Tell me something new: startup valuations, information asymmetry, and the mitigating effect of informational updates

Lukas Koenig and Julius Tennert

Venture Capital, 2022, vol. 24, issue 1, 47-69

Abstract: A high level of information asymmetry is characterizing for venture capital investments making new information about entrepreneurial companies especially valuable for a venture capitalist’s valuation process. This paper uses text classification and text mining methodology to extract structured data about capital allocation plans in a unique sample of 1,550 European funding rounds that serves as proxy for the private informational updates shared with investors by entrepreneurs. We show that venture capitalists incorporate the content and specificity of information into their valuation process. Further, results confirm that the value of new information is dependent on the prevailing level of information asymmetry.

Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13691066.2022.2026744 (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:24:y:2022:i:1:p:47-69

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

DOI: 10.1080/13691066.2022.2026744

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 ().