Venture Capital & Private Equity

Group	Teacher	Department	Language
	Carlos Trenchs Sainz de la Maza	Dirección General y Estrategia	ENG

COURSE CONTRIBUTION TO PROGRAM

The objective of this course is to understand the practices and to analyse in depth the activities of venture capital (VC) and private equity (PE) investors. Participants will be involved in the whole process of "the venture capital cycle?.

The course will cover the different topics of the cycle: from fundraising, dealflow analysis, investing, monitoring, adding value and, finally, exiting from the portfolio company and, hopefully, making good returns for the investors. Furthermore, the course will present the challenge of valuing a start-up and reaching an agreement in price, in exchange for a percentage of the entrepreneurial venture. We will also review the important tasks of structuring the deal, negotiating key clauses and solving conflicting situations, both from the point of view of the management team and the investor. Additionally, buy-outs, and more specifically leveraged buy-outs (LBOs), management buy-outs (MBOs) and Buy & Build deals, will be analyzed in detail to understand key factors for success.

All these topics will lead us to work in detail with fundraising documents, financial plans, valuation and contracts, especially the term sheet and shareholders' agreement and, finally, to analyse the different exiting options to maximize the IRR of the investment. We will also cover recent topics in the sector, such as equity crowdfunding or philanthropic venture capital.

The content covers the "venture capital cycle?, divided in three stages: fundraising, investing and exiting. However, the investing stage takes most of the day-to-day activity of a professional working in VC or PE, and can be divided in two parts: a) the deal origination, screening of proposals and closing the investment; and b) post-investment activities

Course Learning Objectives

At the end of the course, students should:
1 be familiar with the venture capital and private equity sector, its challenges, opportunities and key participants involved
2 understand and apply some major financing concepts, such as financial plan, valuation techniques, pre-money and post-money valuation, term sheet or harvesting methods
3 show venture capital / private equity decision-making skills. Throughout the course participants will be in the role of investors or entrepreneurs / management teams, to understand how different decisions can affect the final outcome of any investment

CONTENT

1. Introduction to the course. Venture capital, private equity and business angels
2. Fundraising, legal structure of funds, return to investors and fund performance
3. Dealflow, screening and analysing a business plan
4. Financial plan and valuation of start-ups
5. Private Equity: Leveraged Buy-outs (LBOs). Mid-term assignment
6. MBOs. Other Buy-outs: Build-ups, Search Funds. Structured debt. Philanthropic VC.
7. Legal: The Term Sheet and other legal documents
8. Harvesting: the exit. Conclusions
9. Presentation of final assignment (Final Evaluation)

1. Introduction to the course. Venture capital, private equity and business angels

2. Fundraising, legal structure of funds, return to investors and fund performance

3. Dealflow, screening and analysing a business plan

4. Financial plan and valuation of start-ups

5. Private Equity: Leveraged Buy-outs (LBOs). Mid-term assignment

6. MBOs. Other Buy-outs: Build-ups, Search Funds. Structured debt. Philanthropic VC.

7. Legal: The Term Sheet and other legal documents

8. Harvesting: the exit. Conclusions

9. Presentation of final assignment (Final Evaluation)

Relation between Activities and Contents

	1	2	3	4	5	6	7	8	9
Class Participation
Group Assignments
Individual test or paper

Methodology

Classes will have a strong focus on practical content, and will combine discussion of cases, illustration of key theoretical concepts and presentations. The course requires to prepare assigned readings and cases at home, sometimes individually and sometimes in groups. Please, do all readings as most of the topics covered in readings will be quickly reviewed, if at all, during the sessions. During the classes we will focus on discussing issues and learning from cases and guest speakers.

Description	%
Class Participation	30
Group Assignments	40
Individual test or paper	30

Assessment criteria

Group Assignments:

Participants will be divided in groups and will work in different cases and in two specific assignments:

- Mid-Term assignment: Early stage financing in Europe. Each group will select a European country from the list (see Moodle) to analyse its early stage financing activity. Each group will work on a different country. The assignment consists on finding out about business angels, crowdfunding and venture capital, as well as success stories for the selected country.

