FINANCE 660 - Venture Capital and Private Equity
This course uses a mixture of cases, lectures, and guest speakers to study venture capital and private equity markets in the U.S. and other countries. The course focuses on how financial, legal, and economic issues are dealt with in the financial contracts between venture capitalists and their limited partners and between venture capitalists (or other private equity investors) and the firms they invest in. The emphasis on the perspective of the venture capitalist distinguishes this course from one which emphasizes the perspective of the entrepreneur or manager. The emphasis on deals distinguishes this course from one which emphasizes writing business plans, formulating growth strategies, managing new fast-growing firms, or competing in specific industries. The course addresses not only how venture capitalists provide capital to start-up firms in growing industries, but also how private equity markets provide capital to help established medium-sized firms (often family businesses) grow and restructure.
The course will use the textbook Venture Capital and Private Equity: A Casebook by Josh Lerner. This textbook contains eighteen Harvard Business School cases and a number of notes on topics related to the cases. For each of our twelve class sessions, one case will be the focus of class discussion. The notes and other cases in the book are required background reading. In addition to the materials in the book, other readings will be assigned. These will be made available in a course packet.
The twelve class meetings are allocated as follows: Four days examine how venture capitalists raise money from providers of capital (university endowments, other institutional investors, wealthy individuals, international investors). Five days examine how venture capitalists deal with the firms they finance (both early and late-stage financing, both start-up firms and established family businesses, both U.S. and foreign firms, both high-tech and low-tech industries). Two days examine how venture capitalists exit investments (IPO's, distributions of securities). One day reviews the concepts introduced in the course by examining how venture capital techniques can be implemented within a large firm.
There will be approximately six guest speakers from the venture capital industry (to be scheduled later). There will be a bias towards local speakers. Although some of the speakers will speak in one of the twelve class sessions, it is anticipated that some of the speakers will be scheduled on Wednesdays, where they would address all class sections as an extra class meeting.
There are no pre-requisites for this course. However, concepts and techniques from corporate finance will be used during the course. I will point out sections of the textbook Principles of Corporate Finance, Seventh Edition (2003), by Richard Brealey and Stewart Myers that can be used as background reading to supplement lecture notes and aid your understanding of corporate finance topics utilized in this course. Students who are unfamiliar with corporate finance should take Finance 351 either before this course or simultaneously.