Business-cycles and Cash-on-Market: Pre-money Startup Valuation in the Macroeconomic Environment

Max Berre () and Benjamin Le Pendeven
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Max Berre: Audencia Business School, MAGELLAN - Laboratoire de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon, Université de Lyon, UJML - Université Jean Moulin - Lyon 3 - Université de Lyon
Benjamin Le Pendeven: Audencia Business School

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Abstract: How do business-cycles impact startup-valuations? While several studies explore VC startupecosystems and pre-money valuations, relatively-few delve deeper into the role of macro-level economic factors in influencing those startup deals valuations. Using a dataset of 1,089 venturecapital investments in European Union and European Economic Area markets, this article examines macroeconomic, cyclical and macro-sectoral influences on VC startups pre-money VC valuations. Our findings show that business-cycles impact startup-valuation both directly and indirectly. Beyond DCF factors, startup-valuations are impacted via by business-cycles directly, and via local venture-capital market-size. By using a Structural Equation Model approach, our findings contribute to entrepreneurship and financial-intermediary literature by exploring indirect and endogenous relationship possibilities finding that most determinants are transmission-channels rather than independent drivers. Our findings effectively tie-together startup-valuations, intermediary markets, and macroeconomic determinants.

Keywords: Valuation Startup Venture Capital Entrepreneurial Finance Business-cycle Structural Equation Model; Valuation; Startup; Venture Capital; Entrepreneurial Finance; Business-cycle; Structural Equation Model (search for similar items in EconPapers)
Date: 2022-09-08
New Economics Papers: this item is included in nep-fdg and nep-sbm
Note: View the original document on HAL open archive server: https://hal.science/hal-03872889v1
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Published in 2022 Entrepreneurial Finance (ENTFIN) Annual Meeting, Sep 2022, Bath, United Kingdom

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