Course 2009-2010 a.y.

Course Objectives

Students who attend this course learn which are characteristics and main issues affecting venture and development capital activity. This industry is gaining more and more relevance both in the field of firms financing and as an asset class in the investment portfolios. At the end of 2008 in Europe venture capital firms invested 52.4 bn. € in around 4,600 companies and they had 80 bn. € of free capital to invest. The learning goals are as follow:

• how the fundamental financial theories work in the venture capital industry;
• venture capital as an asset class and its investor categories;
• which are the target companies venture capitalists wish to invest;
• management of the investment process and way out;
• venture capital as a boost to the growth and restructuring of economies.

Course Content Summary

• Venture and development capital: an industry overview.
• Investor categories who place funds in venture capital industry (financial investor, corporate venture capital, government and local authorities, informal investors).
• How to rule relationships between general and limited partners (incentives schemes, disclosure and accountability, how to share profits between parties).
• How to invest: strategies and vehicles.
• What makes venture capital target firms special and why they are not able to raise capital in the debt market.
• Solutions from venture capitalists to firm needs. Relationships between entrepreneur and investor.
• Investment criteria and investment styles (round financing, milestones, venture debt).
• Investment valuation: business plan, deal structuring, valuation criteria and expected IRRs.
• Management of the way out: how and when exit from the investment.

Detailed Description of Assessment Methods

The assessment process is shared in two parts: a) a written exam; and, b) a group assignment. The grade related to the assignment will expire at the end of the academic year. There are differences in the assessment process for attending and not attending students.

Textbooks

• SMITH and SMITH, 2004, Entrepreneurial Finance, 2^nd ed., Wiley (only some sections)
• Some working papers/case histories distributed by course’s web page.

Prerequisites

Students are suggested to gain the basic course ofFinancial System in order to be in a position to fully exploited this course attendance. Attendance of Corporate Finance at the same time could be also useful.