding father is represented by the
fact that Mr. Fernandez invested his own savings to start
Proxicom. He says having your own money invested instills the
mentality that everything is on the line—it’s fourth and ten at the
end of the game and you’re out of time-outs. And even with
Proxicom’s stunning growth, this mentality still exists and
continues to contribute to the success of the company.
Another reason for Proxicom’s success is its broad product
offering. It offers three traditional skill sets that are typically
provided to corporations by three different suppliers. First,
Proxicom offers internet strategy consulting—how a company
can take their business to the internet and develop a competitive
advantage. Second, Proxicom offers strategic marketing and
advertising to clients. Third—the largest of the three according to
Proxicom’s revenues and number of employees—is application
development and systems integration.
Ms. Eleana Gordon, Proxicom’s Director of Corporate
Development offered a unique perspective, as she previously
worked at venture capital firm General Atlantic on the deal to
invest in Proxicom. She said VC prepared her for the corporate
development role as she did a lot of mergers and acquisitions
work. Also, she spent a lot of time interviewing customers during
her due diligence at General Atlantic and recognized the strength
of that source of information. In fact, she currently speaks to
Proxicom customers at least once per week to find out the
company’s strengths and weaknesses and where customers think
the company should venture in the future.
continued on page 5
GSB Private Equity Alumni
Address Students in Panel
by Dhurander Bhatawadekar GSB ‘98
In mid-April, the EVC Group hosted the “GSB Private Equity
Alumni Panel” consisting of three people currently working in the
venture capital and leveraged buyout community.
The three speakers were: Keith Yamada (GSB '95), currently
working at Continental Illinois Venture Corporation; Karen
Kerr, from ARCH Venture Partners, a graduate student of the
University of Chicago’s Chemistry Department; and Ray
Rabindran (GSB '93), of Domain Associates.
The goal of the meeting was for the three panelists to discuss their
experiences and to provide insights on how to launch a career in the
field. The three discussed their backgrounds, the various career
decisions they’ve made in their professional life, and how they
developed the skills and experience necessary to land positions in
the industry.
In addition, Ms. Kerr and Mr. Rabindran, both of whom were
Kauffman Fellows, described the Kauffman Fellows program and
encouraged students to apply. Briefly, the Kauffman Fellows
Program is a two-year paid fellowship in which selected individuals
get the opportunity to work at a venture capital firm. Individuals
apply for the fellowship, and those who reach the last round
participate in a two-day series of interviews with numerous VC
firms to find the right “match.”
Please see the Kauffman web site at www.emkf.org if you are
interested in applying. Note that applications for this year’s
selection process are due September 11.
Panelist Keith Yamada, who started with CIVC eight years ago
before attending the GSB, and subsequently returned to the firm
after graduating in 1995, offered some insights to what types of
professional experience might be applicable to private equity. He
mentioned that a lot of people get into venture capital and private
equity from management consulting and investment banking.
Investment banking helps in the finance area, but the range of
experiences working in different industries in a consulting
environment is also important. At CIVC, Mr. Yamada focuses
primarily on niche businesses generating cash flows of fifty to two
hundred million dollars.
Ray Rabindran received a Ph.D. in Biochemistry from MIT and
received a six-month Kauffman fellowship. When asked if there
were any courses that helped the panelists in their careers, Mr.
Rabindran mentioned that he had taken a “Cases in Entrepreneurial
Finance and Management” class that was extremely useful. He still
refers to some of the cases when sorting through various issues.
Karen Kerr started working for Arch Venture partners after it was
spun off from Arch Derivatives Corporation. Her clients include the
University of Chicago and Argonne National Labs. She focuses
on biotech and high tech firms. Her firm has raised over twelve
billion dollars, which has been put into over three thousand venture
capital projects. Ms. Kerr also credited the Kauffman fellowship for
helping her get into private equity and venture capital.
One student questioned the panel about any setbacks they had
experienced when trying to enter the industry. Mr. Rabindran
mentioned that the hardest thing for him was gaining access to the
VC community. He emphasized that “access is key. Who you know
is really important in the business.” Keith Yamada commented that
people in venture capital and private equity “are really notorious
about not returning phone calls.”
GSB New Vent ur e New s 5
VCs Fund Proxicom
continued from page 4
When Proxicom received its first venture capital in 1996, it had
revenues of $8 million and was doubling its revenues each
year. Mr. Fernandez explained why Proxicom brought in VC as
a simple cost-benefit analysis. The amount of expertise that
came with the VC was greater than the equity position
surrendered.
Proxicom chooses venture capitalists that have dealt with
issues it is, or expects to be, facing and who can otherwise add
value to Proxicom. Proxicom has had the luxury to choose its
venture capitalists as it has received an unsolicited offer of
funds about once every two weeks for the last two years,
according to Mr. Fernandez.
