215

American Journal of Economic and

Management Business

e-ISSN: 2835-5199

Vol. 2 No. 6 June 2023

START-UP VALUATION IN A LOGISTICS AGGREGATOR (CASE

STUDY AT PT LINKNAU)

Shafira Elvina Putella¹, Zuliani Dalimunthe², Teddy Oswari

1,2

Universitas Indonesia, Jakarta, Indonesia

Universitas Gunadarma, Jakarta, Indonesia

Email: [email protected]

Abstract

Many start-ups in Indonesia are supported by an increase in internet user penetration,

reaching 64.8% of the Indonesian population or 171.17 million users (APJII 2019). The

potential of Indonesia's creative economy and start-ups is very large, supported by abundant

natural resources, local cultural diversity spread throughout the archipelago, and diversity of

human resources. The objectives of this study are as follows Describe the financial

performance of start-ups in logistics aggregators at PT Linknau. Analyzing company size,

profitability, economic growth rate, market traction, and competitive advantage against start-

up valuation in logistics aggregators (Case Study at PT Linknau). The data used in this study

are primary data and secondary data. Primary data is in the form of interviews conducted in-

depth interviews with the CEO of PT Linknau, and secondary data is in the form of financial

statements of start-up Companies PT Linknau from 2019-2022. The results show that The

First Chicago Method's valuation is the most suitable for assessing PT Linknau's company

valuation. The main reason this method is the most suitable method is that currently, the

company is already generating operating income, according to Damiano et al. (2020).

Keywords: start-up; innovative start-up valuation methods; start-up's value; aggregator

logistics;

This article is licensed under a Creative Commons Attribution-ShareAlike 4.0

International.

INTRODUCTION

Today's technological developments are increasingly sophisticated, and Indonesia has

become a thriving start-up ecosystem; based on the start-up ranking database (2020),

Indonesia has 2,217 start-ups. Many start-ups in Indonesia are supported by an increase in

internet user penetration, reaching 64.8% of the Indonesian population or 171.17 million

users (Bowdish et al., 2020; Handayani et al., 2021) . From these data, the number of internet

users is increasing over time, and it has become common among Internet users to use the

Internet as a forum for online transactions.

According to Moore, (2014) the change in economic patterns is known as the economic

wave, and the creative economy is the fourth wave in economic orientation after the

agricultural economy, industrial economy, and information economy. Based on the results

of creative economy potential mapping conducted by the Indonesian Creative Economy

Agency in 2016, 16 creative economy subsectors consisting of (1) architecture; (2) interior

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design; (3) visual communication design; (4) product design; (5) films, animations, and

videos; (6) photography; (7) crafts; (8) culinary; (9) music; (10) fashion; (11) app and game

developers; (12) publishing; (13) advertising; (14) television and radio; (15) performing arts;

and (16) fine arts.

The potential of Indonesia's creative economy and start-ups is very large, supported by

abundant natural resources, local cultural diversity spread throughout the archipelago, and

diversity of human resources (Irjayanti, 2020). With the addition of the value of creativity

and innovation to the creative economy, it will have the opportunity to become a driver of

national development and economic growth (Simatupang et al., 2012).

At first, start-ups receive government and external agency support to help kick-start

the business stages, for example, producing prototypes, writing business plans, leasing

facilities, and other activities involved in creating the organization. External agencies'

support guarantees that some companies will have long-term success. The reality is quite the

opposite; once a business has been established and can operate independently, this level of

support is hard to find. The challenge is particularly formidable for business owners at this

stage of the early cycle due to the need for more funding from the public and private sectors.

This relates specifically to theories such as the Business Life Cycle Model developed by

Churchill and Lewis (1982) or Greiner's Growth Model (Handcock et al., 2008).

Figure 1: The Valley of Death Start-up Osawa and Miyazaki (2006)

An interesting start-up that is the focus of this research is Linknau for Business.

