Taxi for sure private company valuation: Investment Valuation Class 20.03.

2024 NOTES
The companies like taxi for sure, ola and uber are all working on the direct driver or operator aggregation
business model (asset like model) and in this model they can do better scalability and have higher
efficiency in comparison to the traditional taxi company.
Problems for valuing a new private company:
. Lack of information
. Negative cash flows in the initial stages (cash burn is happening)
. High growth oriented
When a company like ola uber when they entered the market, they entered the market by giving offers to
both the customers and drivers, but as the market stabilizes the customer acquisition cost (CAC)
decreases and also the top line should go up, thereby as the market stabilizes the negative cash flow or the
cash burn will slowly disappear.
Unit economics in a company(startup) like taxi for sure plays a role in the form of total fare, no.of rides,
commission, arpu, sms+tel costs, call centre, supply side subsidy, contribution, trips/customer/year,
contribution margin, all put together sums up to be the unit economics and also the total CAC.
The problem in valuing a company like taxi for sure or ola where it is not a traditional cab company but
also a technological company is because no company like these companies is listed in the market and so
in order to calculate the beta for a company like this, we need to take the avg beta of the industries of both
technological companies(IT Companies were valued as technological companies then in 2014 era) and the
traditional cab companies(transport companies that were listed in 2014 was considered as traditional cab
company).
TAM- Total Addressable Market
While projecting companies like these we need to take some assumptions such as setting a commission
level of some number in the future or the assumptions like expected arpu say for example 4 rupees and
then gradually project the values until the value comes to 4 in say nth year.
Customer acquisition cost*No.of customers(No. of trips served/no. of rides per customer)= total cac
Even though the revenue of a company finally becomes positive it doesn’t immediately start paying out
taxes, it will only start paying taxes only after the losses which the company had incurred in the initial
stages are offset and when that’s done the company starts paying the taxes.
PV of the cash flows for the next 10 years + PV of terminal Value= Value of operating assets (value of
firm).
Adjusted value of the firm= Value of firm*(1-probability of failure)