Project Achieve Case Study

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Register to read the introduction… This rate was determined using Achieve’s three most comparable companies, Click2learn.com, Learn2.com, and Vcampus. These comparables’ equity betas were determined based on the movement of the market and company returns since their inception. We unlevered these betas and took the median to estimate an industry beta. We assumed an asset beta of 1.15 (the median asset beta of the three comparable companies) and a debt beta of 0 (with no interest bearing debt) for Project Achieve. Using the 30-year treasury rate (5.94%) as the risk-free rate because of Project Achieve’s expected life and a historical 7.0% market risk premium, we calculated Project Achieve’s discount rate at 14.0%. This discount rate values Achieve as a public company, comparable to its public counterparts. As a non-public start-up, however, Project Achieve is far more risky than the more established comparables discussed above. Thus, we added a 5% start-up risk premium to reach an appropriate 19% discount rate for the valuation of Project Achieve. (See Exhibit …show more content…
Angel investors like Daniel Eliot don’t seem to fulfill either of these requirements. Venture capitalists deeply understand start up businesses and could provide a big chunk of capital, but they don’t know schools, their valuation is lower than Jostens’, and they would be no help in gaining traction for Project Achieve’s products. Additionally, a VC firm would likely require much more control than the other types of investors. Strategic investors are the most compelling. A strategic investor may wish to complement its own growth by integrating Project Achieve’s new technology into its business. Since strategic investors are almost always in the same industry as their targets, they can often help with industry contacts and business expertise. For example, Jostens knows schools, has a sales force in the field calling on schools, and offers the best valuation. We would go with Jostens now, perhaps bringing in a venture capitalist in a later round. We would also keep in mind the possibility of selling out to Jostens down the road if Project Achieve’s products gain

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