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National Research University Higher School of EconomicsStudent ThesesThe evaluation of internet-based startups' investment appeal
Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Anna Soboleva
The evaluation of internet-based startups' investment appeal
Faculty of Economics
Bachelor’s programme
8
2014
The bachelor work on “The evaluation of internet-based startups’ investment appeal” contains 2 figures, 8 tables and 1 appendix. The number of pages is 50. The number of sources is 30. Keywords: internet economy, internet-based companies, internet-based startups, methods of startups’ investment appeal evaluation, discounted cash flows, Russian internet economy, HSE Fund supporting innovative entrepreneurship, IRR, WACC.Russian internet economy develops rapidly. New internet-based companies emerge each year and they need to be invested. To increase their chances of success, as well as the efficiency of investments the investment appeal of young companies should be evaluated carefully. The problem is to choose the evaluation method in terms of developing Russian Internet market.The purpose of the research is to evaluate russian internet-based startups’ investment appeal. The object of the research is the Internet-based startups in Russia. Subject of the research – evaluation methods of investment appeal of young companies working in the field of Internet technologies (Internet startups).Literature review has showed that the majority of research papers and articles about internet economy and evaluation of internet-based startups are written by foreign authors. In Russian special literature this topic is poor studied. Scientific novelty of the research is to adapt the evaluation methods used by American and other foreign analysts taking into account features of Russian internet economy. The practical significance of the work lies in the fact that the main conclusions and evaluation methods can be used by founders in the process startups’ business plans creation and positioning a product, as well as by investors to make their investment decisions.In the first chapter, "Theoretical aspects of the network economy" the concept and the structure of the Internet economy, its features and elements are discussed. Then, theory of internet-based startups is considered: the concept, life cycle, basic characteristics, types of Internet startups, success factors. The last part of the theoretical analysis is the analysis of the existing startups’ investment appeal valuation methods.In the second chapter “The evaluation of Russian internet-based startups’ investment appeal” the data on startups is collected. The data source is HSE Fund supporting innovative entrepreneurship. In sum, 10 startups were evaluated and results were compiled and analyzed. Moreover, the chapter proposes measures to increase the practical relevance of the work.The research has showed that 7 of 9 startups (tenth startup was regarded as an outlier) are attractive for investor. IRR of four project exceeds 100% and IRR of two projects exceeds 200%. This fact indicates the excess return on investment. Express analysis of calculation correctness based on qualitative indicators has not showed any inconsistencies. However, it’s practically impossible to calculate investment appeal precisely. The factor of expert opinion or “investment intuition” plays a great role in making investment decisions. Thus, the results of this research should be considered as "basic" criterion, i.e. criterion of the first order, built solely on financial analysis.

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