IILM Undergraduate Business School 1

[FIN 201]

IILM Undergraduate Business School

Module Name: Venture Capital & Private Equity

Course Code: FIN 201

Stage: 2

Semester: 3

Credits: 5

Maximum Marks: 100

Module Prepared by: Shraddha Mishra

Module Plan Discussion Date: 18 July 2017

Members Present: Shuchi Agrawal, Gurpreet Bhatia, Nidhi Piplani, Reenu Bansal, Shweta
Nanda, Gargi Sandilya, Anindita Chatterjee, Kritika, Saloni Sachdeva, Daisy Mathur Jain,
Aarti Sharma

Comments:

Final Submission Date:

Module Approved by:

 Dean – Dr Daisy Mathur Jain

 Director – Dr. Shuchi Agarwal

 IILM Undergraduate Business School 2
[FIN 201]

IILM Undergraduate Business School

Module Name Venture Capital & Private Equity

ECTS Credits 5
Academic Year UG 2016-19
Module Code FIN 201
Type of Course Obligatory for all Specializations
Semester Third
 IILM Undergraduate Business School 3
[FIN 201]

IILM Undergraduate Business School

Venture Capital & Private Equity

SBS Batch 2017-2018
Academic Year: 2017-18
Semester III Credits - 5

The venture capital and private equity industry, having expanded significantly over the past
15 years, plays an increasingly important role in shaping our economy. While acknowledging
that private equity investing is an apprenticeship business, this course seeks to understand
how these organizations work, why they take the forms that they do, and where crucial
problems and opportunities for innovation exist.
Introduction to Tutors
Module Leader and Tutor:
Ms. Shraddha Mishra
Cabin No: 347 (3rd Floor)
Email Id: shraddha.mishra@iilm.edu

1. Introduction to the Module:

Most of the world's work is done through organizations, which comprise groups of people
working together to accomplish organizational objectives. To achieve these objectives they
use various resources. These resources need to be financed or paid for. Managers to work
effectively need to know the amounts of these resources, means of financing them & the
results achieved through using them. This information is required both by internal & external
users & decision makers.

This subject provides an overview of the venture capital and private equity industry and an
accessible introduction to the literature on recent developments in venture capital and private
equity investments. It provides particular perspectives on the three major areas of venture
capital and private equity: fundraising, investing and exit strategies. The subject draws
extensively on the experience of senior industry practitioners who use their experience to
provide students with insights into real-world venture capital and private equity decision-
making processes. The subject also makes extensive use of the case study approach to
teaching and learning, focusing on venture capital and private equity investment cases in
weekly class discussions.
 IILM Undergraduate Business School 4
[FIN 201]

Course Focus:

The course equips you with the knowledge of concept of Venture Capital and Private Equity.
It covers in details the day-to-day activities of venture capital including screening deal flow,
making investments, and managing a portfolio. This course is extremely vital to understand
how private equity fund are raised and structured, the legalities involved, and the participants
in the fundraising process.

Learning Outcomes: At the end of this course, students would be able to:

- Describe the history and basic concepts of the venture capital industry.
-Understand how private equity funds are raised and structured, the legalities involved, and
the participants in the fundraising process.
-Understand the day-to-day activities of venture capital including screening deal flow,
making investments, and managing a portfolio.
-Discuss various exit strategies and the challenges of each.
-Compare the US venture market with foreign venture markets.
-Explain how and why large corporations have adopted the venture capital model.

2. Module Pre-Requisites:

An interest in understanding how businesses are financed through venture capitalist. The
readings suggested in the learning notes will enable the comprehension of the subject.
Conceptual learning to be reinforced with the help of journals, web resources, reference
material to better understand managing groups and teams in practice.

3. Preparing for the class:

The module requires that the participants should be interested in understanding how a new
venture is started and financed. The course is very apt for those who want to pursue their
dreams and look for funding for their new companies.

We believe in learning through participation so a) learning through class discussion and

dialogue helps in achieving the objective of this module b) also peer learning contributes in
the overall learning in the classroom. The concepts are delivered using live examples so it
involves a lot of calculation and problem solving exercises using excel.

