Entrepreneurship Game Thomas Hellmann

8/3/2019 Entrepreneurship Game Thomas Hellmann

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The Entrepreneurship Game1

So many questions haunting us...Dangerous thoughts of what could go wrong

Against the odds, we must carry on

We must be strong and fearless

Neville Brothers

Starting a company seems like a daunting task. Entrepreneurs need to deal with a great

variety of issues. I believe that there are a few basic skills that can be learned before

engaging in an entrepreneurial venture.

In our class discussions we will sharpen our understanding of the entrepreneurial process

by discussing and analyzing business problems that entrepreneurs face. This I believe is a

fundamental preparation for anyone interested in entrepreneurship. But entrepreneurshipis also about action. How can one gain some experience? One suggestion is to start a

company, make lots of mistakes, lose lots of money and have all your friends and

relatives coincidentally arrange to be out of town for your birthday party. A hopefullyless painful alternative is to play the Entrepreneurship Game.

The Entrepreneurship Game has one simple objective:

To experience the challenges of starting and financing a new company

The fundamental idea of the game is to simulate the process of starting and financing a

new company. You will go through this process as an entrepreneur and as an investor. Asan entrepreneur you will have to find your own business opportunity, communicate your

idea to other people and negotiate funding with investors. Some of you will be successful

in obtaining (fictional) funds to start your company, while others will get to ponder why

nobody financed their business idea. As an investor you will learn to recognize goodbusiness opportunities, to mentor and critique entrepreneurs, to make hard choices about

which companies to finance, and to negotiate terms with entrepreneurs.

Entrepreneurs rely on the resources and cooperation of other people and businesses.

Throughout the Entrepreneurship Game you will focus on how to communicate your

business ideas and even your personality. This is fundamental to the entrepreneurialprocess. It will give you an opportunity to learn from your peers, and hopefully to see

how they are learning from you.

1 Copyright Thomas Hellmann, 2005. This document contains teaching related materials. All rights

reserved.


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Maybe the most important aspect of the game is to play it with a positive and

entrepreneurial spirit. The game is meant to be an opportunity to explore new

dimensions, to be creative, and also to have fun.

Overview of the Game

We will work in teams. Teams will have dual roles, both as entrepreneurs and investors.

As entrepreneurs, teams will develop a business opportunity. They will write a business

proposal, which can be thought of as a reduced version of a business plan. The focus ofthe game will be less on the writing of a picture-perfect business proposal and more on

communicating the content of the business proposal to various parties. As investors,

teams will evaluate the business plans of other teams, and provide constructive feedback.

Entrepreneurs will try to obtain fictional financing from the investors. Naturally, not

everyone will get financed. To create a competitive market place, we will use thefollowing simple rules. To be funded as entrepreneurs, a team needs to find a syndicate of

exactly two other teams that wants to provide funding. As entrepreneurs, each team either

obtains funding from a syndicate of two, or no funding at all. As investors, each team

either funds one entrepreneurial team (as part of a syndicate with another investor), or noteam at all. The former is preferred, i.e., it is encouraged that each investor becomes part

of a syndicate that finances an entrepreneurial team. There are two obvious rules about

conflicts of interest. First, no team can finance itself. Second, a team cannot both investin another team and also receive funding from that same team.

The objective for the entrepreneurs is to obtain financing at a good valuation. As you can

see, in this game it is not good enough to have a good idea. You really need to convince

investors that your idea is the best.

The process of starting a company often takes several years, but we will have about three

months. The experience will be intense and it will be important to stay on schedule.There will probably be a few moments where you wished you had more time for some

things, and in reality you might want to spend more time on identifying the best

opportunity or writing a full-fledged business plan. But time pressure is not unrealistic.

Name me one successful start-up company where things have not been hectic! The art ofentrepreneurship is not to do things perfectly, but to do the best given the circumstances.

The same principle will apply to the Entrepreneurship Game.

There will be two consecutive sections of this undergraduate elective. There will not be

two separate games, but one integrated game. It will be possible to form teams across the

two sections. I will ask you to work with me through any scheduling difficulties that thismight involve.


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Grading of the Game

You will probably find that the main motivation for playing this game comes from being

evaluated by your peers and by outside panelists. But since you will spend a lot of timeand energy on the game, I will grade your participation in the game. 60% percent of your

total grade will come from the game. 10% comes from the class presentation (discussedbelow). 25% comes from what I call the unweighted team performance. This is simplythe grade that a team achieves. Another 25% comes from the weighted team

performance. This part of the grade takes into account that within a team there may be

differences in terms of how much each team member contributes. The weighted team

performance grade is meant to discourage free-riding within teams. It only applies forteam of more than two people. At the end of the class, you will be asked to fill out a peer

evaluation form. This form asks you to rate the contribution of all your team members by

assigning a percentage score to each member. These scores will be used to calculate theweight that will be applied to the individuals teamwork as illustrated by the example

below. Note that the weights for all team members have to add up to 100%.

Percent given to A to B To C

by A NA 50 50

by B 75 NA 25

%

given

by C 60 40 NA

Total 135 90 75

Suppose the team mark was 50 points

then:

A would get 1.35 x 50 = 67.50

B would get 0.90 x 50 = 45

C would get 0.75 x 50 = 37.5

To determine these weights, you will be given the following team member evaluation

form


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TEAM MEMBER EVALUATION FORM

(to be submitted by XXX)

Team Name:

Your Name:

DO NOT RATE YOURSELF. And make sure that the weights for

all other team members add up to 100%.

Team Member's Name % Effort (scale 1-100%)

If you fail to return or fill out the feedback form by end of the last day of class, I will

simply assign equal weights to all of your team members.

