Venture Capital and Private Equity: A Casebook (v. 3) [Hardcover]

Josh Lerner (Author), Felda Hardymon (Author), Ann Leamon (Author)

Book Description

ISBN-10: 0471230693 | ISBN-13: 978-0471230694 | Publication Date: October 15, 2004 | Edition: 3

Over the past twenty years, the private equity industry has undergone tremendous growth and sweeping changes.? With the growth of private equity investing, it is imperative that financial professionals fully understand this complex subject.? The cases and notes in this updated edition are designed to provide you with a better understanding of the history of the private equity industry?s development and the workings of the industry today. Divided into four modules, the first examines how private equity funds are raised and structured; the second considers the interactions between private equity investors and the entrepreneurs that they finance; the third discusses the process through which private equity investors exit their investments; and the last considers the future of the private equity industry.

Editorial Reviews

From the Inside Flap

The private equity industry is experiencing tremendous change. Buyout firms are raising funds of more than $20 billion; the sizes of venture funds are rising again toward the $1 billion mark. At the same time, the industry is globalizing at a rapid rate.

This new Fourth Edition of Lerner and Hardymon's classic text reflects the current and future state of the industry as it introduces you to the private equity-venture capital process. Reviewing the history of private equity leading up to today's environment, the authors give you insight into the ways in which private equity groups work; the key distinctions in the industry; how the concepts of corporate finance are applied to private equity; and valuation approaches--popular techniques as well as less frequently used ones--in practice today.

Through extensively updated real-world cases, Lerner and Hardymon examine:

• How private equity funds are raised and structured
• The features of private equity funds and the actors in the fundraising process
• Interactions between private equity investors and the entrepreneurs they finance
• The critical problems that companies in a private equity portfolio face
• Valuation approaches, from techniques widely used in practice to methods that are likely to be important in the future
• How private equity firms invest in, monitor, and add value to companies
• successful strategies fro exiting investment and returning capital to investors
• The international arena, with examples from Great Britain, Ireland, Germany, Argentina, and China
• Fundamental shifts in the industry and how firms are  meeting the challenge

Built upon the solid foundation of its acclaimed Previous editions but thoroughly updated to include the challenges of the 21st century, Venture Capital & Private Equity: A Casebook, Fourth edition remains an essential resource for current and aspiring private equity and venture capital professionals. --This text refers to an alternate Hardcover edition.

From the Back Cover

Why have private equity funds experienced such tremendous cycles of boom and bust?
How have these funds created so much value?
Can we expect this kind of growth in other countries and other types of investments?

These are just a few of the exciting and important questions you’ll explore in this new and updated collection of real-world venture capital and private equity cases.

Now thoroughly revised to reflect the new realities in today’s venture capital and private equity markets, Lerner, Hardymon, and Leamon’s Third Edition addresses such timely issues as troubled portfolio companies, markedly smaller funds, and ongoing attempts to address the problematic practices of the late 1990s.

The cases take you through each step in the venture capital/private equity process, including:

• Raising and structuring private equity funds
• Investing in, monitoring of, and adding value to companies
• Exiting investments and returning capital to the private equity group’s investors
• Adapting the private equity model in other settings, such as corporate and community development venture funds

About the Authors:

Josh Lerner, the Jacob H. Schiff Professor of Investment Banking at the Harvard Business School, is one of the best-known authorities on venture capital. Both his academic and practical activities focus on the structure and workings of these funds. His mix of practical and academic perspectives is at the heart of this book.

Felda Hardymon is a Professor of Management Practice at Harvard Business School and a partner since 1981 at Bessemer Venture Partners, a leading venture capital firm.

Ann Leamon, after co-founding the Center for Case Development at Harvard Business School, now serves as Senior Research Associate dedicated to the Venture Capital & Private Equity class. She came to Harvard after a decade of senior analytical positions in operating companies.

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Product Details

• Hardcover: 576 pages
• Publisher: Wiley; 3 edition (October 15, 2004)
• Language: English
• ISBN-10: 0471230693
• ISBN-13: 978-0471230694
• Product Dimensions: 10.1 x 8 x 1 inches
• Shipping Weight: 2.7 pounds
• Average Customer Review: 4.1 out of 5 stars  See all reviews (17 customer reviews)
• Amazon Best Sellers Rank: #552,452 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

96 of 101 people found the following review helpful:

5.0 out of 5 stars Perhaps the only book available on the subject matter, November 26, 2000

By 

Unsatisfied (Redwood City, CA USA) - See all my reviews

This review is from: Venture Capital and Private Equity: A Casebook (Hardcover)

Over the past few years the institutional private equity market has exploded. Riding on the backs phenomenal public markets and a wave of technological innovation, private equity in general and venture capital has become one of the most sought after investments.