The course outline has detailed session plan which includes readings and cases. You are
required to come prepared by going through the material already uploaded on Neo LMS. The
quality of discussion will contribute to the overall achievement of this programme’s goals.
 IILM Undergraduate Business School 5
[FIN 201]

4. Module Overview:

Session Topic
1 Introduction to Venture Capital and Its scenario in India
2 Features and Advantages of Venture Capital and Process of Venture Capital
3 Role of Venture capitalist
4 Stages of New Venture Development
5 How to form a Business Proposal to attract Venture Capitalists
6 Recent Startup Deals in India
7 Funding process of Venture Capital fund
8 Structuring a Venture Capital Deal, Selecting and Approaching a Venture Capital Deal.
9 Methods of Venture Capital Financing
10 Case: Mindtree Consulting Pvt. Ltd
11 Role of SEBI in Venture Capital Fund
12- 13 Valuation Approaches
14 Due Diligence
15 Case: Reva Electric Car Company (RECC)
16 Global Comparison of Venture Markets
17 Mid-Term Exam
18 Exit routes for Venture Capital Financing
19 Concept of Private Equity
20 Classification of Private Equity
21 Characteristics of a Private Equity Transaction
22 Private equity Process
23 Harvesting Decision
24 Differentiate between Private Equity and Venture Capital, Harvesting
25-26 Public Private Partnerships
27 Deal Structuring
28 End term Exam

5. Readings:
The readings will also be made available to the students. The below mentioned text will be
helpful to the students.
Main Text:
 Venture Capital, Private Equity, and the Financing of Entrepreneurship by Josh
Lerner (Author), Ann Leamon (Author), Felda Hardymon (Author)

References:
 Entrepreneurial Finance – Philip Adelman and Alan M. Marks 5th Edition PHI
Learning Pvt Ltd.
 The Masters of Private Equity and Venture Capital Hardcover – by Robert Finkel
(Author), David Greising (Author)
 IILM Undergraduate Business School 6
[FIN 201]

Journals
 Chartered Accountant
 Chartered Finance Analyst
 Journal of Banking and Finance

6. Detailed Schedule:

Session 1: Introduction to Venture Capital and Its scenario in India

Description of the session: The session will give a brief description of the history and basic
concepts of venture capital. This session will also highlight the recent changes in the venture
capital industry. The venture capital funds invest in companies in exchange for equity in the
companies it invests in, which usually have a novel technology or business model in high
technology industries.
Learning Outcome: To understand the role of Venture Capitalists in the industry and how
can they add value to a business.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall
Desired Video Link:
What is Venture Capital? https://youtu.be/mxFUPzRdqjY
Session 2: Features and Advantages of Venture Capital and Process of Venture Capital

Description of the session: This session will emphasize on the procedure of Venture Capital,
i.e. how a start-up can raise funds to make his business moving. The session will also
emphasize on the characteristics of a venture capital fund. The benefits of getting funding
from a venture capital will be discussed in the class.
Learning Outcome: The students will develop an understanding of the step by step process
of venture capital, its features and advantages.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall
Desired Video Link:
How a VC Fund works: https://youtu.be/9Ts6xZd0j6M
What a VC offers: https://youtu.be/bqA98xVc70w
Session 3: Role of Venture capitalist

Description of the session: It will underline the role of venture capitalists in a business. The
session will be done in a discussion format where the students would be urged to come out
with the role of venture capitalists and how the role might be little different for different
sectors of business scenario.
 IILM Undergraduate Business School 7
[FIN 201]

Learning Outcome: The Students will develop an understanding on choosing the right
venture capitalists for your business.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall
Desired Video Link:
Choosing the (Right) VC: https://youtu.be/8L4xozULVMs
Get Chosen by the Right VC: https://youtu.be/TvC6HQVptAY

Session 4: Stages of New Venture Development

Description of the Session: The session will presents the analysis of Stages of New Venture
Development and the deviations from their infancy stage. It also discusses the financial
performance and measuring the progress with mile stones in the high risk businesses.
Learning Outcome: To understand the stages of new venture development and how they
operate.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall

Session 5: How to form a Business Proposal to attract Venture Capitalists

Description of the Session: This session will stress upon making a business plan for
attracting venture capitalists. The students would be given a task of identifying a business
idea and find out existing ventures in the same sector. They will have to write a business plan
for their business idea and present it in the class.
Learning Outcome: To understand the development of a business plan

Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,

Hartman 2004 Edition, Prentice Hall

Desired Video Link:

What is a fair valuation for your company? https://youtu.be/lGevN0pcGZs

Session 6: Recent Startup Deals in India

Description of the Session: The session will provide details of the recent Start-up Deals in
India during 2011- 2015. It will also discuss the various new business started in India and the
venture capitalist who has invested in their businesses.

