THE APPLICATION OF RISK-BASED NEW VENTURE VALUATION TO CALCULATE VALUE OF HEALTHCARE START-UP (CASE STUDY : MED-EASE)

• Main Author: Buna Kristianto, Priskilla
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/67010
• Institution: Institut Teknologi Bandung

During the COVID-19 pandemic, the Indonesian market's biggest growth rates were in the healthcare and technology sectors. As a new digital start-up that serves the healthcare sector, Med-Ease seized the opportunity to develop a business strategy. Med- Ease is a comprehensive web platform that helps healthcare organizations by supplying real-time data to improve patient care. At the moment, Waiting Ticket and Available Doctor are the two key characteristics that Med-Ease uses to service its consumers. On December 9, 2021, the Med-Ease web-based system went live at www.medease.id and began operating. By the end of Quadrant I in 2022, the company has achieved milestones 1 (prototyping and a market feasibility assessment) and 2 (beta testing and the generation of first revenue). In order to reach milestone 3 (acquiring a sales channel), Med-Ease needs to allocate additional money for marketing and sales efforts. We should not dismiss the role that a cash-burning marketing plan is expected to perform in this stage as an entrepreneur. The startup cannot rely on its current financing resources to get through the stage and avert cash flow problems. Med-Ease should therefore perform a start-up valuation to determine the company's value in order to obtain capital support from outside sources with the intention of realizing and expanding the business. The limited financial historical data and uncertain future, however, impose limitations on the new firm appraisal process. As a result, this study is being conducted to determine the selling price of Med-Ease to recommend to investors, taking into account its existing valuation at milestone 3 and its projection for milestone 4 (normal risk). This type of new venture may encounter one-of-a-kind investment problems. Businesses rely on art rather than finance because traditional valuation procedures are ineffective in this scenario. As a result, the researcher will apply a risk-based new venture valuation technique to the problem as an evolution of the discounted cashflow approach. This risk-based valuation technique is considered a win-win option for investors and entrepreneurs because it uses financial modeling to link market-based assumptions through cash flow. It is best suited for use with early-stage enterprises or new initiatives. This method is still uncommon in Indonesia due to its artistic projection technique. It was demonstrated in this study that the risk-based new venture valuation technique was capable of combining the investor and company’s perspectives by taking into account both the investor's risk and the company's potential. Using a risk-based new venture valuation technique, this study achieves a Med-Ease valuation when the normal risk is used. The result shows us that the company will be worth to offer to investor starting in the phase 3 (tentative) and phase 4. In an ideal condition, the startup will reach milestone 4 in Y4M4 and be valued at IDR 2,629,244,678. In the real world, the company will apply normal risk at Y4M12 and be valued at IDR 1,721,592,423. In the worst-case scenario, the company will reach milestone 4 in Y5M9, worth IDR 1,037,966,273. Given the growth of the industry and the company's vision, it is reasonable to conclude that Med-Ease deserves to be developed.