Gene Riechers, Managing Director in charge of Venture
Investments at the investment banking firm of Friedman,
Billings & Ramsey, and Roger Horwitz, a Director in GE
Capital’s Corporate Technology Ventures Group, are
representatives of two VC firms chosen by Proxicom in the last
two years. These gentlemen shared insights into the VC
industry. According to Mr. Horwitz, “Raul is a seasoned CEO
and could take Proxicom into the public market as an IPO. That
is rare; many young companies fail to have this [a seasoned
CEO] taken care of. “
Mr. Riechers offered advice and some startling statistics. He
said, “VC is much more a time management game than a
money management game. You have to look for deals where
no one else is looking, and you have to make quick decisions.”
Last year, he spent less than ten minutes reviewing 90% of the
business plans that crossed his desk. Out of 400 proposals he
received last year, he did 6 deals.
He also gets 5-10 resumes per week from people looking to get
into the VC industry. He said there are three ways to get into
the VC industry. First, receive an undergraduate, technical
degree, then work for a few years in industry, return for your
MBA at a top school, and then try to get into a VC firm. This is
a very competitive route. Alternatively, one could work for
years in industry, get a lot of great experience, and then enter
the VC industry. The final alternative is to start your own
venture fund.
As for a job that will lead to the VC industry after two years
out of business school, Mr. Riechers offered some sobering
advice. Go into a job because you are passionate about it, not
because you think it is a stepping stone to VC, because all jobs
are stepping stones. Find something you believe in and want to
be in and do it.
Finally, all the panelists gave some tips for would-be
entrepreneurs. First, you need some work experience, though it
may have been before entering the GSB. Second, give the
venture capitalists a clue that you know you do not know
everything—for instance, bring in outside board members, hire
a good attorney and a good accountant. Third, you must be
willing to fail. Finally, if you have the drive to do it, then do it.
THE STUDENT’S CORNER ===============
A Web Gui de For t he Buddi ng
Vent ur e Capi t al i st
by Davi d C. Mc Cl el l an, GSB ‘98
For students interested in learning more about
the private equity industry, jump-start your
education by checking out the following web
pages:
• www.v1.com: Venture One provides
“ critical investment information on the
nation’s most promising venture-backed
companies.” Includes quarterly VC
industry statistics and news and online
resources for entrepreneurs.
• www.redherring.com: Red Herring
provides fun yet insightful info on venture
capital firms and the entrepreneurs who
they back.
• www.upside.com: Upside Online provides
the latest Silicon Valley news and gossip.
• www.pw.com/vc: Price Waterhouse
publishes a quarterly venture capital
survey that includes statistics, trends and
a listing of virtually every VC firm. The
latter contains a “ skinny” for each VC firm
and often a link to the firm’s web site.
• www.once.com/gcg: The Growth
Company Guide to Investors, Deal
Structures, and Legal Strategies. A 302
page online book on the industry,
organized by topic.
• www.ideacafe.com/getmoney/FINANCING.
shtml: Idea Cafe provides info for the
entrepreneur seeking VC funding.
• pubweb.acns.nwu.edu/~sra858/entrep.html
: The Kellogg “ resources for
entrepreneurs” page offers links to several
handy sites, including other MBA clubs
such as HBS, MIT, Berkley, and Stanford,
and to networking organizations.
GSB New Vent ur e New s 6
Entrepreneur & Venture Capital Group
c/o Office of Career Services
University of Chicago Graduate School of Business
1101 E. 58
th
Street
Chicago, IL 60637
ADDRESS CORRECTION REQUESTED
Fall Quarter
• Kauffman Fellow applications due: September 11
• EVC New Membership/Kick-off Event with Prof.
Steven Kaplan—Week of Sep. 28
• EVC Pub Night—October 8
• 3rd annual Ed Kaplan New Venture Challenge
Official Kick-Off Event with Distinguished Guest
Speakers—Week of November 9
• NVC: Teambuilding Events among GSB, University
of Chicago graduate schools, and Illinois Institute of
Technology undergraduate engineering
students—TBD
• EVC Distinguish Speaker Event—Week of November
16
• EVC & ARCH: Workshop with ARCH CEO’s
Business Plans—TBD
Winter Quarter
• GSB Entrepreneurship & Private Equity
Conference—tentatively scheduled for Jan/Feb 1999
• NVC Guest Speakers: How to create a business plan
& lessons learned from previous winning
teams—TBD
• NVC: Phase I Summary Business Plans due —Week
of February 22
• Private Equity Alum Panel—TBD
Spring Quarter
• NVC: Phase II business plans due—Week of May 10
• Speaker Series Event—TBD
• NVC: Phase III presentations—May 28
PRELIMINARY SCHEDULE OF EVENTS
1998-99 School Year
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