Learning Outcome: To understand the current scenario of Venture capitalists and the
industry requirements.
 IILM Undergraduate Business School 8
[FIN 201]

Essential Reading: Entrepreneurial Finance – Philip Adelman and Alan M. Marks 5th
Edition PHI Learning Pvt Ltd.

Session 7: Funding process of Venture Capital fund

Description of the session: It will help students to learn how a venture capital fund is formed
and the process of venture capital funding. The session will direct the students towards the
process through which they can approach venture capitalists to provide funding for their start-
ups.
Learning outcome: To understand the Venture Capital funding process and its course of
action.

Essential Reading: Entrepreneurial Finance – Philip Adelman and Alan M. Marks 5th
Edition PHI Learning Pvt Ltd.

Desired Reading: How startup options (and ownership) works.

https://a16z.com/2016/08/24/options-ownership/

Session 8: Structuring a Venture Capital Deal, Selecting and Approaching a Venture

Capital Deal.

Description of the Session: Venture capital covers a broad range of transaction types. This
session will consider the risks of various types of deal for the investor, and shows how these
translate into required returns. It then focuses on one particular type of deal: the management
buyout. Using a real-life example, it shows how deals can be structured and why they can be
potentially lucrative for the managers who undertake them.
Learning Outcome: How to structure a venture capital deal

Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang, Hartman

2004 Edition, Prentice Hall

Desired Reading: 65 Questions Venture Capitalists Will Ask Startups

https://www.linkedin.com/pulse/65-questions-venture-capitalists-ask-startups-hojatallah-
goudarzi?goback=%2Enpv_AAsAABMB9Y0BhXHOumM*5LoRin9pO5O*4qerpb2lY_*1_*
1_name_a4XN_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1
_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1_eml*5email*4m2m*4invite*4single*401*5hero*54*5p
rof~cta_*1_*1&trk=prof-post

Session 9: Methods of Venture Capital Financing

Description of the Session: This session accentuates the various methods of venture capital
financing along with their pros and cons so that the students are able to make a choice among
various methods and choose the one that is suitable to their business proposal/ idea.
 IILM Undergraduate Business School 9
[FIN 201]

Learning Outcome: To develop an understanding on the several methods of venture capital

financing
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall

Session 10: Case: Mindtree Consulting Pvt. Ltd

Description of the Session: The case highlights the important success factors for Venture
capital investing in India as well as the important role that the venture capitalist plays in the
financing landscape.
Learning Outcome: To understand the various aspects of funding process, structuring the
deal and financing landscape.

Session 11: Role of SEBI in Venture Capital Fund

Description of the Session: The session highlights the regulatory issues and various aspects
of Venture Capital. The session briefs the students on the regulatory framework laid down by
SEBI so that the students know the purview of the venture capitalists and their rights and
responsibilities.
Learning Outcome: To learn the legal characteristics of a venture capital
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang, Hartman
2004 Edition, Prentice Hall

Session 12- 13: Valuation Approaches

Description of the Session: To understand the three major approaches to business valuation:
the Income Approach, the Market Approach, and the Cost Approach. Under each of these
approaches there are several methods that might be employed to determine business valuation
depending on the specific nature of the company being valued.
Learning Outcome: To learn the variety of business valuation methods to determine the fair
price or worth of a business
Essential Reading: Entrepreneurial Finance – Philip Adelman and Alan M. Marks 5th
Edition PHI Learning Pvt Ltd.
Desired Video Link:
https://youtu.be/_mrJCoIgTeQ

Session 14: Due Diligence

Description of the Session: This session accentuates on the process of systematically

researching and verifying the accuracy of a statement. How did the term originate in the
business world, where due diligence is required to validate financial statements. What is the
goal of the process?
 IILM Undergraduate Business School 10
[FIN 201]

Learning Outcome: The students will learn at which stage due diligence occurs, the
confidentiality of the due diligence agreement.

