Abstract
The article describes a new approach to modeling of potential development of start-up companies and venture projects using agent-based simulations. We describe an agent-based model of a recently launched successful air ticket sales Internet start-up. Special attention is paid to the description of the model structure, agents’ behavior logic and achieved results. The model was validated on the basis of actual start-up performance over the first year when the company was founded. The model provided useful insights on a number of important strategic management questions that the management of the company faced. Initially the management was inclined to develop the company in the business-to-business sector (B2B). In B2B approach the key clients of the company would be various business entities using company’s services for business travel needs. However the model proved that business-to-consumer segment would be much more beneficial for the start-up since the growth rates in this case are much bigger than if operating solely in B2B sector.
We argue that agent-based simulation of Internet start-up companies are an important tool for reflection and validation of business strategy of fast growing companies at the early stage of their development. The efforts put by the management in simulation of their companies’ development scenarios will provide a considerable pay off when taking important strategic decisions. Additionally, the results of such simulations could be beneficially used in negotiations with potential venture capital investors when presenting various growth scenarios meaningfully validated on the basis of recent development trends. One of the conclusions made is that the companies need to change their traditional approach to business planning and financial modeling by including agent-based simulations where appropriate. Suche “dynamic business plans” have a potential to become a useful tool for valuation of promising start-ups and managerial strategic decision-making.
Keywords
business plan, dynamic business plan, agent-based modeling, business planning
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