Valuation using the market penetration model (MPM) or the growth potential of a company[1] is a method of estimating the value of a company by calculating the depth of its market penetration as evidenced by its customer base and industry niche.
The process consists of: The market penetration model focuses on the synergy and opportunities for fast growth between the target company and the acquiring company.
It prioritises ability to exploit future customer opportunities over previous financial performance.
[4] Instagram was a relatively small company, employing 13 programmers and was just two years old at the time of the sale.
It had no revenue, but was initially valued at $1 billion on account of it highly desirable customer base (social media fanatics, smart phone users) and its attractive industry niche (smart phone space).