I will not assign grades on individual assignments. Instead I will use all of the

information that I can observe in the game to come up with an overall evaluation of your

performance. To give you an idea of what I am looking for, let me explain the broadcriteria that I use to evaluate game performance. The over-arching objective is how well

you reason through and communicate your own business ideas. Clearly it matters that you

come up with a reasonable business proposition, but what I care most about is not thequality of that idea itself but instead how you justify and explain your opportunity. I look

at the thoroughness of your analysis, at the logic of your ideas, and at the clarity with

which you communicate them. Finally I look at how you respond to the varioussuggestions and challenges in the game.

All assignments are due in class on the days indicated. Any missed assignment will

impact your grade. Any late assignment is considered a missed assignment.

Class presentations

As mentioned above, communication is very important in the game. In order for all of us

to learn from each other, and in order to learn to present, each team will have theopportunity to present to the class. I will set aside several classes for class presentations. I

also expect a high standard for these presentations.


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Team meetings

During the game I want to stay in touch with you and be aware of the progress you make

and the challenges you face. I also want to have the opportunity to provide you with somefeedback or to ask you more questions about your business idea. In addition to our

informal contacts I will meet with each group in my office to discuss their businessopportunities.

Protection of intellectual property

Some of you may consider pursuing your opportunity for real after the game. Eachperson is responsible for protecting his or her intellectual property. I suggest that you

avoid disclosing any information that you consider confidential. Some of the assignments

are meant to be distributed to other people in the class. If you are worried aboutintellectual property issues, you may elect not to have parts or all of an assignment

distributed to other people in the class. Please let me know if you are choosing this

option. If you are uncertain about what to do with any particular assignment, you arewelcome to ask for clarification anytime.

Pre-existing and concurrent business plans

Some of you may already have a business plan, or be simultaneously writing a business

plan in another class. I have nothing against you using this, but you must let me know

about this as soon as possible, as I will evaluate your efforts in the game to anappropriately higher standard.

I am greatly looking forward to working with you in the entrepreneurship game.

Thomas Hellmann


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Main steps for the Entrepreneurship Game

(Based on 10 weeks of teaching, timing modified as needed)

Assignment 1: (First week)

This is an individual assignment, not a team assignment! Please submit via Email two

entrepreneurial ideas of yours. Briefly describe each idea in one paragraph. The

assignment should fit on a single page.

Assignment 2: (Second week)

Please submit via Email the name of your team, and the people who are part of your

team.

Assignment 3: (Fourth week)

You are asked to write up a preliminary document about your opportunity and strategy.

The document is typically between 4-6 pages long, and typically contains the following

sections:

1.) Executive summary2.) Customer / target market analysis3.) Strategy: including business model and competitive advantages

You will need to distribute three electronic copies of this document. The first two copies

are for your two mentors. The third copy is for me. Please make sure to hand in your

documents in time, otherwise you will derail everybody elses time schedule.


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Assignment 4: (Fifth week)

You are asked to review two business plans from other teams. The mentoring feedback

should focus on making critical and constructive comments. For each team you should

provide some written feedback, typically about two pages per plan. For each feedback,

you should send one copy to the team and one copy to me.

Between assignment 4 and 5, I usually have class presentations.

In addition I meet with every team in my office for 30-45 minutes.

Assignment 5: (Seventh week)

You are asked to write up a draft business plan, including financial projections. The

document typically contains the following sections:

1. Executive summary2. Customer / target market analysis3. Strategy: including business model and competitive advantages4. Marketing and Operations5. Risks6. Management Team (incl. rsums)7. Financial Projections

You will need to distribute three electronic copies of this document. It is recommended

that you include the spreadsheet with the financial projections. The first two copies are

for your two critics. The third copy is for me. Please make sure to hand in your

documents in time, otherwise you will derail everybody elses time schedule.


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Assignment 6: (Eight week)

You are asked to critique two business plans from other teams. The feedback should

focus on making critical and constructive comments, including on the financial

projections. For each team you should provide some written feedback, typically about

two pages per plan. For each feedback, you should send one copy to the team and one

copy to me.

Between assignment 6 and 7, I usually have class where students have time to make

their deals. I might also have a final short presentation for each team.

Assignment 7: (Tenth week)

Each team should submit two items.

1.) You are asked to submit your final business plan. There is nor preset format, exceptthat the main body (excluding CVs, financials and appendices) should not exceed 20

pages. For many business plans, it is useful to include sections on

1. Executive summary2. Customer / target market analysis3. Strategy: including business model and competitive advantages4. Marketing and Operations5. Risks6. Management Team (incl. rsums)7. Financial Projections

It is recommended that you include the spreadsheet along with your financial projections.

Any late submissions will affect your grade

2.) Every team is responsible for submitting a class term sheet for the investment that

they made in the entrepreneurship game. If no investment was made, a brief explanation

will be required for this. All term sheets are to be handed in class. Team sheets need to besigned by both the investor team and the entrepreneurial team that is receiving the

(fictional) funding.


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Class Term Sheet2

Investor Team (Names and Team Number)

Identify of investor team (VC, angle, FFF, other)

Entrepreneurial Team (Names and Team Number)

Syndicate Investor Team (A separate sheet is

needed for each investor)

Total amount of fictional funding provided by the

syndicate

Price per share

Number of shares held by entrepreneurial team

Number of shares received by the two investor

teams

Number of shares allocated to an option pool

Pre-money valuation (incl. option pool)

Post-money valuation

Types of investor shares (e.g. common, simple

convertible preferred, participating preferred, type

of multiple liquidation preferences, etc.)

Composition of the board of directors

Other clauses (e.g. vesting, milestones, etc.)

Investor Signatures

Entrepreneur Signatures

2 This class term sheet is part of the entrepreneurship game, and does not have any real legal validity of any

kind.

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Entrepreneurship Game Thomas Hellmann