Venture capital

Summary

The course applies finance concepts to the world of venture capital (VC). Students are introduced to all institutional aspects of the VC industry. Students analyze the relations between investors, general partners, and entrepreneurs, including limited partnership agreements as well as term sheets

Content

Keywords

Venture capital - Private equity - Finance of innovation - Valuation - Option pricing theory

Learning Prerequisites

Required courses

Introduction to finance

Recommended courses

Investments

Learning Outcomes

By the end of the course, the student must be able to:

• Describe all the institutional aspects of the venture capital industry.
• Give an example of the asymmetric information problem that drives contracting in the venture capital industry
• Recall discounted cash-flow and comparables valuation techniques
• Apply finance tools and concepts to the world of venture capital and financing of projects in high-growth industries.
• Use option pricing techniques to price the preferred securities issued to venture capitalists
• Describe how leveraged buyout transactions work

Transversal skills

• Plan and carry out activities in a way which makes optimal use of available time and other resources.
• Give feedback (critique) in an appropriate fashion.
• Take feedback (critique) and respond in an appropriate manner.
• Summarize an article or a technical report.

Teaching methods

Lectures, homework, case studies, expert talks, exercises

Assessment methods

30% Homework and case studies

25% Midterm exam

45% Final exam

Homework is open book. Midterm and final exam are closed-book.

Supervision

Resources

Virtual desktop infrastructure (VDI)

No

Bibliography

Venture Capital and the Finance of Innovation by Andrew Metrick and Ayako Yasuda, John Wiley and Sons.

Ressources en bibliothèque

• Venture Capital and the Finance of Innovation / Metrick

Moodle Link

• https://go.epfl.ch/FIN-522