Linknau was established in 2019 as one of the start-ups that runs a business as a logistics

aggregator, which uses applications via devices or smartphones for integrated delivery of

goods through an application to support business growth. Linknau logistics partners include

JNE, Anter Aja, Ninja Express, 21 Express, SAP Express Courier and Si Cepat. Linknau, in

running its business, has all the conveniences for business people, such as being able to

integrate with company systems using Application Programming Interfaces (APIs), having

their store couriers with multiple logistics support, providing access between business people

and partners through a separate interface system and providing more choices of delivery

partners if using Linknau.

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217

Figure 2. Sales Data, Investment Expenditure Activities, and Investor Income for the

2019-2022 Period

Furthermore, the growth rate is the process of increasing the production of goods and

services in the economic state of the community; an economy is said to experience growth

if the economic level achieved in a certain year is higher than the previous year. So that the

rate of increase in GDP can cause changes in the ratio of state income because GDP is the

numerator of the calculation of the Tax Ratio. DP is one of the benchmarks that can be used

to determine a country's income. Gross domestic product is the number of products in the

form of goods and services produced by production units within the territorial boundaries of

a country (domestic) for one year (Kummu et al., 2018). Economic growth is very influential

on company valuations, supported by research conducted by (Purnamasari et al., 2022) states

that company growth and economic growth greatly affect start-up valuations. Likewise,

research conducted by Oktaviani & Apriani, (2020) states that company growth, along with

economic growth, greatly affects start-up valuations.

Market traction is a development momentum for start-ups to increase sales and

customer base. In other words, traction is the company's ability to monetize the value of its

users, where the output can be in the form of users, partners, merchants, and so on, as long

as it can be monetized. Generally, a company's success in the traction period is judged by

the number of new customers and the total revenue they receive. However, many large

companies such as Amazon, Google, Uber, and start-ups such as Gojek have good traction,

although their revenue can only sometimes be determined. Traction is an abstract yet

possessive concept. Here are some important functions of traction for start-ups, Key Investor

Considerations as the main consideration for investors to disburse funds. Investors will

choose companies that are stable, potential, and able to grow exponentially. Indirectly, the

traction success rate of a start-up is an indicator that is quite influential for investors who are

interested in disbursing funds. Next, the Customer Interest Indicator is the customer's interest

in the product or service offered (Solihin, 2020). The traction value will be a validation and

material for evaluating the success of a start-up's product or service. Then, the ever-

increasing traction value can convince excellent candidates to join your start-up. Thus, you

can improve the quality of human resources within the company. Finally, considering

traction is an effort to increase business profits, revenue, and customer base. No wonder

start-up traction is also called a "whip" for companies to continue to take innovative steps so

that their start-up grows. Market traction affects company valuation; this is supported by

research conducted by Nielsen & Dane-Nielsen, (2019) stating that market traction affects

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Vol. 2 No. 6 Jun 2023

218

start-up valuation. Meanwhile, research conducted by Visconti, (2020) states that market

traction affects start-up valuations.

Competitive advantage here is how a business practices or implements business

strategies and is useful for implementing objectives and strategies to compete in the market

(Porter & Siggelkow, 2008). There are also three general strategies for businesses that want

or aim to have above-average performance in the industry taken, namely 1) Cost Leadership,

2) Differentiation, and 3) Focus (Pulaj et al., 2015). The competitive scope can greatly

influence and significantly impact competitive advantage. Competitive advantage also

affects the company's valuation. Meanwhile, Chiun-sin Lin and Chih-Pin Huang et al.,

(2011) research states that competitive advantage affects company valuation. The

importance of assessing start-up valuations in terms of company size, profitability, industry

growth in line with the economy, market traction, and competitive advantage is used to

attract investors. Therefore, it is necessary to research the effect of company size,

profitability, market traction, and competitive advantage on start-up valuation in logistics

aggregators (Case Study at PT Linknau). The objectives of this study are as follows Describe

the financial performance of start-ups in logistics aggregators at PT Linknau and can be

considered by investors in making investment decisions by looking at these factors.

RESEARCH METHODS

The study was conducted from January to March 2023. The data used in this study are

primary data and secondary data. Primary data is in the form of interviews conducted in-

depth interviews with the CEO of PT Linknau, and secondary data is in the form of financial

statements of start-up Companies PT Linknau from 2019-2022. There are also data as

support for this research in the form of journals, theses, and books as research support. This

study used a descriptive and verification approach using primary and secondary data. The

descriptive approach provides an overview of the company's financial condition and ability

to provide added value for investors in PT Linknau's start-up company.

