IB9TG-15 Financing Innovation
Introductory description
The module covers the finance of innovation, emphasising quantitative methods useful for venture capital investing and the valuation of high-tech start-ups. It will provide a framework for making investment decisions about high-technology projects and expose students to several promising new companies. The primary audience is students interested in entrepreneurship, venture capital, or R&D-intensive companies (e.g., tech, pharma).
Module aims
The module aims at familiarising students with the venture capital industry and the valuation techniques specific to the financing of innovation. It will help students gain a deeper understanding of investment decisions in and by high-tech companies.
The module will start with a brief review of standard valuation techniques. After examining the structure of the venture capital industry, we will discuss the importance of business contingencies for the valuation of high-tech start-ups. You will learn about tools that allow to account for these contingencies in valuing start-ups’ assets and liabilities. You will then discover how these tools can also be applied to venture financing and the design of entrepreneurial executive compensation.
Outline syllabus
This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.
Review of static firm valuation
Discussion of the venture capital industry
Importance of business contingencies for start-up valuation
Tools and methods to value high-tech start-ups with business contingencies
Applications to venture financing and entrepreneurial executive compensation
Learning outcomes
By the end of the module, students should be able to:
- Demonstrate understanding of, and discuss, the specificities of venture capital investing and financing of innovation
- Demonstrate understanding of, and discuss why, traditional valuation approaches (e.g., DCF techniques) are inappropriate to value contingent claims embedded in corporate assets and liabilities
- Demonstrate understanding of and discuss the valuation of corporate assets including their embedded flexibilities and optionalities
- Demonstrate understanding of and discuss the importance of the contingent claim approach to value investment in and by high technology firms
- Discuss and critically evaluate the implications of the optionalities embedded in corporate assets and liabilities for corporate policies, for the value of the firm and its financing.
Indicative reading list
Reading lists can be found in Talis
Interdisciplinary
the course includes interdisciplinary elements, from entrepreneurship and strategy.
International
the course will draw examples from companies and investors internationally.
Subject specific skills
Use the risk-neutral valuation approach in different contexts.
- Use the above described valuation approaches in the context of venture capital and innovative start-ups
Transferable skills
Written communication
Study time
| Type | Required |
|---|---|
| Lectures | 10 sessions of 2 hours (13%) |
| Seminars | 9 sessions of 1 hour (6%) |
| Private study | 49 hours (33%) |
| Assessment | 72 hours (48%) |
| Total | 150 hours |
Private study description
Private study to include preparation for lectures/ seminars and own reading
Costs
No further costs have been identified for this module.
You do not need to pass all assessment components to pass the module.
Assessment group A
| Weighting | Study time | Eligible for self-certification | |
|---|---|---|---|
Assessment component |
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| Individual Assignment | 80% | 58 hours | Yes (extension) |
|
2500 words |
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Reassessment component is the same |
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Assessment component |
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| Group case study assignment | 20% | 14 hours | No |
Reassessment component |
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| 1000 word individual case study assignment | Yes (extension) | ||
Feedback on assessment
via my.wbs
Courses
This module is Core for:
- Year 1 of TIBS-N1F5 Postgraduate Taught Business and Finance