Venture Capital and Entrepreneurial Finance

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Course Information
Discipline(s): 
Finance
Terms offered: 
Fall, Spring
Credits: 
3
Language of instruction: 
English
Contact Hours: 
45
Prerequisites: 

None

Additional student cost: 

None.

Description: 
The primary objective of this course is to provide an understanding of the concepts and institutions involved in entrepreneurial finance and private equity markets. To do this, the course explores private equity from a number of perspectives, beginning with the entrepreneur / issuer, moving to the private equity partnership, and finishing with investors in private equity partnerships. Students will learn the basics of finance, valuations, dilution and non-dilutive funding sources and will understand capital structure for new ventures, term sheets and how to negotiate them.   The course is ideal also for those students that consider themselves as “aspiring entrepreneurs” and that want to understand how to secure funding for their business ideas. They will receive a guide to secure funding using the many financing options available to get new ventures funded.   This can be considered a hands-on course in the sense that gives a full understanding of how to implement winning investor pitches, who and when to pitch, how to avoid common mistakes that limit the effectiveness of the pitch, and how to ‘get to the close’.   The presentation of real-word case-studies and the usage of techniques coming from major players belonging to private equity world will further enhance the link with the best practices observable in the market.
Attendance policy: 

Regular class attendance is mandatory. Students are expected to attend classes each day, including course-related excursions.

IES Abroad Milano allows a maximum of TWO excused absences per semester. Each further absence will automatically result in a penalty of two points off (2/100) on the final grade. SEVEN absences per course (including 2 excused absences) will result in a failing grade for that course. Furthermore, an absence on the date of scheduled tests, presentations or quizzes does not entitle you to recover/reschedule such tests. Failure to attend your midterm and/or final exam will result in an F grade on that paper/exam.

Learning outcomes: 

Students will learn the ‘language’ of fund raising and how to successfully fund new ventures. Daily discussions will cover issues of private equity finance from seed stage through growth equity to recapitalization. Deal structure, incentive design, risk-based valuation, financial management in private, rapidly growing enterprises will be included. Exit strategies will be covered, including initial public offerings, mergers and strategic partnerships. Restructuring poorly performing projects will also be discussed. Importance is also given to issues related to the suppliers of capital, individual investors, venture capitalists, commercial banks, asset-based lenders and investment banks.

Can a student really do this course if he/she doesn’t know anything about business or finance?  Yes! We expect students completely new to this topic to take this course and we have designed the content in that way.

By the end of the course, students will be able to:

  • Define the role of private equity in the overall economy and how the private equity industry actually works, its ecosystem and processes.
  • Explain the key issues of assessing, valuing, negotiating, monitoring and exiting private equity investments.
  • Apply and interpret the alternative private equity valuation approaches (including limitations of each).
  • Acquire familiarity with the full spectrum of private equity investments, from venture to management and leveraged buy-outs, including risk and return considerations in each.
  • Apply private equity investment considerations to ‘real world’ situations. 
Method of presentation: 

The course is presented in a seminar format and involves a combination of lectures, class discussions and student presentations.  Students will work on a case study.  The background research and evaluation of data in the context of the underlying theory will enable the students to develop a better understanding of the selected topic.

Field study: 

Management and Finance

Required work and form of assessment: 
  • Midterm exam - 35%
  • Class Participation - 10%
  • Final Paper & Class Presentation (case study) - 20%
  • Final Exam - 35%

Class Participation
Class participation is another key component of the course.  Students’ contributions should reflect their reading and thinking about the relevant topical issues.  The style of the discussion will be informal and participative.

Midterm Exam
The mid-term exam will be closed-book. It will be taken in-class and may consist of questions in short answer or short essay format.

Final paper and class presentation (case study)
Students will work in groups of two or three (depending on class size) on the final paper and class presentations.  Each group should identify one theoretical topic from the course outline and conduct research to gather data on a recent (or historic) event in international finance or the global economy.  Useful sources for the research will include quality newspapers (e.g., Financial Times, Economist, New York Times, etc.) in addition to relevant books/journal articles.  The objective of this coursework is to evaluate the data and to analyse and discuss the case study in the context of the underlying theoretical discussion.