RESULT AND DISCUSSION

Company Conditions

The general description of the company consists of a profit and loss statement and a

company balance sheet. The research's main results are calculating the valuation of Linknau's

start-up using real options, venture capital, and first Chicago methods. Furthermore, the

three valuation methods will produce a valuation value for PT Linknau and can be used to

increase the company's capital.

PT Linknau has been operating since 2019, and the following is a summary of the

company's financial statements.

Table 1. Profit and Loss Report of PT Linknau

Income Statement

2021

2022

Nominal Growth

In Idr

Income

Services - Jne

35,895,093

358,950,930

323,055,837

Services - Fast

2,094,419

196,875,374

194,780,955

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Services - Anteraja

130,500

78,039,000

77,908,500

Services - Sap

2,682,485

53,649,710

50,967,224

Services - 21 Express

79,047,364

229,237,355

150,189,991

Services - Ninjavan

4,196,980

88,136,579

83,939,599

Other Income

17,100,000

5,000,000

- 12,100,000

Total Income

141,146,841

1,009,888,947

868,742,106

Total Cost Of Business

81,145,656

527,081,239

445,935,583

Gross Operating Profit

60,001,185

482,807,708

422,806,523

Operating Costs

50,726,129

99,575,391

48,849,262

Salary & Allowance Costs

1,065,902,649

895,358,225

- 170,544,424

General & Administrative Expenses

125,468,886

178,642,600

53,173,714

Total Operating Costs

1,242,097,664

1,173,576,216

- 68,521,448

Net Operational Profit/(Loss).

- 1,182,096,479

- 690,768,508

491,327,971

Other Income/Expenses

- 4,922,667

5,518,309

10,440,976

Total Other Income/Expenses

- 4,922,667

5,518,309

10,440,976

Net Profit/(Loss) Before Tax

- 1,187,019,145

- 685,250,199

501,768,947

Corporate Income Tax

Net Profit/(Loss) After Tax

- 1,187,019,145

- 685,250,199

501,768,947

Table 1. PT Linknau Balance Sheet Report

Balance Report

2021

2022

Nominal

Growth

In IDR

Asset

Current assets

PettyCash

124,236

3,192,865

3,068,629

Bank

864,108,190

498,521,849

- 365,586,341

Accounts receivable

86,580,000

3,257,500

- 83,322,500

Other receivables

- 3,885,450

2,580,375

6,465,825

Investor Receivables

215,750,000

35,000,000

- 180,750,000

Other Current Assets

4,276,628

Input VAT

5,945,325

42,538,096

36,592,772

Total Current Assets

1,172,898,929

589,367,313

- 583,531,615

American Journal of Economic and Management Business

Vol. 2 No. 6 Jun 2023

220

Balance Report

2021

2022

Nominal

Growth

In IDR

Fixed assets

Fixed Assets - Office Equipment

177,391,358

191,617,848

14,226,490

Intangible Assets

15,000,000

Total Fixed Assets

192,391,358

206,617,848

14,226,490

Depreciation & Amortization

Accumulated Depreciation - Office

Equipment

- 33,636,042

- 43,726,855

- 10,090,813

Accumulated Amortization

- 10,000,000

- 14,500,000

- 4,500,000

Total Depreciation and Amortization

- 43,636,042

- 58,226,855

- 14,590,813

Total Assets

1,321,654,245

737,758,307

- 583,895,938

Liability and Equity

Short Term Liabilities

Accounts payable

41,732,699

Exit VAT

9,686,874

69,308,436

59,621,562

Other Debt - Investors

4,200,000,000

Long-term obligation

Total Liabilities

4,209,686,874

4,311,041,135

101,354,261

Equity

Paid-up capital

500,000,000

Retained earning

2,201,013,483

3,388,032,629

1,187,019,145

Current Period Revenue

1,187,019,145

- 685,250,199

501,768,947

Total Equity

2,888,032,629

3,573,282,828

- 685,250,199

Total Liabilities and Equity

1,321,654,245

737,758,307

- 583,895,938

Based on the financial statements above, in the 2022 profit and loss report, PT

Linknau recorded a net loss of -685 million IDR. This condition improved compared to the

position in the previous year, where the company recorded a net loss of -1.18 billion IDR.

