Valuing Project Achieve

HBS Case No.: 201-080; Teaching Note: 201-130

Posted: 29 Jan 2002

See all articles by Mihir A. Desai

Mihir A. Desai

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Date Written: June 1999

Abstract

SUBJECT AREAS: Valuation, Entrepreneurial Finance, Corporate Finance

CASE SETTING: June 1999, U.S. Software

Project Achieve is a startup 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. The case outlines the economics of the business and provides the necessary background figures to build the business model and arrive at a valuation.

This case 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, the case can provide 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.

Suggested Citation

Desai, Mihir A., Valuing Project Achieve (June 1999). HBS Case No.: 201-080; Teaching Note: 201-130. Available at SSRN: https://ssrn.com/abstract=298770

Mihir A. Desai (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6693 (Phone)
617-496-6592 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
2,017
PlumX Metrics