Teams will be graded on the basis of the in-depth of their analysis of the event using research, team discussions and readings. Team project presentations will have a 20-minute time limit and written reports a 10-max page length.

Final Exam
The mid-term exam will be closed-book. The final exam is cumulative and will cover the material of the entire course. It will be taken in-class and may consist of questions in short answer or short essay format.

content: 
Week Content Assignments
1

PART 1: GENERAL FRAMEWORK

  • Lecture 1 - Capital Formation Strategies and Trends
  • Lecture 2 - The fundamentals of private equity and venture capital

Required readings:

  • Chapter 1 - Raising Capital (p. 4-21)
  • Chapter 1 - Private Equity and Venture Capital in Europe (p. 3-12)
  • Slides from the Instructor
2
  • Lecture 3 - Overview of Historical Trends
  • Lecture 4 - The Role the Business Plan Plays

Required readings:

  • Chapter 2 - Private Equity: History, Governance, and Operations (p. 29-45)
  • Slides from the Instructor
3
  • Lecture 5 - Clusters of investment within private equity
  • Lecture 6 - Legal framework in Europe for equity investors

Required readings:

  • Chapter 2- Private Equity and Venture Capital in Europe (p. 15-25)
  • Chapter 4- Private Equity and Venture Capital in Europe (p. 41-59)
  • Slides from the Instructor
4
  • Lecture 7 - Legal framework in the United States and the United Kingdom for equity investors

PART 2. THE PROCESS AND THE MANAGEMENT TO INVEST

  • Lecture 8 - The management of equity investment

Required readings:

  • Chapter 5 - Private Equity and Venture Capital in Europe (p. 65-78)
  • Chapter 7 - Private Equity and Venture Capital in Europe (p. 105-113)
  • Slides from the Instructor
5
  • Lecture 9 - Fundraising
  • Lecture 10 - Investing

Required readings:

  • Chapter 8 - Private Equity and Venture Capital in Europe (p. 117-129)
  • Chapter 9 - Private Equity and Venture Capital in Europe (p. 131-146)
  • Slides from the Instructor

Project update I

6
  • Lecture 11 - Midterm Exam
  • Lecture 12 - Managing and monitoring, exiting
     

Required readings: (Lecture 12)

  • Chapter 10 - Private Equity and Venture Capital in Europe (p. 147-150)
  • Chapter 11 - Private Equity and Venture Capital in Europe (p. 159-165)
  • Slides from the Instructor
7

PART 3. VALUATION AND THE "ART OF DEAL MAKING"

  • Lecture 13 - Company valuation in private equity and venture capital
  • Lecture 14 - Techniques of equity value definition

Required readings:

  • Chapter 12- Private Equity and Venture Capital in Europe (p. 175-185)
  • Chapter 13- Private Equity and Venture Capital in Europe (p. 187-198)
  • Slides from the Instructor
8
  • Lecture 15 - Financing seed and start-up
  • Lecture 16 - Financing growth and Value Creation

Required material:

  • Chapter 14 - Pricate Equity and Venture Capital in Europe (p.205-218)
  • Capter 15 - Private Equity and Venture Capital in Europe (p. 221-228)
  • Slides from the Instructor

Project update II

9
  • Lecture 17 - Preparing for an Initial Public Offering
  • Lecture 18 - Execution of an IPO

Required material:

  • Chapter 18 - Private Equity and Venture Capital in Europe (p. 267-272)
  • Slides from the Instructor 
10
  • Lecture 19 - Financing buy-out
  • Lecture 20 - Turnaround and distressed financing

Required material:

  • Chapter 16 - Private Equity and Venture Capital in Europe (p. 237-244)
  • Chapter 17 - Private Equity and Venture Capital in Europe (p. 253-260)
  • Slides from the Instructor 
11
  • Lecture 21 - Class Review
  • Lecture 22 - Class Presentation 
 
 

The final exam will take place during Finals week.

 

Required readings: 
  • Private Equity and Venture Capital in Europe, 1st Edition Markets, Techniques, and Deals- 2009 by S. Caselli
  • Slides and Teaching Notes prepared by the Instructor