New Venture Financing

Catalog description

This course focuses on financing entrepreneurial companies especially startup and early stage ventures Its overall aim is to understand how entrepreneurs and their financial backers can spot and create value This involves learning about the following topics that trace out the venture capital cycle opportunity recognition how to tell a great opportunity from a mere good idea valuation and evaluation placing a value on the opportunity for funding purposes negotiating funding structuring the financing contract so as to avoid conflict before it arises and optimize performance incentives managing the investment helping the entrepreneur in nonfinancial matters and safeguarding the investment and exit taking the investee company public in an IPO selling it to management or a trade buyer or closing it down If we want to understand how venture capitalists VCs create value in this cycle and how they interact with entrepreneurs we also need to understand the VC own incentives and constraints These are linked to the fundraising cycle and the structure of a fund VCs are continually raising new funds and the terms on which they do so influences their behavior For an entrepreneur it is critical to understand how This implies that we will explore new venture financing from a number of different perspectives the entrepreneur the venture capitalist that of the investors backing the VC such as pension funds and college endowments and stock market investors at the IPO This course is not open to students taking or having taken Entrepreneurial Finance B40.3361 While the two courses cover similar ground in some lectures New Venture Financing focuses more heavily on startups and the workings of the venture capital industry.