Financial valuation of start-up businesses with and without venture capital

Michael Lerm, Roland Rollberg and Peter Kurz

International Journal of Entrepreneurial Venturing, 2012, vol. 4, issue 3, 257-275

Abstract: This paper introduces a three-step model for the financial valuation of business ventures based on the principles of the theory of functional business valuation. It distinguishes between start-up businesses not raising venture capital and those raising venture capital. First of all, the entrepreneur's investment programme has to be optimised ignoring the business venture ('basic programme'). Then, the start-up has to be valued to answer the question, whether it is profitable or not without venture capital ('first valuation programme'). In the third step, the start-up has to be valued once more taking available venture capital into account in order to determine its specific contribution to the value of the new business as a basis for decision making ('second valuation programme').

Keywords: valuation theory; functional business valuation; business start-ups; venture capital; linear programming; entrepreneurship. (search for similar items in EconPapers)
Date: 2012
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