As the global investment industry continues to evolve, private equity and venture capital firms must adapt to a rapidly changing landscape. In this Q&A, Josh Lerner, faculty chair and Jacob H. Schiff Professor of Investment Banking at Harvard Business School, talks about the outlook for the industry—and how the Private Equity and Venture Capital program can help executives build their firm's value and reputation over time.
Both the buyout and venture capital industries face unprecedented challenges. Following an overabundance of investments in the mid 2000s, buyout funds suffered an aftereffect of epic proportions. But in recent quarters, buyout fund portfolios have recovered in a way that has surprised even the most optimistic observers. Meanwhile, after a prolonged drought, venture capital has experienced new life and, according to some observers, even the repeat of bubble-like behavior.
All is not rosy—many of the investors on which these funds have traditionally depended, such as endowments and pensions, have increasingly looked to bypass funds and pursue direct investments into private firms. At the Private Equity and Venture Capital (PEVC) program, we'll explore strategies for navigating this unsettled and often mysterious territory, and offer some surprising predictions about the future opportunities to be captured in these sectors.
Private equity is a much more complex and global business than it was 15 years ago. What was originally just a U.S. and European business has become increasingly globalized. Today, mega groups are active all around the world, from Africa to Alaska. In recent years, an increasing number of groups have sprung up in the emerging economies, combining Western best practices with local knowledge. Executives must be able to adjust their investment strategies to compete in different regions and countries.
It's important to keep the material timely, so we vary the curriculum from year to year depending on the new cases. As we explore the dynamics of global capital and companies, we focus on four themes: the changing interests and demands of institutional investors and other limited partners; the evolving investment environment and novel deal structures and opportunities; the challenging task of adding value to portfolio firms; and the strategies buyout firms are applying to tackle the problems of scaling and institutionalization.
At PEVC, our goal is to provide a strategic view of how the private equity industry is evolving, and help participants improve their effectiveness at every stage of the deal. While we can't definitively answer which specific deals are the best ones in particular markets, we do highlight the major trends that are emerging across the industry. We also provide frameworks that participants can use back at their companies to help them identify, evaluate, and finance the best new opportunities.
Over the years, we've found that our Game Simulation is successful in stimulating discussions and thinking about private equity strategy. Much of the knowledge in the private equity industry is experiential. While there is no substitute for years of experience, this game allows us to highlight some of the program's key themes in a much more interactive and engaging way. Participants sharpen their skills as they compete with their peers to discover the best deal in a selected sector.
We seek a diverse participant mix to ensure lively discussion and mutual learning. These include general partners and other senior investment professionals from private equity groups; representatives of limited partners, such as sovereign wealth funds and family offices; leaders of private equity-backed firms; lawyers and bankers active in the private equity ecosystem; and regulators and investment professionals at development banks and similar organizations.
Private Equity and Venture Capital is designed to deliver three key takeaways. First is the powerful HBS learning experience—the specific knowledge and fresh insights conveyed through the global cases and interactive lectures. Second is the global perspective that participants gain from engaging with thoughtful peers from diverse industries and countries. And third are the personal connections—a global network that many participants find to be a valuable asset for years to come.