orderTalk Software services company orderTalk is a leading provider of hosted, white- labelled (business-to-business) online and...

  

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orderTalk Software services company orderTalk is a leading provider of hosted, white- labelled (business-to-business) online and digital ordering platforms for restaurant pick-up and delivery. This is enabled via a proprietary software solution that is fully integrated with the point of sale (POS) systems. The start- up was co-founded by lawyer, Patrick Eldon, and software developer, Hilton Keats, in 2004 after Keats developed the software for restaurant chain Jason's Deli in the US in 1998. A year later, orderTalk was launched in Cape Town, South Africa, but the client was UK-based. In 2007, the entrepreneurs approached HBD Venture Capital (VC) with a request for capital to expand the business. While most VC investment opportunities come through an existing referral base, orderTalk was an email solicitation. The company was at a fairly early stage when it submitted its business plan to HBD,but the investment team immediately recognised that the business model is highly scalable internationally and was already generating a recurring monthly revenue. It was initially funded by a key client paying for the service upfront, which was a clear sign that there was a need for the product in The VC partnership with HBD allowed orderTalk to move from an entrepreneurialstart-up in Cape Town to a global force. While orderTalk had the technical capabilities in Cape Town, their main client base in the US and UK started growingaggressively. In 2018, orderTalk was acquired by Uber Eats and was seen as a significant exit for HBD. Investor: HBD Venture Capital (managed by Knife Capital)Year of investment: 2007/2008 Investment amount: R9 millionInvestor shareholding: 45% Sector: E-commerce/Online Food OrderingType of investment: Growth capital Turnover: 60x growth (2007) Assume that when HBD made its initial investment in orderTalk in 2007, it used the Venture Capital Method as a valuation tool to arrive at the initial 45% stake. At the time, HBD used a 10-year investment horizon and expected orderTalk to generate earnings before interest, tax, depreciation and amortisation (EBITDA) of R30 million. Assume HBD used an EBITDA multiple of 12 in estimating the terminal value, and that orderTalk had 880 000 shares in issue before the investment. 1. What was the expected internal rate of return (IRR) that HBD used in arriving at the 45% required stake? (3) 2. What was the future value of HBD's investment? (1) 3. How many additional shares were issued to HBD for the R9-million investment? (Round off your answer to the nearest shar 4. Calculate the per share value of the new shares issued, as well as the total post-money valuation 5. Identify and evaluate the exit strategy used by HBD. In your evaluation, discuss the benefits and shortcoming of the strategy. (4) orderTalk Software services company orderTalk is a leading provider of hosted, white- labelled (business-to-business) online and digital ordering platforms for restaurant pick-up and delivery. This is enabled via a proprietary software solution that is fully integrated with the point of sale (POS) systems. The start- up was co-founded by lawyer, Patrick Eldon, and software developer, Hilton Keats, in 2004 after Keats developed the software for restaurant chain Jason's Deli in the US in 1998. A year later, orderTalk was launched in Cape Town, South Africa, but the client was UK-based. In 2007, the entrepreneurs approached HBD Venture Capital (VC) with a request for capital to expand the business. While most VC investment opportunities come through an existing referral base, orderTalk was an email solicitation. The company was at a fairly early stage when it submitted its business plan to HBD,but the investment team immediately recognised that the business model is highly scalable internationally and was already generating a recurring monthly revenue. It was initially funded by a key client paying for the service upfront, which was a clear sign that there was a need for the product in The VC partnership with HBD allowed orderTalk to move from an entrepreneurialstart-up in Cape Town to a global force. While orderTalk had the technical capabilities in Cape Town, their main client base in the US and UK started growingaggressively. In 2018, orderTalk was acquired by Uber Eats and was seen as a significant exit for HBD. Investor: HBD Venture Capital (managed by Knife Capital)Year of investment: 2007/2008 Investment amount: R9 millionInvestor shareholding: 45% Sector: E-commerce/Online Food OrderingType of investment: Growth capital Turnover: 60x growth (2007) Assume that when HBD made its initial investment in orderTalk in 2007, it used the Venture Capital Method as a valuation tool to arrive at the initial 45% stake. At the time, HBD used a 10-year investment horizon and expected orderTalk to generate earnings before interest, tax, depreciation and amortisation (EBITDA) of R30 million. Assume HBD used an EBITDA multiple of 12 in estimating the terminal value, and that orderTalk had 880 000 shares in issue before the investment. 1. What was the expected internal rate of return (IRR) that HBD used in arriving at the 45% required stake? (3) 2. What was the future value of HBD's investment? (1) 3. How many additional shares were issued to HBD for the R9-million investment? (Round off your answer to the nearest shar 4. Calculate the per share value of the new shares issued, as well as the total post-money valuation 5. Identify and evaluate the exit strategy used by HBD. In your evaluation, discuss the benefits and shortcoming of the strategy. (4)

Answer rating: 100% (QA)

31 Let i be that IRR Hence FV of HBDs investment stake in x terminal value of the company Or Investm... View the full answer