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Innovation Finance

  • Module code: BS7567
  • Year: 2018/9
  • Level: 7
  • Credits: 15
  • Pre-requisites: None
  • Co-requisites: None

Summary

Venture capital and business angel finance has been the driving force behind some of the most vibrant sectors of the economy. Companies famous for receiving venture capital or business angel funding early in their development include Apple, Microsoft, Google and Amazon. US and western Europe no longer dominate the industry and emerging countries such as China, India and Russia are fast catching up. Recently, the explosion of crowdfunding platforms has signalled a new era for the innovation finance industry. This module analyses all stages of the funding ladder for innovative companies, from crowdfunding, business angels, venture capital, private equity to IPO or M&A. It examines the main forms of innovation finance and the investment process; how private equity and venture capital funds, business angels and crowdfunding platforms work; how firms become investment ready, raise external finance and how to they finally exit. You also learn about wider framework conditions that have a bearing on business innovation, including availability of finance for innovation, public policies and agencies promoting innovation.

Aims

The aim of this module is:

  • To develop in depth knowledge of the innovation finance industry including private equity, venture capital, business angels and crowdfunding, including a good understanding on how such instruments differ from other types of corporate finance.
  • To understand the decision-making process with respect to screening and selecting of business proposals, negotiating and structuring the deal, following up on investments, and exiting.
  • To provide critical knowledge on how to identify and approach innovation finance providers, how to become 'investment ready', and how to write funding proposals.
  • To enhance and develop key skills in pitching to venture capitalists and develop an appreciation on the evaluation of business opportunities from a VC point of view. To further learn how VCs structure deals, monitor and add value to their portfolio companies.

Learning outcomes

On successful completion of the module, students will be able to:

  • Understand key concepts and theories concerning types, processes and models of innovation finance (including private equity, venture capital, business angels and crowdfunding).
  • Understand the role of innovation finance in supporting the entrepreneurial process and company growth.
  • Critically assess and evaluate the challenges of different innovation finance models in regards to leadership, strategy, organisational structure and behaviour.
  • Explore the techniques specific to innovation finance management, and be able to relate different finance modules to support innovation-related firms or projects within firms.
  • Acquire practical and transferable skills such as, analysis of case studies, undertaking deductive and inductive reasoning, and enhancing presentation skills.

Curriculum content

Definitional and conceptual issues

  • Institutional background of innovation financing and differences between entrepreneurial and 'traditional' corporate finance
  • Forms of innovation finance and relationship between innovation finance and growth
  • Innovation finance around the world
  • Policy responses to the lack of innovation finance around the world (government interventions, legislations, tax incentives etc.)

Strategies for fundraising

  • How to finance a new venture: venture capital, business angels and crowdfunding
  • How to become 'investment ready' and how to write a funding proposal
  • How to find investors, how to select an investment partner and how to negotiate with VCs: terms, expectations, and milestones

Teaching and learning strategy

The development of the learning outcomes is promoted through a series of teaching and learning methods. It is a mix of interactive teaching and learning:

  • Lectures: a series of weekly lectures will take place. In each lecture, a specific issue will be analysed and discussed.
  • Group discussions will help students to demonstrate knowledge, understanding and critical thinking of relevant aspects.
  • Multimedia sessions: one or more theoretical sessions will include video presentations that will be followed by analytical group discussions
  • Case studies: cases will be analysed and discussed through the contribution of the theoretical lectures. This method will help students to develop their critical thinking as well as a particular awareness and understanding of specific issues. Funding applications will also be used as case studies

Breakdown of Teaching and Learning Hours

Definitive UNISTATS Category Indicative Description Hours
Scheduled learning and teaching Lectures and workshops 32
Guided independent study 118
Total (number of credits x 10) 150

Assessment strategy

Formative assessments will be achieved through in-class critical analysis of various case studies on crowdfunding, business angels and venture capital funding, strategies and barriers faced by companies raising innovation finance, with feedback given by the tutor.

The summative assessment consists of two parts:

Coursework (70%): Students will be asked to identify the best suitable source of finance for a company of their choice, identify suitable finance providers and prepare an application for funding. The students will develop all necessary material for the funding proposal including a long term funding strategy.

Practical exam (30%): Students will be required to deliver an individual professional pitch for raising external finance from their selected innovation finance provider (a crowdfunding platform, a business angel or a venture capital fund).

Mapping of Learning Outcomes to Assessment Strategy (Indicative)

Learning Outcome Assessment Strategy
1. Understand key concepts and theories concerning types, processes and models of innovation finance (including Private Equity, Venture Capital, Business Angels and Crowdfunding). Individual Presentation Individual Report
2. Understand the role of innovation finance in supporting the entrepreneurial process and company growth. Individual Presentation Individual Report
3. Critically assess and evaluate the challenges of different innovation finance models in regards to leadership, strategy, organisational structure and behaviour. Individual Presentation Individual Report
4. Explore the techniques specific to innovation finance management, and be able to relate different finance modules to support innovation-related firms or projects within firms. Individual Presentation Individual Report
5. Acquire practical and transferable skills such as, analysis of case studies, undertaking deductive and inductive reasoning, and enhancing presentation skills. Individual Presentation Individual Report

Elements of Assessment

Description of Assessment Definitive UNISTATS Categories Percentage
Individual presentation Practical exam 30
Individual report Coursework 70
Total (to equal 100%) 100%

Achieving a pass

It IS NOT a requirement that any element of assessment is passed separately in order to achieve an overall pass for the module.

Bibliography core texts

Lerner, J. Leamon A. and Hardymon, F., (2012), Venture Capital, Private Equity, and the Financing of Entrepreneurship, Hoboken, NJ : Wiley

Bibliography recommended reading

Landstrom, H. and C. Mason, (2014), Handbook of Research on Venture Capital: 2: A Globalizing Industry (Handbooks in Venture Capital Series), Edward Elgar

Lerner, J. (2009), Venture capital and private equity : a casebook, Hoboken, NJ : Wiley

Collins, L., and Pierrakis, Y. (2012). "The Venture Crowd: Crowdfunding Equity Investments into Business, London: Nesta

John Gilligan, J., and and Mike Wright, M., (2012), "Private Equity Demystified" ,2012 Edition. London:ICAEW

BVCA & PwC, (2004), "A Guide to Private Equity". London

Hall, B. (2005). "The Financing of Innovation". In Blackwell Handbook of Technology and Innovation Management , Edited by: Shane, S. Oxford: Blackwell Publishers, Ltd

Lerner, J. (2009). Boulevard of  Broken  Dreams: Why  Public  Efforts to  Boost Entrepreneurship and Venture Capital Have Failed - and What to Do about It. Princeton,  N.J: Princeton University Press

Mondher C., and Sana, E., (2009). Venture Capital Financing: A Theoretical Model, University of Reims OMI-LAME, ISG-Sousse

Zook M.A., (2005). The Geography of the Internet Industry: Venture Capital, Dot-coms and Local Knowledge , Blackwell Publishers: Oxford

Journals

Venture Capital: An Interational Journal of Enterpreneurial Finance;

Entrepreneurship: Theory and Practice;

International Small Business Journal;

Journal of Business Venturing;

Small Business Economics

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