Mytek Innovations: Valuing a Start-up

Mytek Innovations Private Limited (MIPL), a digital platform provider for infrastructure project management, is facing a dilemma regarding the personal belief of Mr Shivkumar Borade (CEO) about raising capital and firm valuation. After achieving 19× growth in turnover within a year and with a potential market size of $204 billion, Mr Borade is keen to expand his business activities. However, his conviction to run a debt-free company leaves him with the only choice of finding suitable like-minded partners (venture capitalists or private equity players) willing to give the right value for an equity stake. This case highlights the opportunities available to the promoters in terms of projecting financials in a realistic manner, for exponentially growing start-ups in the new-age economy and the use of valuation methods such as discounted cash flow, net asset value method and price to earnings ratios. The challenge before the promoters is to arrive at a fair valuation for MIPL before beginning negotiations with potential investors. The case also highlights the significance of personal value and belief systems and how they override the financial reasoning of key stakeholders.