Startup Financing, Valuation, and Venture Capital

ESMT Berlin Germany

The aim of this course is to provide students with little or no finance background with solid basic knowledge of capital raising process and valuation techniques in startup companies. Students will

  1. gain an understanding of the process which entrepreneurs go through to raise different types of financing from investors;
  2. develop the competences to value these companies from a venture capitalist perspective;
  3. and understand contracts with venture capital investors.

The first part of the course will emphasize the understanding of financing needs of early-stage companies from the entrepreneur’s perspective, motivation to invest from different investors’ perspective, and how to reconcile their interests through contracting. Students will learn how deals are structured between investors and entrepreneurs to mitigate potential conflicts and agency issues inherent to young companies. We, especially, focus on venture capital financing. The course will then discuss valuation methods and their applicability for innovative young companies. We will have some guest speakers from the Berlin’s startup ecosystem.

In the second part of the course, students will have the opportunity to “get their hands dirty”, thus, to asses real business ideas from different investor’s perspective. They will evaluate how appropriate are financial model, estimation and forecasting of free cash flows and other valuation attributes, provided by startups, and based on this assessment will have to apply valuation techniques to make decision if they would invest in those companies.

At the end of this course students will be able to

- know more about different forms of entrepreneurial finance;

- evaluate financing alternatives for new ventures;

- understand venture capital investments; and

- value startup firms using various financial models and valuation approaches

Students will be expected to work in teams to evaluate business ideas and are required to participate actively in all discussions.

The course is beneficial for future entrepreneurs looking to attract investors, as well as those planning careers in private equity, venture capital, investment banking, portfolio management, corporate finance and financial consulting.