- Final assignment: Fundraising: The Private Placement Memorandum (PPM). In the final assignment each team will be presenting to a panel of wealthy investors (that's of course the faculty team) a proposal to invest in their fund. The team should present the strategy of the fund, the opportunity, how they expect to get deal flow, track record of the team, involvement with the portfolio companies and exit strategy.

- Individual Test/Paper

Class attendance is mandatory, and more than one absence will negatively affect your grade. PLEASE, INFORM YOUR TEACHER IF YOU ARE PLANNING TO MISS A CLASS AS SOON AS POSSIBLE.

Participation will be based on quality not quantity. If the faculty considers that your class participation has not reached the minimum level expected (i.e. you failed) then you will be asked to "retake" this participation through a final exam, including all material covered. Those affected, hopefully none, will be informed after session 5. If you go to the retake, maximum grade would be 5 (pass) and this will count for your participation grade in the final weighting of grades.

Bibliography

- Ante, S. (2008) "Creative Capital: George Doriot and the Birth of Venture Capital? - HBS Press
- Bartlett & P. Economy (2002) "Raising Capital for Dummies?- Wiley Publishing
- Benjamin, G. & Margulis, J. (2001) "The Angel Investor's Handbook: How to Profit from Early-Stage Investing? - Vision Books
- Bussgang, J. (2010) "Mastering the VC Game? - Portfolio Penguin
- Bygrave, W., Hay, M. & Peeters, J. (1999) "The Venture Capital Handbook? Prentice Hall
- Campbell, K. (2003) "Smarter Ventures? - Prentice Hall
- Carey, D. & Morris, J. (2010) "King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone? - Crown Business
- Cendrowski, H., Martin, J., Petro, L. & Wadecki, A. (2008) "Private Equity: History, Governance and Operations? - Wiley
- Cumming, D & Johan, S. (2009) "Venture Capital and Private Equity Contracting? - Academic Press
- Draper, W. & Schmidt, E. (2011) "The Startup Game: Inside the Partnership between Venture Capitalists and Entrepreneurs? - Palgrave Macmillan
- Feld, B. et al (2011) "Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalists? - Wiley
- Finkel, R. & Greising, D. (2009) "The Masters of Private Equity and Venture Capital? - McGraw Hill
- Gompers, P. & Lerner, J. (2002) "Entrepreneurial Finance? - Wiley
- Gompers, P. & Lerner, J. (2001) "The Money of Invention? - Harvard Business School Press
- Gupta, U. (2000) "Done Deals? - Harvard Business School Press
- Kocis, J., Bachman J., Long A. & Nickels, C. (2009) "Inside Private Equity" - Wiley
- Lawton, K & Marom, D. (2013) "The Crowdfunding Revolution? - McGrawHill
- Lutoff-Carroll, C., Pirnes, A. & Withers LLP (2009) "From Innovation to Cash Flows? - Wiley
- Manigart, S. & Meuleman, M. (2004) "Financing Entrepreneurial Companies? - Larcier
- Perkins, T. (2007) "Valley Boy? - Gotham Books
- Sahlman, W., Stevenson, H, Roberts, M. & Bhidé, A. (1999) "The Entrepreneurial Venture? - 2nd Edition - Harvard Business School Press
- Smith J. & Smith R. (2004) "Entrepreneurial Finance? 2nd Edition - Wiley
- Schertler, A. (2006) "The Venture Capital Industry in Europe? - Palgrave Macmillan
- Timmons, J., Spinelli, S. & Zacharakis, A. (2004) "How to Raise Capital: Techniques and Strategies for Financing and Valuing Your Small Business? - McGraw Hill
- Wilmerding, A. (2006) "Term Sheets and Valuations? - Aspatore Books

Type:	OP	Curs:	1	Period:	S semester
ECTS Credits:	3 ECTS

Venture Capital & Private Equity (CF35031)

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