7 Pages Posted: 21 Oct 2008
An angel/venture capitalist could invest in an Internet sheet-music publishing start-up. The chance of success multiplied by the value, if successful, suggests that this isn't a good investment. Nevertheless, several friends suggest the optionality present in the venture: abort an unsuccessful website and sell the technology; switch the technology if the website is good, expand, buyout. Decision trees and Monte Carlo simulations are used to value these options, which make the opportunity look very attractive.
Rev. Mar. 25, 2014
Scor-eStore.com was not yet a company¾it was still simply the ideas and experiments of two budding entrepreneurs. Mark Burgess, a graduate student in computer science, and Chris Madsen, a professional musician, hoped it would become a company. They had both invested a lot of time and creativity to get where they were now.
Burgess had created a prototype sheet-music viewer that could display sheet music on a PC screen, play it through the PC's speakers, and print it on the PC's printer, all via the web. For proprietary music, it would print the music only when purchased over the web, and all transmissions would be encrypted. This viewer, unlike other viewers currently available, would, when completed, read files created by the popular notation software used by musicians to write and edit music. This capability would give the viewer a competitive edge by accepting music uploaded to the viewer on the web. Composers could use the viewer to show their music to others, give them a chance to play the music (or a portion of it), and deliver printed sheet music on the web, without ever giving the user an electronic copy that could be copied to others. By using additional existing software that transcribed pieces played on an instrument into an electronic musical-notation file, a composer could even create the music by playing it on an electronic piano keyboard or other instrument. At this point, however, the viewer was not fully functional, and testing would be needed to confirm that it would do all of these things in practice.
Madsen had used the pilot of the viewer to convert a dozen selections of music into the viewer's format, adding a lot of touch-up work by hand. When perfected, the viewer would do all the conversion automatically, including all the music's diacritical marks. Madsen had created a prototype web page where invited visitors could browse, play, and print sample pieces of sheet music. From the comments of visitors to the site, there was ample reason to think that a dressed-up website, endowed with 1,000 or so selections and listed in the common search engines, could be successful.
. . .
Keywords: option valuation, simulation, valuation, decision trees
Suggested Citation: Suggested Citation
Here is the Coronavirus
related research on SSRN
This is a Darden A Case paper. Darden A Case charges $6.25 .
File name: UVA-QA-0581.pdf
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.