This condition was supported by an increase in revenue of 868 million IDR and a decrease

in salary costs of -170 million IDR. Regarding the financial balance, the company's total

assets decreased by -583 million IDR, most of which came from a decrease in bank cash of

-365 million IDR. Total Liabilities also increased by 101 million IDR from the increase in

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trade payables and outgoing VAT. Total Equity decreased by -685 million IDR following

an operating loss in 2022.

The Real Option Method of Valuation Method at PT Linknau

The Real Options method is used in PT Linknau's valuation in this study, assuming

that management can carry out business operations by obtaining funding from external

parties (investors) or without additional funding. In addition, Real options valuation is very

useful in its application to optimize the value of a strategic investment decision by evaluating

several options under certain conditions with a different order of evaluation to obtain optimal

results and develop several options. Existing and determined strategic decisions that serve

as an advantage in the future. In this method, the authors use data from the financial

statements owned by PT Linknau and projected financial statements for the next 5 years.

There are 2 scenarios used in making financial report projections, namely with

additional financing of 2 billion IDR and without additional financing. With data processed

from PT Linknau's financial reports, it is found that if additional financing is obtained from

external parties, the revenue growth will be 339%. Meanwhile, revenue growth is projected

at 172% without additional financing in 5 years. From these data, the projected cash flows

and present value of cash flows are obtained as follows:

Table 2. Real Option Model Cash Flow Projections

In IDR million

2023E

2024F

2025F

2026F

2027F

Probability

Present Value

With External Funding

421

768

1,790

4,257

5,336

65%

3,933

Without External Funding

154

358

851

1,067

35%

787

The present value of flows with and without external funding is 3.9 billion IDR and

787 million IDR. The author uses a probability that 65% of the company will get external

funding and 35% without external funding. Using these probabilities, the present value of

expected cash flows is 2.8 billion IDR.

Table Error! No text of specified style in document.. Option Value Calculation

Expected PV

2,831

Investment Cost

2,000

Option Values:

831

Furthermore, to calculate the option's value, cash flow expectations must be reduced

by the investment value, where the value of the option is 831 million IDR. The PT Linknau

management considers this option's value in determining whether the company needs

external funding.

The Venture Capital Method of valuation method at PT Linknau

In the valuation method of The Venture Capital Method, company value is assessed

from the net present value of future cash flows in an optimistic scenario. This valuation

calculation uses a specified timeframe and interest rates representing high investment risk.

The Venture Capital Method calculates the value of a start-up company by assessing future

cash flows using a comparable and market multiple approach. Furthermore, start-up

companies are discounted using a high discount rate in accordance with the company's high

risk. In the case of PT Linknau, with the current conditions, the company needs to obtain

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funding from investors of 2 billion IDR to increase the company's revenue growth by 3.4

times within 5 years. The author uses a net income approach to calculate the exit value of

investors who will provide funding. The company's growth projection can be seen in the

following table.

Table 3The projected growth of PT Linknau's profit and loss balance

In IDR million

2023E

2024F

2025F

2026F

2027F

Revenue

1,923

2,727

4,086

6,539

8,439

EBITDA

362

1.109

2,723

3,359

NetIncome

368

1.116

2,730

3,366

Net income growth grew from 68 million IDR to 3.4 billion IDR within 5 years after

receiving funding from investors. Using the value of net income in 2027, the author uses a

revenue multiple of 5x to determine the exit value of investors when they want to take

advantage of their investment in PT Linknau. The exit value obtained using the multiple

revenue method is 16.8 billion IDR. Furthermore, the company's valuation value is

calculated by calculating the present value of the exit value using DCF with a discount rate

of 35%, considering the level of risk obtained by investing in start-up companies.

