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Product cover image for Sigma Ventures: Evaluating an Early-Stage Venture Capital Investment (A)

Sigma Ventures: Evaluating an Early-Stage Venture Capital Investment (A)

Shimin Chen; Viktar Fedaseyeu; Ling Zhao

Product #:FIN-23-088-CE
Supplier:China Europe International Business School
Discipline:Finance
Setting:China, 2017
Details:Case (PDF) • 8 pages • 2023-08-10 (Rev: 2023-08-10)

Subjects:

Finance and investing

Industries:

Financial service sector

Geography:

ChinaAsia
Your Price:$10.54

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Sigma Ventures is a venture capital (VC) firm that invests in technology, intelligent manufacturing, healthcare, and consumer services companies in their early and growth stage. In late 2017 Li Yuan, Sigma Ventures' founder and managing partner, needed to decide whether a startup called Isolimit was worth investing in. If so, then Isolimit was to be valued.
The case describes how Sigma Ventures assessed Isolimit's team, market, and technology and shows how Sigma used the venture capital method to evaluate its potential investment. Specifically, the case discusses three aspects of early-stage venture capital investments: (1) How should venture capital firms evaluate early-stage startups? (2) What is the logic of the venture capital method? (3) How should venture capital firms apply the venture capital method to determine the percentage stake they should receive in exchange for their investment?

Learning Objectives

This case is based on a real-world VC investment in an early-stage startup and broadly applies to VC valuation in general. The case aims to help students understand how venture capital firms assess early-stage investments qualitatively and quantitatively. And it clarifies the logic and critical steps behind VC valuation. After discussing the case, students should be able to: 1.Understand the main factors according to which venture capital firms evaluate startups. 2.Understand why we must modify the conventional discounted cash flow valuation method for startup ventures. 3.Understand the logic of the venture capital method in evaluating early-stage investments. 4.Understand how to apply the venture capital method to determine the stake in the startup that VC firms should receive in exchange for providing capital.
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Case Study: Sigma Ventures: Evaluating an Early-Stage Venture Capital Investment (A) (English version) | Ivey Publishing