FINANCE 651 - Entrepreneurial Finance

Course Overview

This course is aimed at students who are considering a career in the entrepreneurial sector. This includes students who wish to start or purchase new ventures, those who wish to join rapidly growing organizations, or those who wish to work in private equity, venture capital or business development in large organizations.

The course is designed to introduce students to the challenges and pitfalls of financing new enterprises. We will mostly use the case method, but I will supplement this approach with lectures when appropriate.

Broadly speaking, we can think of entrepreneurial financing decisions in terms of a life cycle. The cycle begins with identifying opportunities, moves to marshaling resources to take advantage of these opportunities and executing the business plan, and ends with harvesting the venture’s success. Accordingly, I have divided the course into three distinct sections:

Identifying and Valuing Opportunities: Will this idea make or lose money? What must happen for this venture to succeed? Are these people the right people for the job? This section will focus on identifying good ideas, separating them from bad ideas, and in general, valuing the asset side of the balance sheet.

Structuring Deals: Which sources of funds offer the most attractive terms? This section will focus on the liabilities and net worth side of the balance sheet, and will study how various financial contracts affect the incentives of financiers and entrepreneurs. We will also focus on alternative financing vehicles, such as joint ventures, and strategic alliances. When we explore alternative financing vehicles, the emphasis will be on the costs and benefits of partnering with strategic investors relative to seeking standard VC financing.

Harvesting Opportunities: How do we exit? This covers the IPO process and considers other exit decisions that entrepreneurs face.

This course is designed to complement FINANCE 660 – Venture Capital and Private Equity. This course focuses on the perspective of the entrepreneur, while VCPE focuses on the perspective of the venture capitalist. As a result, this course covers many topics, like strategic alliances, joint ventures, and angel financing, that VCPE does not cover. Likewise, VCPE covers a number of topics, such as syndication, limited partners, and fund structure, that are distinct from this course. Neither course is a prerequisite for the other. Nevertheless, students who are deeply interested in entrepreneurship would benefit from being exposed to the material in both courses.