20453 - VENTURE CAPITAL AND VALUATION
Course taught in English
Advanced: Lezioni erogate in modalità sincrona e asincrona in aula e a distanza
Innovative technology companies are a driving force behind the growth of advanced economies. They represent the most dynamic part of entrepreneurial firms, and contribute substantively to the creation of jobs, living standards, and wealth. They are important also for the continued growth of large established companies, which often obtain new products and technologies by acquiring innovative start-ups. A fundamental challenge for all entrepreneurs is the ability to reach out to owners of resources they do not own and convince them to commit them to their venture. Investors are the most important of such owners of resources since money is itself very important for attracting resources like skilled labor or specialized assets. The course mission is then to analyse and understand the process through which innovative entrepreneurs may obtain financing, the structure of financial contracts, the valuation of the company and the implications for innovation strategy. Such analysis also needs to consider that an important characteristics of venture investors is that they become actively involved in the company, which they push to achieve success within a clearly defined time period.
The course analyzes the economics of venture investors and the venture fundraising cycle. The course is structured around the following main themes:
1. An introduction to Entrepreneurial Finance.
2. The economics and strategy of venture investors.
3. Investor assessment of business opportunities.
4. Valuation of entrepreneurial companies.
5. Debt financing and staged financing.
6. Deal structuring, deal contracting, and deal management.
- Recognize the goals and constraints of different venture investors, and the implication these have on the management of an entrepreneurial venture.
- Understand the valuation of private knowledge-based ventures.
- Identify the different phases of a financing deal– origination, valuation, structuring, contracting, management, and exit.
- Formulate a business plan for eliciting interest from venture investors, and assemble financial projections to illustrate the venture’s business model.
- Elaborate a financial plan and fundraising strategy.
- Pitch a business opportunity to a potential investor.
- Calculate the valuation of an entrepreneurial venture, and assess the value relevance of the covenants in the term sheets.
- Negotiate a funding round.
- Face-to-face lectures
- Online lectures
- Guest speaker's talks (in class or in distance)
- Exercises (exercises, database, software etc.)
- Case studies /Incidents (traditional, online)
- Group assignments
- Interactive class activities on campus/online (role playing, business game, simulation, online forum, instant polls)
The learning experience of this course is based on a mix of in-person and online lectures, mostly interactive.
- Lectures consist of both academic materials and of illustrations taken from actual business situations that are commented and discussed. Academic materials are mostly explained and discussed in interactive sessions, which may also address actual business examples.
- In most modules the academic material is complemented by interactive case study discussions and by team execution and discussion of numerical and situational exercises. Exercises are largely done in online sessions to exploit the breakout room structure. Some case discussions may also be done online to train students to online business discussions.
- Instant polls are used to provide discussion material and to verify how the class is learning new concepts.
- There are two written case study assignments to be developed in teams, and at least one lecture by an external guest speaker.
- The use of actual business situations, case studies, and external speaker(s) aims at connecting the body of theoretical knowledge covered in the course to a variety of real innovative venture experiences.
- The course also includes a team assignment where students identify and analyze, in a structured way, one issue arising from an actual case of entrepreneurial funding. This allows students to discuss in depth a situation of their choice and present it to the class, to the instructors, and to real entrepreneurs or investors in a final presentation.
There is no distinction between attending and non-attending students.
Students choose one of two grading options (by the second week of the course):
1) Take the final exam and engage in two written case assignments in teams (the exam counts for 70% of the course grade and the case assignments for 30%)
2) Take the final exam, engage in two written case assignments in teams, and perform a 'real start-up analysis' in teams (the exam counts for 50% of the course grade, the case assignments for 20%, and the real start-up analysis for 30%)
The final exam consists of: (i) multiple choice questions, (ii) conceptual open questions, (iii) numerical exercises, and (iv) questions on case studies’ discussions.
The two written case assignments (in teams) are designed with the purpose of verifying students’ ability to identify and analyze a real entrepreneurial finance situation using the tools learnt in the course. The two assignments are designed with the purpose of verifying students’ ability to:
- Identify and analyze the main issues related to the course, and execute effective business intelligence, including communication of the arguments.
- Work on a team and organize and present effectively the relevant outcomes.
The real start-up analysis assignment aims at examining one fundraising issue in an actual situation chosen by the team and approved by the course professors. The analysis is presented in a lecture to the class and (if possible) one investor or entrepreneur, after having received feedback from the course professors.
1. Slides and other materials made available on Blackboard
2. Textbook: Marco Da Rin and Thomas Hellmann (2020) Fundamentals of Entrepreneurial Finance, Oxford University Press (ISBN: 9780199744756).
3. Case studies from Harvard Business Press Online or developed by the course Professor.