The Mechanics of Venture Capital

IFF Training

How long?

  • 16 weeks
  • online

What are the topics?

IFF Training

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About the course

This course provides you with an understanding of what constitutes venture capital, who is involved and how they are involved. With an in-depth insight into the process, activities and skill set required as a participant from the development of an investment initiative through to exit.

Venture capital is a relatively new and vibrant area of finance that is constantly changing and being driven by the demands of those involved, together with the influence of the likes of financial markets and regulatory authorities. As a consequence, the course aims to provide you with both traditional and contemporary perspectives and insights into a very important growth area of finance.

WHAT YOU WILL LEARN

  • The basic principles of venture capital, how they have developed among a diverse range of participants, with both for-profit and not-for profit primary objectives
  • The importance of the finance lifecycle in influencing the nature and substance of venture capital activity
  • The different types of synergies and/or control benefits arising from a proposed venture capital investment and how to evaluate/value them
  • The principles of how to manage a venture capital investment to create value for a potentially successful exit
  • The structuring (and restructuring) of venture capital investments, and the range of financial instruments that can be used to fund them
  • The importance of thorough risk analysis, comprehensive due diligence, and implementation skills in achieving a potentially successful exit

Modules

Unit 1 - Fundamentals of venture capital

Following Unit 1, you will be able to:

  • Explain the meaning of the term ‘venture capital’ and its relationship to ‘private equity’
  • Explain the similarities and differences between private equity and venture capital
  • Explain what venture capital is, who is involved, how and why
  • Explain and contrast different venture capital investment strategies

Unit 2 - Venture capital investment process and due diligence

Following Unit 2, you will be able to:

  • Explain the venture capital investment process
  • Describe the process of venture capital proposal origination and screening
  • Describe the selection process for venture capital proposals
  • Describe the different types of risk to which a venture capital investment may be exposed
  • Explain how the different types of risk encountered in venture capital investing may be prioritised
  • Describe how the different types of risk encountered in venture capital investing may be mitigated

Unit 3 - General principles and the valuation of venture capital companies

Following Unit 3, you will be able to:

  • Explain the principles of value creation
  • Explain the principles that underpin return on assets
  • Explain and distinguish between accounting measures of value and economics, like Net Present Value (NPV) and Internal Rate of Return (IRR)
  • Discuss the economic rationale for venture capital investing
  • Explain how venture capital firms can create value
  • Review the different valuation methods applicable to venture capital investing
  • Demonstrate important valuation perspectives – absolute versus relative value

Unit 4 - Practical considerations in the valuation of venture capital companies

Following Unit 4, you will be able to:

  • Explain the difference between pre-money valuation and post-money valuation
  • Explain convertible notes, financing rounds and dilution
  • Explain the challenges in valuing venture capital businesses
  • Provide a review of the different valuation methods that can be used in venture capital valuation
  • Explain the venture capital method of valuation, its use and limitations
  • Explain the difference between value and price and why each is important to understand in venture capital decision making
  • Explain how venture capital firms can create value
  • Demonstrate important valuation perspectives – absolute vs. relative value

Unit 5 - Deriving value from venture capital investments

Following Unit 5, you will be able to:

  • Explain (remind about) the multi stage venture capital investment process
  • Review/flag how “control” can be achieved with a minority investment via protection mechanisms
  • Introduce “control” protection mechanisms
  • Review the importance of control to prospective value creation and extraction
  • Explain the difference between synergies and control benefits from venture capital investments
  • Explain the meaning and importance of relative valuation in determining synergies and control benefits

Unit 6 - Structuring and restructuring venture capital investments

Following Unit 6, you will be able to:

  • Explain the significance of the structuring of venture capital investments to try to achieve an optimal return
  • Review and explain the different financial structuring options – different types of equity, debt and how they are related to, but differ from, mezzanine finance
  • Explain the meaning of mezzanine finance and why it is important in the structuring of venture capital investments
  • Explain the different types of mezzanine finance and how they can be tailored to meet specific needs

Unit 7 - Approval process, execution and documentation

Following Unit 7, you will be able to:

  • Explain the importance of the deal, approval and execution process
  • Review key elements of the deal, approval and execution process
  • Review the key documents used in a transaction and their purpose
  • Explain role of representations and warranties
  • Explain role of covenants
  • Explain role of conditions precedent
  • Explain role of closing conditions
  • Explain role of non-binding indications of interest
  • Review the importance of screening of both the venture capitalist by the entrepreneur, and the entrepreneur and the proposal by the venture capitalists
  • Review the importance of the term sheet

Unit 8 - Managing and realising venture capital investments

Following Unit 8, you will be able to:

  • Explain the challenges in managing venture capital investments
  • Review mechanisms of control, including board representation, allocation of voting rights, and control of access to additional financing
  • Review the key issues in managing and realising value from venture capital investments
  • Explain the challenges in restructuring to create value
  • Examine the ways in which a venture capital firm can be restructured
  • Explain the carve out, the split off, and the split up as restructuring methods
  • Examine how to build value before the exit and the role of value based management (VBM)
  • Review the importance of Economic Profit (EP analysis for late stage venture capital businesses)

Experts

Roger Mills

Roger Mills is an Emeritus Professor at the University of Reading. For more than 20 years, he was Professor of Finance and Accounting at Henley Management College, now Henley Business School and, subsequently, a Professor Dr in the VU University, Amsterdam. Roger has a unique blend of academic ...

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The Mechanics of Venture Capital at IFF Training

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