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Product cover image for Applied Mobile Labs: Valuation of a Start-Up (Portuguese Version)

Applied Mobile Labs: Valuation of a Start-Up (Portuguese Version)

Jaslene Kaur Bawa; Vinay Goyal; S.K. Mitra

Product #:9B16NP022
Supplier:Ivey
Discipline:Finance, International Business
Setting:India, 2015
Details:Case (PDF) • 14 pages • 2021-07-13 (Rev: 2016-08-23)

Subjects:

Impact investingCorporate social responsibilityBusiness managementFinance and investingInternational business

Industries:

Information technology and telecom sector

Geography:

AsiaIndia
Your Price:$9.71

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An angel investor had invested seed capital in a start-up company that aggregated and sold value-added services for mobile telecommunications in India. The company had done well since its inception in 2009, but the revenue growth figures reported for 2014 were concerning. According to the performance report, the start-up had grown 12 per cent in 2014—less than half of the estimated industry revenue growth figure for mobile value-added services. The investor wondered if his investment was profitable despite the negative cash flows and significant lifetime company losses incurred during the first three years of operation. Should the investor stay invested with, or divest from, the start-up? What would the company’s exit value be?

Learning Objectives

This case is ideal for MBA students who have already studied conventional methods of valuation, such as discounted cash flow and market multiples. The case can also be used at an undergraduate level in an elective course in entrepreneurial or corporate finance. After completion of this case, students will be able to
  • understand how angel investors and venture capitalists value start-up firms;
  • use data and statistical methodology to demonstrate the use of a variation of the discounted cash flow method of valuation;
  • understand that a top-down, free cash flow to firm model is a better alternative to conventional methods of valuation, especially for start-ups in the technology sector; and
  • assess a company’s value, the investor’s projected returns, and the company’s exit values with calculations.
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Case Study: Applied Mobile Labs: Valuation of a Start-Up (Portuguese Version) | Ivey Publishing