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  • January 2001
  • Case
  • HBS Case Collection

Valuing Project Achieve

By: Mihir A. Desai and Kathleen Luchs
  • Format:Print
  • | Pages:14
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Abstract

Project Achieve is a start-up providing information management solutions for schools. Its founders see a need for software both to manage the volumes of information necessary to administer a school and to connect parents, teachers, and students in a more effective way. Originally funded by angel investors, Project Achieve is raising its first formal round of financing and needs to establish a firm valuation. This case outlines the economics of the business and provides the necessary background figures to build the business model and arrive at a valuation. Explores quantitative considerations of venture financing: 1) value neutrality of equity issuance is illustrated; 2) cost of capital is computed from raw return series, and the appropriate discount rate is selected based on comparables; 3) decision trees are used to highlight the importance of probabilistic thinking; and (4) subscriber models are compared with annual free cash flow models both for determining financial value and as decision-making tools for business choices. In addition, provides a setting to discuss the more qualitative issues involved in choosing investors. In particular, the founders are comparing two options: an infusion of additional capital from current and new investors or an investment from a potential strategic partner. Each option has very different implications for the direction of the business going forward.

Keywords

Business Startups; Valuation; Venture Capital; Cost of Capital; Cash Flow; Forecasting and Prediction

Citation

Desai, Mihir A., and Kathleen Luchs. "Valuing Project Achieve." Harvard Business School Case 201-080, January 2001.
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About The Author

Mihir A. Desai

Finance
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