Venture Capital

1.5 Credits · Level: Undergraduate

What do Apple Computers, Facebook, and Google have in common? All of these companies received financing and advice from a distinct source of capital broadly defined as Venture Capital. The impact of this source of capital is considerably larger than its size. It is frequently cited as one of the main reasons why entrepreneurial activity is much higher in the United States compared to the other parts of the world. On the other hand popular press has sometimes demonized venture capitalist as “Vulture Capitalist” seeking to hoodwink hard working entrepreneurs in giving away their companies for cheap. This course aims to increase students’ understanding of how these organizations are structured and operate, why they take the form they do, and what special challenges and opportunities this industry faces. Every year thousands of new ventures are started and a nearly equal number of existing businesses are closed down. Almost all of these ventures are single founder/employee type of ventures where the founder has neither the desire nor the possibility of creating a significant business organization. A small fraction of such ventures, however, hold the promise to grow into large businesses. The vast majority of such “high growth potential” startups are in the Technology and Life Sciences industry. For most of these startups, Venture Capital is most important source of funding their launch and growth. In this course we shall devote significant amount of time on understanding the role of Venture Capital (and to a lesser degree on Angel Investors) in financing new start-ups. The course requires and reinforces the skills needed to analyze a business with a strong emphasis on financing deal terms and valuation techniques. The course concludes by examining the harvesting of entrepreneurial ventures whereby the entrepreneur and the financiers realize the returns for their effort. The course is driven almost exclusively by case studies, many of which are based on start-ups or young firms.