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Upon completion of the case study, student will be able to discuss valuation of new-age ventures and understand how it is different from the valuation of organisations with a longer history; analyse the considerations (quantitative and qualitative) while evaluating investments in new-age ventures; and develop a framework involving the various dimensions of investment readiness.

The fintech space in India has seen an upsurge of activities since 2016. The growth of Paytm, RazorPay and many such ventures and the drastic improvements in this ecosystem have been significant catalysts for this segment of new-age tech companies. Funding and valuations have seen a sharp increase, especially when businesses worldwide felt the after-effects of the pandemic, with India being home to a large number of unicorns, second only to the USA. Open Financial Technologies Ltd (OPEN TECH) is one such venture that claimed its spot as the 100th unicorn of India within a span of five years since inception. With a strong focus on disrupting the banking sector in India, this neo-bank aspires to be the equivalent of Stripe in India and eventually be a strong competitor in the international market.

Richard O’Neil is an active investor in the fintech space, based out of the UK, and he is currently looking to expand the market by considering investment options. In the process, Richard and his team have identified India as a viable and competitive market, as new venture support and funding are increasingly emphasized through policies such as Startup India, Make in India and many such more to sustain and propel its benefits. As the team was exploring ventures worth investing, Open Financial Technologies caught their attention. However, Richard, given his experience across fields and being a seasoned private equity investor, realised that valuing new-age companies is as much an art as it is a science. Multiple quantitative and qualitative aspects need to be considered while relevance of traditional valuation techniques to put a value on such entrepreneurial ventures is questioned. At this juncture, he finds it crucial to evaluate the investment readiness of OPEN TECH.

This case allows students to understand how valuation of new ventures is different from that of established companies and analyse the crucial factors worth considering while evaluating an investment proposal as a venture capitalist, which eventually helps shape the funding pitch of an entrepreneur in the space.

This case study can be useful for students undertaking graduate- and executive-level courses on business valuation and strategy and entrepreneurship, as well as entrepreneurial finance elective at the undergraduate level. One could use this case in courses on entrepreneurship and innovation, such as an introductory course on entrepreneurial finance and a course on venture capital and private equity. It also allows discussion on fintech and neobanking and the valuation of privately held companies.

Teaching notes are available for educators only.

CSS 1: Accounting and finance.

Case information was mainly acquired through interviews with Richard Gammans, chief operating officer. Dr Gammans was a visiting professor at Fayetteville State University for a year, and two of the case authors developed personal friendships with Richard. Interviews were conducted over a two-year period as the accelerator got started. In addition, one author conducted a team-building session with the management team and one of the bio-startup researchers. An interview was also conducted with Clayton Duncan, chief executive officer, to gain his agreement with developing the case.

The Accele website included a write-up on each of the pharmaceutical startup companies. The write-up included a company summary, description of the science (disease and cure), the size of the market, results from testing, regulatory considerations and intellectual property. A literature review was conducted as the basis for the information on the pharmaceutical industry.

This case is about a biopharmaceutical accelerator founded in 2011 by two senior executives with experience in both large pharmaceutical companies and running biotech startup companies. The founders were successful in raising capital to start their first venture capital fund which they used to invest in four biotech startups. All four startups were working in very different disease areas. For example, one developed a drug to help with hearing loss that the department of defense was funding. Another of the startups discovered drug candidates that attack antibiotic-resistant bacteria. Biopharmaceutical accelerators were relatively new. They differed from business incubators because they invest in the startups and provide operational support, but the degree of support provided varies across accelerators. The Accele BioPharma accelerator operated in virtual, network type of organization, and Accele BioPharma provided primary strategic and operational management for the startups. The challenge in this case is to identify how the leaders managed the virtual network, and what additional resources were needed so that the management team could expand their ability to assist startups to get drugs approved by the food and drug administration.

This case is suitable recommended for undergraduate/graduate strategy, undergraduate/graduate organizational behavior, entrepreneurship and health-care management courses.

This case can be used to teach students how to analyze innovative business models, as well as to trace their reasons for success and failure. The following objectives also align with categories in Bloom’s taxonomy (Forehand, 2010), consistent with the keywords underlined. More specifically, this case will enable students to learn the following: First, to analyze the distinctive features of a social commerce business model, and how these differ from a traditional e-commerce model. This objective maps to Discussion Question No. 1. This objective helps students to understand the value proposition of an unfamiliar business model (social commerce platform) and compare it with that of a familiar business model (e-commerce platform). Second, racing the causes for success and failure of a venture, using frameworks from entrepreneurship and strategy. This relates to Discussion Question No. 2. This objective helps students analyze strategic decisions of an entrepreneur in light of available resource constraints and by applying appropriate conceptual frameworks. Third, developing recommendations to help a new venture sustain its business model in the face of severe challenges. Discussion Question No. 3 covers this objective. This objective enables students to debate possible paths that the startup could take. The discussion on possible paths naturally causes students to create sustainable or viable options.

