Entrepreneurial Finance and Private Equity: Course Description and Course Syllabus

Abstract

This course uses a combination of cases and academic articles to study entrepreneurial finance and, more broadly, private equity finance. The course is motivated by recent large increases in both the supply of and demand for private equity. The primary objective of this course is to provide an understanding of the concepts and institutions involved in entrepreneurial finance and private equity markets. To do this, the course explores private equity from a number of perspectives, beginning with the entrepreneur / issuer, moving to the private equity partnership, and finishing with investors in private equity partnerships. Throughout the course, we focus on managing the large uncertainties, information problems and agency problems inherent in private equity situations. The first case of the course -- Yale University Investments Office -- provides an introduction to the different classes of private equity and to the concerns faced by investors in private equity partnerships. The remainder of the course is divided roughly into three sections: (1) Issuers/users of private equity; (2) The role of the private equity partnership; and (3) Investments in and fundraising by Private Equity Partnerships.

In issuers / users of private equity, we study the issues faced by individual entrepreneurs and managers. The cases in this section begin with an evaluation of the qualitative attractiveness of the opportunity -- whether a start-up or buyout -- and then place a quantitative value on the opportunity. Armed with these appraisals, the cases then consider how the entrepreneur or manager should attempt to obtain financing. In intermediaries / private equity partnerships, we continue to study issuers of private equity, but we also focus on the role of the private equity partnership. In particular, we study the role of the private equity partnership in choosing, valuing, structuring, and managing private equity investments. In this section, we will look at particular investments made by venture capitalist partnerships, leveraged buyout partnerships, and distressed firm partnerships. More generally, this section of the course will consider why particular methodologies and structures have evolved in the way they have, as well as possible ways to improve on them. The final section of the course -- investments in private equity partnerships -- studies the issues faced in structuring private equity partnerships and in raising funds for them. In this section, we focus on the incentives faced by private equity partnerships and by investors in those partnerships. We also try to understand why the incentives and contractual terms take the form they do.

JEL Classification: G31, G32, G34