However, given the rash of recent publicity, stellar performance, and a balooning assets, there's surprisingly little research available about the institutional private equity market. Profs. Lerner and Gompers currently account for probably half of all academic research in this market.

The institutional private equity market is quite different from angel investments. The majority of the capital at the institutional level flows from large investment institutions like public pensions, endowments and insurance companies. Moreover, the personal investing into private companies do so professionally.

More than anything, the book serves as a primer to the institutional private equity market.

The book was intitially meant for HBS and other MBA students. Thus, almost all the content is in case study form. In a lot of respects this is advantageous. In general, a book either has the option of being a primer or providing high level analysis on a very specific topic. Clearly this book is the former. In my opinion, the downfall of most primers are the oversimplification of topics and useless generalizations. Given the early stages of the institutional private equity market, generalizations are especially questionable and difficult. On the other hand, the case method presents users with numerous situations and predicaments facing the participants. As a result, readers gain an understanding of the issues facing this market from a number of perspectives.

This books provides useful information on key topics such as investing and analyzing private equity funds from an institution's perspective, fund of funds, forming a private equity fund, and the direct investments into companies by the private equity funds, along with many other topics. Whatever level the private equity professional is functioning, understanding each of these components I imagine is key.

This casebook provides an very good overview of the institutional private equity market. Likewise, to the best of my knowledge, this is the only book covering this topic.

137 of 152 people found the following review helpful:

3.0 out of 5 stars Forming a Venture Capital Fund, April 26, 2000

By 

Frederic Harwood (Washington, DC USA) - See all my reviews

This review is from: Venture Capital and Private Equity: A Casebook (Hardcover)

As an investor in small start ups, I had to read this book twice. The first read, the book didn't seem relevant at all. The second, somewhat more methodical read, the picture became clearer--The book is written for MBA students who think they might go to work someday for a firm that forms venture capital investment groups. That's nice, if you are thinking of working for a big venture capital company. But for the investor $300k - $3M investor wanting to understand issues like how much of the company is my investment worth, what percentage of equity should I take, can I treat my investment as a loan and still expect equity, (if yes) how does the loan repayment work so it does not strip the company of working capital and much needed startup cash, what controls do I have over management, how can I be sure they are doing with the money what they are supposed to be doing and not squirreling cash away, what happens to my equity if management needs more funding, how is management paid a salary, how is management rewarded vis a vis the investors--who is in line first, middle and last--and how do I get out early and late, this book provides answers to some of these questions buried in the case studies. You read a case study teasing out the rules of thumbs by what the investors and ownwers did in a particular case situation. In the process, the reader looks for guidelines, principles, and rules of thumb -- but these are mostly buried deep in the paragraphs or found between the lines of a case study or discussion of a case study. What to do, the rules of thumb for the middling-sophisticated investor are hard to comke by, suggesting this is a textbook meant to supplement classroom lectures and discussions. Richard Gladstone's Guide to Venture Capital is a much better primer, but the book that takes Gladstone to the next level and answers the questions I posed above has not been written by Lerner.

35 of 38 people found the following review helpful:

5.0 out of 5 stars Best & Most Modern Book on Private Equity/VC Available, April 4, 2000

By 

John F. Dascher - See all my reviews

This review is from: Venture Capital and Private Equity: A Casebook (Hardcover)

In my opinion this is best and most comprehensive overview of modern VC practices available. Dr. Lerner is cleary the nation's leading authority on VC research and his experiences are detailed in this book.

The case study format is organized into 4 themes (paraphrased): 1. Raising & Structuring Funds, 2. Making Investments, 3. Exiting Invesments, 4. Other forms of VC funds.

so the lessons of each individual case study support a larger and organized theme. Furthermore, the case study format makes the book more entertaining than academic texts tend to be.

If you are somewhat knowledgeable about private equity then this is a "must read". If you are a beginner make sure you become familiar with the ins & outs of private equity/venture capital before reading or else you may miss a lot of the value of this book.