Snowballing signaling theory in startup valuation: a systematic review on investor behavior, market forces and growth dynamics

Muchamad Arif Zamani, Ersa Tri Wahyuni, Hamzah Ritchi and Tettet Fitrijanti

Cogent Business & Management, 2025, vol. 12, issue 1, 2530752

Abstract: This systematic review integrates content analysis and bibliometric methods to explore how market forces, investor perceptions and theoretical frameworks influence startup valuation across different fundraising stages. Following PRISMA 2020 guidelines, the study analyzes 344 news articles and 970 academic publications to identify recurring themes such as innovation, growth, profitability and signaling behavior. The core contribution of this research is the formulation of the Snowballing Signaling Theory – a novel conceptual model that illustrates how valuation signals accumulate over time, reinforcing investor expectations and driving cyclical valuation dynamics. This model explains how valuations, like a snowball, grow through successive funding rounds and eventually align with financial fundamentals, especially at IPO and post-IPO stages. In addition, the study introduces the concept of reverse signaling, where investors actively shape startup behavior through funding decisions, media narratives and exit strategies. By combining qualitative and bibliometric insights, this study bridges academic theory with investment practices, providing a structured framework for understanding startup valuation beyond financial metrics. It emphasizes that each stage of a startup’s lifecycle demands a tailored valuation approach, accounting for evolving investor priorities and market contexts. The findings offer actionable insights for scholars, investors and policymakers navigating the increasingly complex startup financing ecosystem.

Date: 2025
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DOI: 10.1080/23311975.2025.2530752

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