The case describes the challenge facing Vidit Aatrey, the founder and chief executive of Meesho, a social commerce venture headquartered in Bangalore, India, in October of 2022. While Meesho recorded the second-highest sales (by order volume) during India’s festive season, it also recorded layoffs and business closures. While Meesho’s core business of getting resellers to sell through its online platform seemed to be working, its new business ventures, such as expanding into the grocery business and into Indonesia, had failed and resulted in more than 300 layoffs. Meesho was also pressed for funding: valued at US$4.9bn, the global market for venture capital funding had chilled and now demanded profitability, not growth-at-all-costs. Meesho’s cash burn rate was about $40m per month, and Aatrey was hard pressed to come up with options for profitable growth.

This case is intended for students of management at a master’s level in a course on entrepreneurship. At the authors’ institute, this case is used with MBA students in an elective course on entrepreneurship and also in an elective course in general management.

Teaching notes are available for educators only.

CCS 3: Entrepreneurship

OutReach Networks is taught in Darden's Entrepreneurial Finance and Private Equity elective. A teaching note for this case is available for instructors as well as an Excel file for student analysis. This introductory case explores the venture capital (VC) and discounted cash flow (DCF) methods of valuing early-stage companies. OutReach Networks is an unusual start-up company in that it was profitable early in its development and did not have to seek VC funding to support its growth. The company has grown quickly and may soon be a candidate for an IPO. In November 2011, an experienced venture capitalist approaches the founder with an offer to invest $30 million in exchange for 30% of the company. While the founder sees some benefit from the VC's experience in preparing the firm for an IPO and the funding enabling it to scale more quickly, he cannot understand how the VC has arrived at this offer. The founder believes the funding should be worth no more than 15% of his firm. Potential reasons for the disagreement over the valuation are (1) differences in the founder's and investor's view of the company's risk, (2) disagreement over the appropriate set of comparable companies, and (3) differences in the methods used to calculate the percentage equity stake. The case is appropriate for use in courses covering entrepreneurial finance or venture capital.

Entrepreneurship.

Postgraduate/graduate management programmes.

EHBH is a Delhi-based healthy food and snacks company offering an effective, efficient and reliable service in the beverage/catering segment. The company has opened outlets in corporate offices and educational institutions in Delhi/NCR. Driven by quality and hygiene standards, the company's aim is to keep customer satisfaction at the core of its operations. The case on EHBH describes the entrepreneurial journey of the founder and MD, Mr Furkan Khan. The case discusses the motivation to start a new venture. The thrust of the case lies in learning how to develop and operate unique business model. The case is written at the time when the company is in its establishment stage. The case elucidates the potential in the food industry especially fruit juices.

To demonstrate specific motivating factors to enter into a new venture, to understand various entrepreneurial models and their applicability in the present case, to highlight overview, trends and the various challenges associated with Indian juice food industry, to understand the conception and implementation of new business model.

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

Family business.

Specialized undergraduate courses, Elective MBA courses.

This case study uncovers the remarkable story of the relentless growth and sporadic weakening of Nurul Ain (NA) Limited, a family business conglomerate with major operations in the Eastern region of Africa. The case provides an opportunity to follow the different stages of development of this family-owned organization through a sequence of strategic events and family dynamics that led to its recurrent success, decline and rejuvenation. Despite the numerous successes of NA Limited since its establishment in the early 1990s, the ambiguous relationship between family, ownership and management systems has caused a ripple effect of strategic, structural and governance challenges that threaten the sustainability of the family business. Nowadays, the founder faces the pressing challenge of ensuring his legacy remains intact and is passed over to his chosen successor, who, in turn, is confronted with the dilemma of joining the family business or pursing an independent career outside NA Limited. Shedding light on the complexity of today’s family-run organizations, the case allows examining the effectiveness of strategic decision-making in an emerging market context by applying a variety of family business principles, theories and frameworks.

Discuss the sources of competitive advantage and the typical challenges that family firms face in the context of emerging markets. Perform a comprehensive corporate diagnosis and examine the specificities of strategic management process in family businesses. Assess the succession management practices in family-run organizations and design a profile of successful successor. Discuss the effectiveness of various corporate governance mechanisms in the context of family-owned enterprises. Evaluate the strategic choices of the top management team and offer recommendations for securing the family business longevity.

Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 11: Strategy.

