Chimpchange: How to Raise Capital to Grow

In early 2016, ChimpChange Limited, a financial technology (fintech) start-up, had started operations in California and already had more than 80,000 customers. The company needed capital to acquire more customers in order to become cash-flow positive, as was the case with most start-ups. ChimpChange Limited should have been able to attain the break-even number of customers within another year or so, but it needed capital to execute a marketing campaign to attract these customers. It had already undergone several series of funding rounds. At this point, should it return for a series C funding round or should it raise funds through an initial public offering (IPO)? If it were to opt for an IPO, where should this take place?

This case is intended for use in advanced undergraduate- or graduate-level finance courses in international finance, advanced corporate finance, and investment banking. The case deals with a decision about how to raise capital and the issues involved in valuing an early stage venture. It introduces some of the issues involved in valuing high-growth technology companies while they are still in their rapid growth phase (i.e., before they are consistently generating positive cash flows). The case allows for interesting discussions regarding fintech, disruption, corporate governance, and valuation. After working through the case and assignment questions, students will have developed their ability to do the following:<ul><li>Compare and contrast various methods financial technology start-ups can use to raise capital.</li><li>Identify qualitative differences between various financing alternatives (e.g., private versus public investors and domestic versus international capital markets.</li><li>Outline methods for valuing a project or company, and describe the effects on a company’s valuation of the choice of investors and the location for raising capital.</li><ul>

• Fintech, valuation, technology, IPO