A Case Study On Startups Valuation

With the speed of revolution in conventional thinking by emerging technology increases and the threshold in the establishment of the company’s capital constantly decreases, venture capital and innovative economy are now in the their "golden age" in China. During the decision-making process,objective,fair and reasonable assessment of firm’s value, is not only beneficial to investors in the range of options available to find the most suitable project, but also is beneficial to both investment and financing sides to realize a rational allocation of profit, which is conducive to both sides in the "a zero-sum game" of transaction to arrive at a win-win situation. Venture enterprise value evaluation of both the duality of science and arts,currently within the industry not to form a mature and fair and widely acknowledged methodology,quite a few still used in practical valuation is qualitative analysis. In the future,sharing and support and supplement among several methods, is the trend of venture capital valuation.In combination with specific case, this paper demonstrates the application of different methods to assess enterprise value in venture capital operations, the case comes from the author at the opening of the second half of the class participated in a pioneering project on.This time, the author attempts to stand in perspective of venture capital institutions, based on collection and summary of all macro environment factors the company faced, associated with the company’s reality, use income approach and market approach to value the company, than based on valuations results of generated process and find results produced differences of causes,obtained market approach valuations results is more meaningful to. And finally,a sensitivity analysis of key assumption parameters in the valuation process is performed.Research results showed that: income approach and market approach results respectively for 82.9684 million Yuan and 51.1605 million Yuan. After compared, the results of market approach is more fair and more suitable to start-up enterprise in supernormal growth stage; In addition, from sensitivity analysis of the key assumed parameter in valuations process, case enterprise valuations results on single shop average purchased conversion rate and store market foster time of sensitivity larger,single shop average purchased rate below expected,and new market is taking longer than expected to the main project investment risk.Through case studies,this paper illustrate how qualitative and quantitative analysis in the venture capital valuation practice mutually support each other, as well as how income and market approach complement each other, for the sake of a more comprehensive and fair result of the target company’s value, and obtaining more meaningful reference to provide a support for both investment and financing sides to reach a more rational distribution of profit.