Assignement Essay

1115 Words 5 Pages
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Practical Project
Stage 1: Data Understanding and Business Opportunities

Submitted By:
Daniel Gosert (441686)
Marvin Steiger (437143)
Pramod Rathi (439352)
Samuel Desguin (441838)
Submitted By:
Daniel Gosert (441686)
Marvin Steiger (437143)
Pramod Rathi (439352)
Samuel Desguin (441838)

In the first part of this practical project, we develop a model that helps the Venture Capital (VC) firm to identify good business opportunities, using the data provided by CrunchBase. In this context, we define “good business opportunities” as opportunities that are likely to be acquired and then sold profitably. Therefore, in our further analysis, we only consider companies that have
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In a last step, the VC firm then evaluates future investment opportunities based on a combination of its industry and its location and puts it into one of the two buckets. This serves as an indicator of whether investing into the company, based on available historical data, promises high returns on investment or not.

In the following sections, the different stages will be explained in detail. Afterwards, in a second step, potential areas of improvement to the model are listed.
Stage 1: computing the return on investment
In this section, we compute the return on investment for all the companies that were acquired and for which we have data (3,820 observations). To do so, we adopt the following methodology:

1. Sum all the investment they received over time. From the “Investments” page of the excel, we sum the seed capital and the venture capital that one particular company received during the period from its first round of seed to the company’s acquisition, using the following formula:

TI=Ii

Where: * TI = total investment [currency] * Ii = investment of investor i [currency]

2. Calculate equity for each investor. Next, we use the formula below to determine what fraction of the selling profit each investor will gain following the acquisition.

Ei= Ii×LiTI×T

Where: * Ei = equity of investor i [%] * Ii = investment of investor i [currency] * Li = longitude of

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