The Review of Valuation Models in the Context of Privately Held Internet Companies. A case study of Falcon Social ApS

Klaudia Joanna Flakiewicz

Student thesis: Master thesis


The Internet as an industry is growing very fast. The development of Web 2.0 allowed for businesses not only to have an online presence but also created a new business models where companies operate only within the web. Currently we are watching the technology shift to where manufacturing businesses are less relevant, and the Internet technology companies are becoming more important for today’s economy. As there will be more and more businesses, it is very important that we fully understand the characteristics of Internet ventures and how they should be valued. The Internet industry is one of the few industries where a company can have value even if it is not profitable. A proper valuation is required for corporate actions such as: fundraising, issuing stock compensation or while negotiating exit strategy: M&A or IPO. This research will look into the characteristics of privately held Internet companies and will review the existing valuation models in the context of above mentioned ventures. Moreover the research is setting up the Matrix of valuation models that should be used for a company with given business model and stage of development. To validate the Matrix and allocations of the valuation methods I will perform a case study valuation on Falcon Social ApS, a danish privately held Internet company. The case study showcases how to apply First Chicago Method for a rapid growth company. The purpose of this thesis is to show how the Internet industry has adopted the valuation models from traditional businesses without adjusting them. All the modern financial valuation models are having troubles with explaining the monetary value of the Internet ventures which are due to four main reasons: the inexistence of historical data, the absence of comparable companies, the large number of intangible assets, and the complexity to estimate volatility. There is a need for development of more sophisticated financial models that are better at pricing the Internet businesses. The research focused on setting up a background for the further development of such a models by reviewing the Internet companies and later analysing the existing valuation models in the context of those businesses.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2016
Number of pages132