Publications

Valuation of a Start-Up Company

Spartan Innovations is a Michigan State University sponsored organization whose mandate is to launch start-up companies based on MSU technologies. CourseWeaver Corp. is one of its start-ups. It has been set up to commercialize MSU’s proprietary learning management software by building a company to manage the build-out of necessary software and the marketing and sale of the resulting product. Anderson Economic Group was engaged to provide a valuation of CourseWeaver for Spartan Innovations to use while raising finance from venture capitalists.

Using its experience and knowledge of start-up companies, AEG was able to develop a valuation that took into account all the high-risk inflexion points that start-ups face. In our report, we described the most frequently used valuation techniques, analyzed their applicability in CourseWeaver’s case, and explained their considerable drawbacks. We then described the value functional approach and its superiority over traditional techniques for the purpose of valuing start-up companies. As far as was possible, we provided estimates of CourseWeaver’s value based on all the major valuation techniques. The AEG valuation approach highlights where the subject company stands with regard to the high-risk issues that start-ups face.