This course examines the growth of the venture capital sector from both a theoretical and practical perspective. The course follows the start-up process from initial formation through private capitalization, strategic alliances, and public offerings. Each step in the process is analyzed from the perspective of the entity, of the founder-employees, and of the venture backers. We will carefully consider the incentive mechanisms and control structures used at each step of the transaction, and will focus on both the underlying economic and financial theory, as well as on pragmatic considerations in structuring the transactions. The course also explores the evolution of the private equity market, including VC funds, LBO funds, and hedge funds, as well as related compensational and incentive mechanisms.
Students will be required to complete a term sheet negotiation exercise, a written analysis of scholarship relating to the venture capital process, and a written examination. There will be a series of visitors from practice with extensive experience in the VC process. Prerequisites: Corporations and Capital Markets. Either course may be taken concurrently.