Venture Capital & Private Equity

Spring 2016 (12/16 Revision)

The objectives, structure, operations, and investment

criteria of VC/PE firms
Course Description
This course will provide an introduction to the fields of Venture Capital and Private
Equity and will be taught via the case method using materials published primarily
by Harvard Business School. While the seminar will delve into financial analysis, it
will be oriented towards generalists rather than advanced economics majors and
will be as appropriate for the budding tech entrepreneur who may someday need to
raise capital as it will for the aspiring investment professional seeking to prepare for
internships or interviews. The central pedagogical tool will be cases, each of which
portrays a protagonist facing a set of real world business dilemmas in more or less
the present day. The cases are selected to present critical issues and permit
students to analyze, debate, and derive answers to the central questions. The
cases will be supplemented by technical readings and notes intended to equip
students with the concepts and tools necessary to decipher the cases.
Introductory topics will include a brief history of the rise and evolution of VC & PE;
how such firms are structured and may differ from one another; how VC and PE are
different from each other; a brief introduction to financial statements and financial
analysis; and what the objectives are of the typical in such funds, using as the prime
example the Yale University endowment.
The course is organized around the life cycle of a VC/PE fund. Topics include: raising
a fund, sourcing deals, evaluating investment opportunities, valuing businesses,
negotiating term sheets with entrepreneurs and sellers, managing and adding value
to portfolio companies, making add-on acquisitions, ethical issues in investing, and
exiting investments. While the course takes the perspective of an investor, it will
also cover the funding life cycle of a typical start up with an emphasis on what roles
Venture Capital and Private Equity are relative to other sources of financing. Course
material will be presented primarily through case studies and selected readings.
Class participation is essential as students will learn from each other as they discuss
real problems faced by VC/PE professionals.

Evaluation Criteria/Requirements
Classroom Participation and Case Study Preparation (30%)
Class attendance is required and meaningful participation is essential
Weekly One Page Case Previews (20%)
Due via email by 9:00PM the night before each case
Midterm Exam (20%)
1

Written analysis of a case; administered on a take home basis

Final Exam (30%)
Another case analysis; administered as an in-classroom exam

Weekly Study Materials

There will be no textbooks for this course

All study materials will instead be distributed electronically via a
Coursepack from Harvard Business School
The cost of the Coursepack will not exceed $200.00 per student
Each student is required to register for his/her own Coursepack
All listed study materials and cases subject to change as the semester
evolves

Course Outline
Module I: Accounting Prerequisites and Introduction to VC & PE
Session 1 (Tuesday, 1/24): Basic Concepts in Accounting and Course
Introduction
Online Tutorial:
Financial Accounting; Introductory Section. Harvard Business School.
2010.
Estimated seat time 8 hours
Reading:
How the Twinkie Made the Superrich Even Richer, New York Times,
December 11 2016.
Session 2 (Tuesday 1/31): Asset Classes and the Role of Venture Capital &
Private Equity
Reading:
Rogers, Steven; Et Al. Technical Note: The Private Equity Industry.
Kellogg School of Management. October 2005 Revision. p 1-8, 15-19.
(13 pages)
Gompers, Paul; Et Al. What Private Equity Investors Think They Do for
the Companies They Buy. Harvard Business Review. June 2015. (4
pages)
Additional Reading on Venture Capital TBD
Case:
Yale University Investments Office: February 2015. Harvard Business
School. October 2011.
Session 3 (Tuesday 2/7): Raising a Venture Capital Fund
Reading:
2

Lerner, Josh. A Note on Private Equity Partnership Agreements.

Harvard Business School. April 2011 Revision. (11 pages)
Lerner, Josh. Note on Private Equity Fundraising. Harvard Business
School. April 2011 Revision. (8 pages)
Case:
Columbia Capital Corp. Harvard Business School. April 1999.
Module II: Making Investments
Session 4 (Tuesday 2/14): Early Stage Business Valuation
Reading:
Bussgang, Jeffrey J; Et Al. Entrepreneurship Reading: Partnering with
Venture Capitalists. Harvard Business School. March 2015. (p 4-45)
Roberts, Michael J. How Venture Capitalists Evaluate Potential Venture
Opportunities. Harvard Business School. December 2004 Revision.
(19 pages)
Nanda, Ashish. Ethics in Venture Capital. Harvard Business School.
July 2001. (5 pages)
Case:
PunchTab, Inc. Harvard Business School. October 2011.
Session 5 (Tuesday 2/21): Later Stage Business Valuation
Reading:
Rogers, Steven; Et Al. Technical Note: The Private Equity Industry.
Kellogg School of Management, October 2005 Revision, p 10-15. (5
pages)
Chaplinsky, Susan; Et Al. Valuation of Late-Stage Companies and
Buyouts. Darden Business Publishing, University of Virginia. March
2011. (25 pages)
Case:
Carlton Polish Co. Harvard Business School. May 2015 Revision.
Session 6 (Tuesday 2/28): Deal Terms and Term Sheets
Reading:
Bussgang, Jeffrey J; Et Al. Entrepreneurship Reading: Partnering with
Venture Capitalists. Harvard Business School. March 2015. (p 45-102)
Roberts, Michael J; Et Al. Deal Structure and Deal Terms. Harvard
Business School. November 2005. (8 pages)
Hardyman, Felda G; Et Al. A Note on Private Equity Securities. Harvard
Business School November 2001. (8 pages)
Case:
Term Sheet Negotiations for Trendsetter, Inc. Harvard Business School.
April 2004.
3

Session 7 (Tuesday 3/7): Relative Evaluations among Venture Investments

Reading:
Hardyman, Felda G; Et Al. Best Practices: Decision Making among
Venture Capital Firms. Harvard Business School. October 2007
Revision. (15 pages)
Mullins, John W; Et Al. Good Money after Bad. Harvard Business
Review. March 2007. (5 pages)
Case:
Hardina Smythe and the Health Care Investment Conundrum. Harvard
Business School. June 2011.
Midterm
Session 8 (Tuesday 3/28): Bidding for a Company in a Competitive Auction
Reading:
Fruhan, William E. Company Sale Process. Harvard Business School.
April 2012 Revision. (34 pages)
Case:
Berkshire Partners: Bidding for Carters. Harvard Business School.
August 2011 Revision.
Module III: Managing and Exiting Investments
Session 9 (Tuesday 4/4): Challenges in Managing Portfolio Companies
Reading:
Rogers, Paul; Et Al. Value Acceleration: Lessons from Private Equity
Masters. Harvard Business Review. June 2002. (8 pages)
Cases:
VCPE Strategy Vignettes: 2012. Harvard Business School. November
2011.
Session 10 (Tuesday 4/11)
Reading:
TBD
Case:
Eric Weston. Harvard Business School. April 2013.
Session 11 (Tuesday 4/18): Evolving Strategy in Mature Firms
Reading:
TBD
Case:
Blackstone at Age 30. Harvard Business School. March 2016.
Session 12 (Tuesday 4/25): Exiting Investments
Reading:
Lerner, Josh. Note on the Initial Public Offering Process. Harvard
Business School. July 2007 Revision. (7 pages)
4

Gompers, Paul A; Et Al. Private Equity Exits. Harvard Business School.

July 2014 Revision. (9 pages)
Bussgang, Jeffrey J; Et Al. Entrepreneurship Reading: Partnering with
Venture Capitalists. Harvard Business School. March 2015. (p 102147)
Case:
Brazos Partners and the Tri-Northern Exit. Harvard Business School.
March 2013.
Final Exam (date TBD)