Essential Reading: Entrepreneurial Finance – Philip Adelman and Alan M. Marks 5th
Edition, PHI Learning Pvt Ltd.

Desired Video Link:

https://youtu.be/V0CQY4faQf0

Session 15: Case: Reva Electric Car Company (RECC)

Description of the Session: The case tells about Innovation and the role of venture capitalist
in it. It includes the company's flagship vehicle, REVAi electric car, available in 26 countries
with more than 4,000 of its different versions sold worldwide. It stresses that where the
system has helped to flourish the entrepreneurial initiatives and economies to grow. The
entrepreneurs are not able to exercise their full potential due to excess greed of venture
capitalists. It also discusses the qualities required of entrepreneurs.
Learning Outcome: To identify the probable difficulties in taking up a new venture.

Session 16: Global Comparison of Venture Markets

Description of the Session: The session highlights the Global comparison of the US venture
market with Indian venture markets and other country’s venture market. The start-up
challenges and start-up India will also be discussed in brief.
Learning Outcome: Understanding the difference of US venture market with foreign
venture markets.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall

Session 17: Mid-Term Exam

Session 18: Exit routes for Venture Capital Financing

Description of the Session: The exit strategy is the VC's way of cashing out on its
investment in a portfolio company. A VC often hopes to sell its equity (stock, warrants,
options, convertibles, etc.) in a portfolio company in three to seven years, ideally through an
initial public offering (IPO) of the company. The company becomes liquid through the sale of
its stock to the public and the VC sells its stock to reap its return.
Learning Outcome: Understanding the various methods of exiting a venture capital deal.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall
 IILM Undergraduate Business School 11
[FIN 201]

Desired Video Link:

https://youtu.be/MFBSTZ4aQvg

Session 19: Concept of Private Equity

Description of the Session: The session highlights the concept of Private equity (PE), how
does a financial buyer invest in private companies of all sizes. How private equity firms
invest across many industries, while others are focused on specific industries such as
technology or energy services.
Learning Outcome: The students will learn how Private equity firms typically raise funds
via general partnerships from institutional-type capital sources such as pension funds,
endowment funds, family offices, and high-net-worth individuals.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall

Session 20: Classification of Private Equity

Description of the Session: The term private equity covers many different types of private
equity funds known as stages of private equity. All the stages will be discussed in this session
in detail.
Learning Outcome: The students will learn various stages of private equity and how can
they be used.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall

Session 21: Characteristics of a Private Equity Transaction

Description of the Session: The session enlightens on the various characteristics and feature
of a private equity transaction and description of each feature. The session throws light on the
description of each feature to give a clear understanding of the concept of private equity.
Learning Outcome: The Students will learn the nuances of a private equity transaction.
Essential Reading: Entrepreneurial Finance – Philip Adelman and Alan M. Marks 5th
Edition PHI Learning Pvt Ltd.

Session 22: Private equity Process

Description of the Session: For each fund under management, private equity firms cycle
through a multi-staged process of: Fund raising from limited partners, Portfolio acquisition
 IILM Undergraduate Business School 12
[FIN 201]

search, Investment, Growth, Divestment, and Dispersal of funds back to limited partners.
This session will stress on the same.
Learning Outcome: The students will learn the various stages involved in a private equity
cycle.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall

Session 23: Harvesting Decision

Description of the Session: In this session, harvesting alternatives will be discussed. For any
venture at any given time, the harvesting alternatives realistically available are limited. The
session will cover the factors which bear on decision of how and when to Harvest.
Learning Outcome: The students will be able to determine the challenges of faced by them
at the time of Harvesting.
Essential Reading: Entrepreneurial Finance – Philip Adelman and Alan M. Marks 5th
Edition PHI Learning Pvt Ltd.
Session 24: Differentiate between Private Equity and Venture Capital, Harvesting

Description of the Session: Venture capital can be viewed as a segment of private equity,
from an academic point of view. But for the purpose of making investment decisions, their
respective characteristics are sufficiently distinctive that we should treat them as separate
asset classes. Those characteristics include target companies, risk-reward profiles, minimum
capital contributions, deal structures, liquidity, tax benefits, control vs. minority share
acquired, investor expertise, and others. The session will accentuate on the same.
Learning Outcome: The students will learn how to differentiate between a venture capital
and private equity transaction.
Essential Reading: Entrepreneurial Finance – Philip Adelman and Alan M. Marks 5th
Edition PHI Learning Pvt Ltd.

