MIT Sloan Action Learning
Finance Labs - Shoes of the investor

Finance

Put yourself in the shoes of the investor

Cambridge, Massachusetts, USA

Host Company: Fairhaven Capital
Faculty: Professor John Minahan
Analysis of the investment opportunities in the business-to-consumer Internet application industry.

That was the challenge put to Robin Vogelaar and Lu Lu (both M.Fin. '12) for their Finance Research Practicum. The two worked with the venture capital firm Fairhaven Capital to determine future investment opportunities—and found themselves making a substantial impact on Fairhaven's investment strategy.

Fairhaven's investments currently focus on Internet/tech companies, particularly in the business-to-business arena. Fairhaven was looking to move more into the business-to-consumer (B2C) realm and charged Vogelaar and Lu with determining what was on the horizon for the Internet technology space and uncovering the next big industries and innovations.

The team evaluated a variety of industries and companies in the Internet space that were B2C, including social media, e-commerce, music, and video. They looked at which industries would likely undergo change, because those were the ones in which Fairhaven Capital had more potential to make an impact. They also ascertained how competitive these industries were and which would likely yield a better return on investment.

By the end of the project, Vogelaar and Lu had a comprehensive and insightful set of recommendations for Fairhaven. Though they found it was hard to predict the next industry of innovation, they could identify some important trends. They noted that there is a great deal of interest going on in the social sphere, such as the games that are being launched through Facebook, and recommended that Fairhaven look into those kind of companies. They also suggested that Fairhaven consider companies that are targeting underserved niche markets, believing that competition in this area will be strong in the future.

Finance Labs - Shoes of the investor

Fairhaven was clearly happy with the results and the performance of the students, so much so that they have asked the team to work with them on another project.

For the students, it was an equally valuable experience. Says Vogelaar, "The Fairhaven team provided great knowledge and feedback, and it really strengthened our insights. They made us aware of ways of analyzing the field and considering issues we had not thought of before. Their guidance was very relevant and practical."

"The practicum really strengthened our lessons beyond the classroom," adds Vogelaar. "We also had to think about things from the investors' point of view. And I had never thought of myself in that way before! Through the practicum, I was able to put myself in their shoes."

Read more: John Minahan on Action Learning: How Master of Finance students apply classroom skills to real problems

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