Course 2020-2021 a.y.

The course is split in two parts. The first part is focused on the financial features of VC target companies, the VC industry characteristics and the management of VC companies. The second part devotes attention to carry out a comprehensive analysis of an investment opportunity from the VC investor’s point of view.

• What is Venture and Development Capital (VC) and why it exists.
• What differs entrepreneurial finance from corporate finance
• Why are VC target firms special? Why and when are they not able to raise capital in the debt market?
• Which are the solutions offered by venture capitalists to the firm’s financial needs. The relationships between the entrepreneur (the firm) and the outside investor (the VC company).
• How to invest: legal framework, strategies and investment vehicles.
• Investor categories who place funds in the VC industry (financial institutions and pension funds, family offices, corporations, government and local authorities, informal investors).
• How to regulate the relationship between general and limited partners ring fenced in investment schemes: disclosure and accountability; incentives schemes; how to share returns between parties.
• Investment criteria and investment styles (round financing, milestones, venture debt, portfolio leverage and exit way).
• How to read and analyse a business plan. Business models and revenue forecast.
• Investment valuation: valuation criteria, relevant cash flow and cost of capital measures.
• Investment valuation: valuation model, explicit and implicit values.
• How to put valuation model in practice.
• Investment decision process: terms of the deal, share price, expected IRR and investment recommendation.

• Explain how the fundamental financial theories work, or don’t work, inside the venture capital industry.
• Dig deeper on venture capital as an asset class and motivation to investment.
• Recognize which are the target companies venture capitalists wish to invest in.
• Explain investment schemes and management of the investor.
• Read the financial forecast inside the venture's business plan and indicate what VC looks for.
• Know and apply topics affecting new venture valuation for fully diversified financial investors.
• Describe the investment decision process in the eyes of the risk-return combination.

• understand the financial requirements and fund raising process for starting and developing a venture;
• understand the structure and behaviour of the venture capital industry and players;
• apply relevant criteria and models used in the VC industry for screening opportunities effectively;
• understand what a business plan is and know how to carry out its screening (including information needed to carry out a feasibility study of a business opportunity, how to look for them, how to structure the study in a written format);
• understand the investment policies, the assessment criteria and the IRR objectives for fully diversified financial investors, such as venture capital investors;
• be able to successfully sustain a job/internship in the field of VC industry;
• be able to carry out a financial analysis in a group of peers and manage the relations inside the group.

• 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

On line lectures

A “mild” blended teaching method is adopted. Around one third of the lectures are virtual synchronous; these lectures will be focused on theory and definitions. The rest of the course is on campus with the possibility to attend and participate remotely through Blackboard Collaborate. All the lectures, both virtual synchronous and physical, will be recorded and released through Blackboard.

Guest speaker’s talks

During the course, a bunch of guest speakers will offer insights and their personal experience on venture capital deals and operations. The effective participation will depend on the evolution of the Covid 19 pandemia during the term.

Exercises

During the course, some numerical analysis will support the explanation of key concepts and applications, such as business life cycle, investment scheme economics and return sharing, portfolio analysis, … In the second part of the course the investment analysis will be supported by several spreadsheets that will be applied for both understanding the theoretical framework and putting in practice the valuation and decision taking models.

Case studies/Incidents

The course is fully supported by the analysis of a pivotal case study in order to show examples referred to the main contents of the course. Moreover, in the first part of the course a bunch of incidental cases allow to discuss and put in practice some key features affecting the VC industry.

Group Assignment

Students who join the group assignment will have the opportunity to enter in touch with a real target firm and carry out a real financial analysis, in the eyes of a VC company. The assignment offers the opportunity to put in practice the know how learnt during the course and it is the ideal complementary activity to lectures. Groups will be only online. Their members, both on and off campus, will work together for the final goal and they will be able to contribute to each single task also in relation to their individual background. The assignment also allows students to develop soft skills such as problem solving, time management and write a report in a given format.

For attending students, the assessment process is divided in three parts.

a) written exam (a test with multiple choice questions, weight 60%);

Assessment criteria: ability to recognize and critically review all the topics covered inside the syllabus as well as practice main criteria for the investment selection and decision process.

b) group assignment (weight 30%);

Assessment criteria: the assignment output refers to a written report (a final-investment report) and a pitch presentation of the report. The assessment of the presentation relies also on soft skills such as the quality of the show, the ability to argue, … The assessment of the report refers more on the ability to put in practice the know how learnt during the course and the consistency of the analysis carried out.

c) class attendance and participation (weight 10%).

Assessment criteria: ability to actively participate in discussions; ability to generate original contributions and ideas; ability to present short topics to peers.

For students who do not joint the assignment there is a written exam at the end of the course (a test with multiple choice questions).

Assessment criteria: ability to recognize and critically review all the topics covered inside the syllabus as well as practice main criteria for the investment selection and decision process.

• Textbook: J.K. SMITH, R.L. SMITH, Venture Capital, Deal Structure & Valuation, Second Edition, Stanford University Press, 2019.
• Slides, excel files, cases and other material are distributed through the Blackboard Room for the course.