Session 25-26: Public Private Partnerships

Description of the Session: This session stresses on the concept of Public-Private

Partnerships, how can Public-private partnerships be used to finance, build and operate
projects such as public transportation networks, parks and convention centres. The session
will cover few industries with PPP model.
Learning Outcome: The students will learn the concept of public private partnerships and
how can they be used to finance a project.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall
 IILM Undergraduate Business School 13
[FIN 201]

Session 27: Deal Structuring

Description of the Session: This session highlights on how devising an appropriate deal
structure is an important part of a successful transaction. The key elements of structuring the
right deal like Is the company being sold, or its trade and assets?, Deferred payments/vendor
loan notes ,Earn-out clauses .
Learning Outcome: The students will learn how a deal is structured, the steps involved in
structuring an appropriate deal.
Essential Reading: Entrepreneurial Financial Management Author: Cornwall, Vang,
Hartman 2004 Edition, Prentice Hall

Session 28: End term Exam

7. Assessment Plan

Components Individual/Group Weightage

Positive class participation / Case Studies Individual& Group 20 Marks
Mid-Term Exam Individual 40 Marks
End Term Exam (Closed Book) Individual 40 Marks

Details of assessment:

1) Component 1: Class Assignments: (20%)

The students will be given an assignment (using PPT) to be submitted to the faculty in the
stipulated time. In assignments, students have to collect the company profile of those startup
which has utilized venture capital funds for their business. They also have to enlist their
financial performance based on financial statement analysis of past few years.

2) Component 2: Mid-Term Exam (40%)

Mid-term examination will be conducted on the topics listed above. The online test will be in
the form of multiple choice questions, fill in the blanks, State True or False, etc.

3) Component 3: End Term Exam: (40%)

A three-hour closed book on campus end-term examination will be held at the conclusion of
the course. The examination will test students' theoretical understanding through questions
and their ability to apply various concepts to situation based problems.
 IILM Undergraduate Business School 14
[FIN 201]

8. Maps
8.1 Assessment Map

Module A1 A2 A3 A4 A5
Venture Capital and Private * * *
Equity

A1- Individual assignment

A2- Group assignment
A3- Open book examinations
A4- Closed book examinations
A5- Presentations

8.2 Teaching Map

Module Name: T1 T2 T3 T4 T5 T6
Venture Capital and Private Equity * *

T1: Lectures
T2: Seminars/Tutorials
T3: Projects
T4: Case Discussion
T5: Guest Lectures/Industrial Visit
T6: Lab Sessions

8.3 Curriculum Map

Program Learning Goals

Module L1 L2 L3 L4 L5 L6 L7 L8
Venture Capital and * * * * *
Private Equity

L1- Awareness
L2- Global & Multicultural Perspectives
L3- Critical & Integrative Thinking
L4- Communication: Oral & Written
L5- Data & Information Analysis
L6- Teamwork
L7- Entrepreneurial & Innovative Thinking
L8- Responsible Leadership
 IILM Undergraduate Business School 15
[FIN 201]

8.4 Assessment Mapping with Learning outcomes and PLGs:

Sl. Assessment Module Learning PLGs Remarks

No. Component Outcomes assessed assessed
1. Positive class
participation / -Understand the day-to-day activities of venture
Case Studies capital including screening deal flow, making
investments, and managing a portfolio
L1, L2
L3, L4,
L9
2 Mid-Term - Describe the history and basic concepts of the L1, L2
Exam venture capital industry. L3, L4,
-Discuss various exit strategies and the challenges of L9
each.
-Compare the US venture market with foreign
venture markets.
3 End Term -Understand how private equity funds are raised and L1, L2
Exam (Closed structured, the legalities involved, and the L3, L4,
Book) participants in the fundraising process. L9
-Explain how and why large corporations have
adopted the venture capital model.