My other occasional on-campus activity this year — besides the Outdoor Industry Club — is a bit of work with the University Venture Fund. It’s a really great program where students can work with major VC firms investing real money in real deals. My role is to help students a bit with understanding business strategy.
I’m not sure why, but venture capital is often thought of as a finance topic, but of course it’s really about strategy. The fundamental question of strategy is how firms can develop and sustain a competitive advantage. And a sustainable advantage is exactly what VC firms are looking for when they’re seeking firms to invest in. So while VCs need to know a bit about finance in order to calculate things like NPV and weighted-average cost of capital, the really crucial skill for VCs is distinguishing business plans containing good strategies from those containing bad.
I’ll be posting slides and notes for UVF students here.
(Oh, and it’s the same for private equity… while you need to know the NPV stuff, the really important thing for private equity is identifying firms that are applying less-than-optimal strategies, so you can buy the firm, fix it, sell it, make a fortune…. and then be governor of Massachusetts.)
Leave a Reply