The case focuses on two major challenges in deal making in emerging market economies---deal sourcing and negotiation---by focusing on a real (but disguised) Indian private equity deal. In 2010 Surya Tutoring was a fast-growing tutoring academy for high school students aspiring to gain admission to the prestigious Indian Institute of Technology (IIT). Surya’s CEO, R. K. Sharma, wanted to expand its reach beyond Kota (a city of 1 million people in the northern state of Rajasthan), which had become the center of the IIT prep school industry and home to tens of thousands of students studying for the rigorous IIT entrance exam. Sharma knew there was vast untapped potential in the teeming Indian metropolises of Mumbai, Chennai, Delhi, and Bangalore, as well as in foreign markets such as Dubai and Australia. Sharma had received term sheets from two private equity firms willing to finance Surya’s expansion. By the end of the month he needed to decide which to accept: the offer from big bulge bracket fund Blackgem, or the one from ZenCap, a small Indian firm based in Mumbai with which he had become intimately familiar during the past year.

After analyzing and discussing the case, students should be able to:

• Identify the differences between the United States and an emerging market such as India when it comes to deal sourcing, negotiation, and financial contracting

• Value a growth equity transaction in an emerging economy, including financial, contractual, and qualitative (social networks, local knowledge, trust) aspects of the deal

Identify the differences between the United States and an emerging market such as India when it comes to deal sourcing, negotiation, and financial contracting

Value a growth equity transaction in an emerging economy, including financial, contractual, and qualitative (social networks, local knowledge, trust) aspects of the deal

In June 2013, redbus.in, a bus ticketing website, was acquired by the Ibibo Group, a subsidiary of South Africa based internet and media firm Naspers Ltd, for USD 135 million. Soon after signing the deal, Phanindra Sama - CEO and co-founder of redBus, went for a holiday to London along with his parents. Sama remained incommunicado during the 10 day trip by not acquiring a local number and not accessing his emails. During Sama's absence, senior management team of Alok Goel and Satish Gidugu at redBus along with three mid-level managers submitted their resignation. Apart from employees of redBus, the Ibibo takeover team was also ‘foxed’ as desperate calls and emails to Sama elicited no response. This case examines the chaos created due to Sama's absence and helps in understanding the issues when a technology start up is acquired.

MBA students Tim Joyce and Brandon Cornuke had what they believed was a great product concept: a body powder that could be delivered in an aerosol spray. Current market-leading powders such as Gold Bond and Johnson's Baby Powder involved messy application, as they were only available in “dump-on” form. Worse, because powders deposited on top of the skin didn't adhere to it, they tended not to last long. Joyce and Cornuke believed an aerosol powder spray would solve these problems. They called their product concept Dry Goods. However, taking Dry Goods from idea to reality presented some serious challenges. How would two students without access to a lab be able to research and develop a complex chemical/physical process like aerosol delivery, let alone manufacture it once they had a proven prototype? To address these problems, the two entrepreneurs sought out a contract manufacturing partner. After identifying a number of options, Joyce and Cornuke had to decide which partner offered them the best chances of success, given their goals and financial constraints.

Students will learn about the process of hiring a contract manufacturing partner to produce a new packaged good for a startup.

Using the case, students will learn about the following topics: identification of the right shareholder for a start-up. Need for a tech co-founder for an app-based start-up. Delay in building the right team at the right time. Lack of preparedness; a start-up’s challenges in identifying the business model. What was the real pain point (problem identification)? Did the solution meet market expectations (solution quality)?; consumers’ usual social habits. How do people’s habits hinder a product’s survival in the market? Why do consumers continue to behave the same way they have? Technology-related constraints.

KnoDues was a mobile application (app)-based start-up in the domain of split expenses. The business idea germinated in early 2015 and became a reality toward the end of 2015. In a developing country context, the case provides rich insights into lean vs traditional start-up formation, founders’ knowledge, opportunity identification, product development and investment. India is a growing economy with ever-increasing smartphone users and internet consumers. Despite its deep-rooted rural-urban divide in the usage of modern technologies, India possesses a vast market opportunity in big cities. Rightly so, KnoDues intended to target the urban youth (between 15 and 35 years of age) population. Although KnoDues was not a unique product or the first of its kind, the founders perceived it to be the “first mover” in the Indian market. In its initial days, the product received an overwhelming response from accelerators and business-plan judges. Although KnoDues achieved more than 20,000 downloads by the end of 2016, customer retention and attracting investors became a difficult task. Founders felt that the difficulty was because of people’s “usual social habits,” and inadequate revenue model. Toward the end of 2017, KnoDues’s founders contemplated on ceasing their business.

Undergraduate, postgraduate and executive.

Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 3: Entrepreneurship.