Table 4. Post-Money Valuation

Rate of Return

35%

Post-Money Valuations

3,753

The valuation value after the investment ( Post-Money Valuation ) was obtained at 3.8 billion

IDR. According to a comparison of investment value and post-money valuation, investors

are entitled to 53.3% ownership of the company.

Table 5Pre-Money Valuation and Ownership Proportion

Post-Money Valuations

3,753

Pre-Money Valuations

1,753

VC Ownership

53.3%

This method also allows the author to compare the company's valuation before and

after the investment by reducing the Post-Money Valuation with the investment value. Thus,

the company's value before investment ( pre-money valuation ) is 1.7 billion IDR.

The First Chicago Model of valuation method at PT Linknau

The First Chicago method is in many ways similar to DCF. However, this method

considers several scenarios that indicate uncertainty in business growth. The First Chicago

Method is a weighted average of three DCFs, one for each scenario. The growth rates

assigned to these scenarios differ from company to company, depending on several factors.

These factors are scenarios in which the company has optimism in terms of performance

growth, scenarios in which the company operates with reasonable growth, and the last is the

scenario in which the company operates in pessimistic conditions. Since there are differences

in terms of uncertainty, the probabilities of each scenario are also different. In the case of

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Norsk Hydro, the ideal scenario is given a probability of 90% and 5% in the best and worst

scenario, respectively. In the case of PT Linknau, the probability of an ideal scenario is 60%,

an optimistic scenario is 10% and a pessimistic scenario is 30%. The probability of the

pessimistic scenario is higher than the optimistic one because, considering the current

condition of the benchmark interest rate, which shows an increasing trend, it will be more

difficult for companies to pursue higher growth rates than before. The following is the

calculation of The First Chicago Method's valuation.

Table 6. Valuation The First Chicago Method

In IDR million

2023E

2024F

2025F

2026F

2027F

probability

DCF

Optimist Scenario

632

1.152

2,685

6,385

8.004

10%

5,899

Ideal Scenario

421

768

1,790

4,257

5,336

60%

3,933

Pessimistic Scenario

154

358

851

1,067

30%

787

Weighted Average Valuation

3,185

From the above scenario, the present value obtained under optimistic cash flow

conditions is 5.9 billion IDR, in the ideal scenario 3.9 billion IDR, and 787 million IDR in

the pessimistic scenario. To calculate the valuation value of The First Chicago Method, the

author must calculate the present value, which has been weighted based on the probability

of each scenario. These data obtained a weighted average valuation of 3.2 billion IDR. The

valuation value found by The First Chicago Method is consistently higher than the DCF

calculation because it takes into account both optimistic and pessimistic scenarios. The

valuation calculation from The First Chicago Method is also more relevant because, in the

real world, there are probabilities of success and failure determining factors for business

success. Therefore, the authors believe that The First Chicago Method's valuation

adequately represents the accuracy of PT Linknau's company value.

CONCLUSION

Based on the research results above, it can be concluded that the financial performance

of start-ups in logistics aggregators at PT Linknau can be explained using company

valuations calculated or measured using three methods, namely the Real options method, the

First Chicago method, and the Venture Capital Method. The results show The Real Options

method is used to optimize the value of strategic investments by considering the existing

options. This study projected financial statements for 5 years with and without additional

external financing. The results show a company valuation of 2.8 billion IDR considering the

probability of additional occurrences without external funding. Furthermore, the VCM

method assesses the company based on the investor's exit value. In the case of PT Linknau,

the company's valuation was found to be 3.8 billion IDR. Finally, the First Chicago method

is used as a weighted average of the three DCFs to address uncertainties in business growth.

Probability is given in each set scenario. In the case of PT Linknau, the valuation value

obtained was 3.2 billion IDR. In the case of PT Linknau, the company is in the logistics

technology industry, and the company level is already growing. It has started to have

customers, so the company's revenue has started to cover operational costs even though it is

still in a loss condition. Under these conditions, the authors consider The First Chicago

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Method to be the most suitable company valuation method for assessing PT Linknau's

company valuation. The main reason why this method is the most suitable is that currently,

the company is already in a condition of generating operating income, according to Damiano

et al. (2020).

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