Venture Capital Finance

Venture capital is an important financial intermediary for, and component of entrepreneurship, innovation and organizational change. By one estimate, over 1,200 VC firms around the world are evaluating more than 20,000 business plans on a given day. The media extensively glorifies venture capitalists, policy-makers increasingly look to venture capital as a source of jobs and economic growth and hardly a day goes without another celebrity in the entertainment industry making a foray into the world of venture capital.

Nonetheless, little is understood about the structure, governance, strategy, incentives, culture, capabilities and operational processes of venture capital organizations. These gaps in understanding yield significant missteps and frustration for those intersecting with venture capital and in fact so much that especially many entrepreneurs feel venture capital is the “dark side” and inherently evil.

By offering a window into the inside dynamics and the intricacies of venture capital, this course aims to bridge these gaps for students and prepare them as a potential entrepreneur, venture capitalist, institutional investor, management consultant or a policy-maker.

The course is divided into four modules.

1. Describe how different forms of venture capital organizations are organized, capitalized and managed and address the costs and benefits of working with them as an entrepreneur.

2. Explain how VC firms compete, make money and create value for entrepreneurs, fund investors and the economy.

3. Describe why and how venture capital firms syndicate and illustrate different patterns of syndication.

4. Articulate a strategy for generating a deal flow and identifying deals.

5. Discuss how venture capital incentives play into deal selections and negotiations with entrepreneurs.

6. Demonstrate a rigorous understanding of how deals are valued, structured and harnessed.

7. Appraise what constitutes a more appropriate type of investment capital for a new venture.

8. Discuss the nature of post-investment interactions between the VC and founders and recommend strategies for working with management teams to maximize value.

9. Evaluate the relative attractiveness of alternative exits for a portfolio firm and formulate exit preparation strategies.

10. Identify the key challenges to the current venture capital model and propose policy and strategies for enhancing the entrepreneurial finance ecosystem.

The readings will give you a broad as well as a deep picture on all aspects of entrepreneurial finance ecosystem. Course slides will raise several questions for in-class debates. There is no textbook.

We will use our brand new, proprietary “WHU VC Simulation Package” to run waterfall games.

• Individual essay: 30%
• Group assignment: 20%
• Group project: 40%
• Class participation: 10%

For details please see Syllabus!