Instructors:
The course would be team-taught by David Denis (Finance) and Timothy Folta (Strategic Management).

Course Description:
The market for private equity capital has grown dramatically over the past two decades. Private equity organizations provide funds to entrepreneurial firms that tend to be characterized by substantial intangible assets, a lack of positive current earnings, and highly uncertain future prospects. These firm characteristics are particularly relevant in industries in which innovation and technical know-how are the key competitive resources. Because such firms often find it excessively costly to raise debt or public equity capital, they frequently seek funds through private equity markets. The simultaneous management of firm knowledge and capital acquisition is an important determinant of the success of the entrepreneurial firm; hence this management problem will be an important theme of this course. The course will use cases, text readings, and problems to examine issues pertaining to the financing and strategic management of entrepreneurial firms.

Potential topics include:

• The structure of venture capital funds.
• Using private equity to signal unobservable firm capabilities.
• Linking competitive strategy to financing strategy.
• Managing the appropriability of firm technology.
• Factors affecting the choice among sources of financing, including private equity, public equity, research agreements, and commercial agreements.
• Financial contracts and corporate strategies that control conflicts of interest.
• Valuation of private equity investments.
• Exit strategies and their impact on both venture capitalists and the entrepreneurs that they finance.
• Applications of the private equity model to larger corporations.

Potential Audience:
The course would be suitable for second-year MBA students interested in careers as private equity investors or intermediaries, such as investment bankers. However, it will also be pertinent to managers of entrepreneurial firms, particularly those in emerging industries. By concentrating on fast growth firms in the start-up and post start-up phase of development, this course fills a needed gap in a curriculum that focuses predominantly on the management of existing and established organizations.