Company valuation of start-ups. A critical examination of the applicability of selected evaluation methods

Table of Contents

1 INTRODUCTORY

2 CHARACTERISTICS OF A START-UP COMPANY

2.1 Life cycles of companies and products

2.2 Definition of start-ups

3 REQUIREMENTS OF THE EVALUATION METHODOLOGY

3.1 Definition of enterprise value

3.2 Functions of company valuation and valuation occasions

3.3 Value determinants of a company valuation

3.3.1 Cash Flow

3.3.2 Terminal Value

3.3.3 cost of capital

3.3.4 Multipliers

3.4 Requirements for the evaluation procedure for a start-up

4 EVALUATION PROCEDURES AND THEIR APPLICABILITY

4.1 Overall valuation method (net present value oriented)

4.1.1 Earned value method

4.1.2 Discounted Cash Flow Method (DCF)

4.1.2.1 Weighted Average Cost of Capital

4.1.2.2 Adjusted-Present-Value

4.1.3 Applicability of capital value-oriented procedures in start-up companies

4.2 Individual valuation procedure (net asset value oriented)

4.2.1 Net asset value method

4.2.2 Applicability of value-oriented procedures in start-up companies

4.3 Mixing process (market value oriented)

4.3.1 Multiplier method

4.3.2 Applicability of market value-based methods

4.4 Situational procedures

4.4.1 Venture Capital Procedure

4.4.2 Applicability of situational procedures

5 EXEMPLARY APPLICATION OF A START-UP COMPANY VALUATION

5.1 Short presentation of the start-up "HelloFresh SE"

5.2 Company valuation using the VC method

5.2.1 Investigation of the current market position

5.2.1.1 Market volume/ growth rate

5.2.1.2 Market share of HelloFresh SE

5.2.1.3 Analysis of the most important markets

5.2.1.4 Analysis of the food market

5.2.1.5 Summary and outlook

5.2.2 5-Year Forecast HelloFresh SE

5.2.3 Calculation VT

5.2.4 Calculation V0

6 CONCLUSION

Research Objectives and Key Topics

The primary objective of this bachelor thesis is to critically examine the applicability of traditional company valuation methods when assessing start-up companies. Given the unique characteristics of start-ups—such as a lack of historical financial data, high growth potential, and significant initial losses—the work investigates whether standard procedures like Discounted Cash Flow (DCF), net asset value, or multiplier methods are suitable or require specific adjustments. The central research question focuses on identifying which methods provide the most objective and reliable enterprise value in the context of high uncertainty and future-oriented potential.

• Analysis of start-up lifecycle stages and inherent valuation challenges.
• Critical evaluation of standard methods: DCF, Net Asset Value, and Multipliers.
• The specific role and practical application of the Venture Capital (VC) method.
• Case study of HelloFresh SE to demonstrate practical valuation challenges and calculations.
• Synthesis of best practices for valuing young, innovative firms.

Excerpt from the Book

Summary of Chapters

1 INTRODUCTORY: This chapter provides an overview of the economic importance of start-ups and defines the scope of the thesis, focusing on the challenges of valuing these young entities.

2 CHARACTERISTICS OF A START-UP COMPANY: This chapter outlines the development phases of start-ups, their lifecycle characteristics, and provides a formal definition of what constitutes a start-up.

3 REQUIREMENTS OF THE EVALUATION METHODOLOGY: This section details essential valuation components, including enterprise value definitions, functions, and key determinants like cash flow, terminal value, and cost of capital.

4 EVALUATION PROCEDURES AND THEIR APPLICABILITY: This chapter conducts an in-depth critical analysis of various valuation approaches, specifically evaluating their suitability and limitations for young, high-growth firms.

5 EXEMPLARY APPLICATION OF A START-UP COMPANY VALUATION: This chapter demonstrates the practical application of the Venture Capital method using HelloFresh SE as a case study, including market analysis and financial forecasting.

6 CONCLUSION: The final chapter summarizes the findings, noting that while traditional methods provide building blocks, individual adaptation and the use of situation-specific methods like the VC approach are necessary for realistic valuation.

Keywords

Start-up, Company Valuation, Venture Capital Method, Discounted Cash Flow, WACC, APV, Enterprise Value, HelloFresh SE, Multiplier Method, Net Asset Value, Financial Forecasting, Risk Premium, Equity Valuation, Market Analysis, Growth Potential

Frequently Asked Questions

What is the core focus of this bachelor thesis?

The thesis focuses on the critical examination of traditional company valuation methods and their suitability for valuing start-up companies characterized by high growth, uncertainty, and non-existent financial history.

What are the central thematic fields covered?

The work covers valuation methodologies (DCF, Multipliers, Net Asset Value), start-up specific characteristics, market analysis for valuation, and the specific application of the Venture Capital (VC) method.

What is the primary objective or research question?

The primary goal is to determine to what extent traditional valuation methods are applicable to start-ups and to identify how they can be adapted to overcome the limitations posed by a lack of historical data.

Which scientific methods are primarily utilized?

The author utilizes a deductive, analytical approach by examining literature on corporate finance and valuation theories, followed by an empirical case study application using the Venture Capital method.

What is addressed in the main body of the work?

The main body breaks down specific valuation methodologies, discusses their theoretical application to start-ups, and provides a practical implementation example using HelloFresh SE as a real-world case study.

Which keywords best characterize this work?

Key terms include Start-up Valuation, Discounted Cash Flow (DCF), Venture Capital Method, Multiplier Method, Enterprise Value, and Financial Forecasting.

Why is the DCF method often considered problematic for start-ups?

The DCF method relies on historical financial data and steady cash flow projections to determine value; start-ups often lack this history and frequently report initial losses, making standard DCF calculations less reliable.

How does the Venture Capital (VC) method differ from traditional methods?

The VC method is specifically tailored for start-ups by calculating a future "exit value" and discounting it back to the present day, thus focusing on the realization of potential growth rather than current profitability.

What role does the "peer group" play in the valuation of HelloFresh SE?

The peer group allows the author to derive market-based multipliers to benchmark HelloFresh's valuation against comparable entities in the food e-commerce market, compensating for the lack of internal historical stability.