The course uses a two-pronged approach to the study of entrepreneurial finance. First, we will analyze principles of corporate finance, valuation, and coordination and control of firms, with an eye toward developing the tools and concepts of entrepreneurial financial management. Second, we will use cases on firms at different stages of their life cycle to illustrate how these tools and concepts may be applied in practice. We will analyze the cases from both the viewpoint of the entrepreneur and that of the investors to understand their motivations, objectives, and considerations. Entrepreneurial Finance and Private Equity investing are intrinsically linked. As an entrepreneur, you cannot negotiate effectively without understanding investors' motivations. As an investor, you cannot evaluate a potential investment opportunity without appreciating
entrepreneur's perspective and incentives. Therefore, the course is designed for students who are interested in either pursuing entrepreneurial activity or financing entrepreneurial ventures.
What is "entrepreneurial finance"? In short, it is a course designed to learn how to evaluate, finance, and capitalize on new business opportunities. More generally, we know that finance studies valuation and the allocation of resources under uncertainty. Indeed, fundamental topics in finance (e.g., valuing cash flows, assessing the cost of capital, choosing among suppliers of funds, and aligning incentives for value maximization) are as important for entrepreneurial firms as for more established firms. Moreover, new and growing firms likely face "financing constraints" on growth and hence difficult decisions about financial contracting have to be made. The capital market for financing entrepreneurial activities, and private equity investing more generally, differs fundamentally from capital markets considered in standard corporate finance.
In principle, we can think of a life cycle of entrepreneurial financial decisions comprised of stages of identifying opportunity, marshaling resources, executing the business decisions, and "harvesting" success. In practice, entrepreneurial finance is not a linear process through this life cycle, and most of the cases we examine will necessarily involve considering multiple stages of the life cycle. As a further dimension, both economists and private equity practitioners describe the need to think simultaneously about four success factors: people, opportunity, context, and the deal. Our case analyses will follow this general framework.
Although numbers and formulas will be an important part of the course, what matters the most is seeing the big picture and being able to apply what we learn in class into real world situations rather than memorizing how to plug numbers into formulas. At the end of the day, formulas may be forgotten and looked up if needed in the future, but the main storyline should stay with you forever.
Assistant Professor of Business
Professor Tania Babina joined the Columbia Business School in 2016. She received a Ph.D. from the Kenan-Flagler Business School at the University of North Carolina. Her research is at the juncture of corporate finance, labor economics, and entrepreneurship. More broadly, she studies inter-relationship between human capital and firm investment, financing, and organizational choices. Her current research explores drivers of entrepreneurship and factors predicting entrepreneurial...