Startup valuation by venture capitalists: an empirical study

Tarek Miloud, Arild Aspelund and Mathieu Cabrol

Venture Capital, 2012, vol. 14, issue 2-3, 151-174

Abstract: How to value a new venture is critical in entrepreneurial financing. This article develops an integrated theoretical framework to examine whether venture capitalists' valuation of a new venture can be explained by factors identified in the strategy theories as important to firm performance. Empirical results from the analyses of 184 rounds of early-stage venture capital investments in 102 new ventures support the central proposition that venture capitalists do take into consideration those factors that are important to firm performance in their valuation of new ventures. More specifically, this article finds that attractiveness of the industry, the quality of the founder and top management team, as well as external relationships of a new venture significantly and positively affect its valuation by venture capitalists when it seeks venture capital financing in its early stages of development. These empirical findings help to establish an initial linkage between the well-developed theories in strategic management and under-researched venture capital valuation practice. It brings more theoretical rigor to the venture capital investment literature by introducing a systematic approach to identify and measure factors important to new venture valuation. It explores a possibility to develop a supplementary method to value an early-stage new venture when extant valuation methods fail to yield consistent results because these methods require accounting information that a new venture typically cannot provide.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://hdl.handle.net/10.1080/13691066.2012.667907 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:veecee:v:14:y:2012:i:2-3:p:151-174

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TVEC20

DOI: 10.1080/13691066.2012.667907

Access Statistics for this article

Venture Capital is currently edited by Colin Mason and Richard T. Harrison

More articles in Venture Capital from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().