The determinants of startup valuation in the venture capital context: a systematic review and avenues for future research

Köhn, Andreas

doi:10.1007/s11301-017-0131-5

Cited by 79 publications

(46 citation statements)

References 89 publications

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“…The latter methods inspired other methods, such as the risk factor summation method. These approaches created by experts and investors take into account qualitative aspects, with a particular focus on critical factors that can determine the success or failure of the young company (Köhn, 2018;Mirzanti et al, 2019). Then, these qualitative variables are transposed to a quantitative dimension in their economic evaluation to get the final startup value.…”

Section: Resultsmentioning

confidence: 99%

“…For the nature of information, we distinguish between financial and non-financial information (Flöstrand & Ström, 2006). Information about growth opportunities and non-financial information (Shevlin, 1996;Ho, 2016) is of great importance for startup valuation (Köhn, 2018). Amit et al (1990) showed that management team skills were crucial elements to successful startup companies.…”

Section: Alternative Methods For Startup Valuation Discussed In the Amentioning

confidence: 99%

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Startup Company Valuation: The State of Art and Future Trends

Montani¹,

Gervasio²,

Pulcini³

2020

IBR

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The aim of this conceptual article is to present a systematic literature review about the most used and innovative startup valuation methods to define the state of art and future trends on this important topic. Because of the particular features of early-stage companies, it is not easy to find an adequate method to assess their value. Traditional valuation methods are unsuitable for startups. Therefore, over time, academic literature and experienced investors created alternative and innovative valuation models. We analysed the main models, outlining the advantages and limits for each one. The results of our analysis show that there is currently no "perfect" method to assess a startup’s value. Each model discussed has significant limits, and the possibilities for improvement are many. We are witnessing a gradual withdrawal from more arbitrary valuation models, and consciousness is growing towards the idea that to better assess startup’s value, it is necessary to consider three aspects: attention to future forecasts instead of past data, using probability to consider different scenarios, and understanding of and attention to the specific business model of the startup rather than data on comparable companies in the market. Currently, none of the discussed methods integrates these three features harmoniously. We expect that in the near future, the academic literature will develop new valuation methods (or will perfect existing ones) that should consider the three characteristics mentioned previously. In this way, it would be possible to create a more suitable method to assess a startup's value, i.e., a method to reduce uncertainty and that better represents the startup’s value and makes startup company valuation more reliable.

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Section: Resultsmentioning

confidence: 99%

Section: Alternative Methods For Startup Valuation Discussed In the Amentioning

confidence: 99%

Startup Company Valuation: The State of Art and Future Trends

Montani¹,

Gervasio²,

Pulcini³

2020

IBR

View full text Add to dashboard Cite

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“…To evaluate them, the following models and methods were developed:  The method of profit margin, which is quite popular, but has significant shortcomings in the assessment. For example, the P/E coefficient (function of cash flows) -this method does not take into account the subjective nature of the ROR rate (since the target rate of return is set by the investor himself, this means a direct opportunity to change the final cost of the project) (Köhn, 2017);  The method of discounting cash flows allows evaluating based on cash flow indicators for the period of investor participation in it. Since such projects, as a rule, do not have a financial history, cash flows here are exclusively interval prognostic in nature (Köhn, 2017); …”

Section: Problem Of Assessing the Investment Attractiveness Of Risk Pmentioning

confidence: 99%

“…The method of valuing the potential audience can be used to assess the future value of the project, the success of which is closely related to a specific audience of customers (Köhn, 2017);  Berkus D. (2012) evaluates the project according to the following parameters: promising idea, implemented prototype, strategically important connections, product promotion on the market. The method focuses on the method of evaluating projects at an early stage.…”

Section: Problem Of Assessing the Investment Attractiveness Of Risk Pmentioning

confidence: 99%

Problem of Assessing the Investment Attractiveness of Risk Projects for Developing Artificial Intelligence

2019

IJRTE

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The article discusses the problem of assessing the investment attractiveness of risk projects for developing artificial intelligence, the methods of such assessment and their features. It is shown that due to the lack of relevant statistical, financial, operational information, the models and methods of investment valuation are, for the most part, subjective. The use of only one model or method of assessing investment attractiveness in the field of the development of artificial intelligence projects is insufficient, while the complex use without taking into account systemic aspects is likewise not sufficiently substantiated. To solve the existing problem, it is proposed to comprehensively use the available capabilities of the method of functional cost analysis (FSA), the essence of which is that the development project is decomposed into separate functions, and the necessary resources are measured and fixed for each function. Analysis of the functions of the object and the costs of the implementation of the functions makes it possible to identify the most acceptable variant of the object from the position of its functional content. At the same time, the article considers the possibility of using the functional-cost analysis method in the evaluation, the essence of which is that the development project is decomposed into separate functions, and for each function, all necessary resources are measured and fixed. An analysis of the object’s functions and their costs will help to identify the most economical version of a risky investment project from its functional content. It is reasonably noted that the main resources to support and promote the development of innovative projects are venture companies that invest considerable funds both at the initial stages and at the stages of development and expansion of projects. The amount of financial resources coming from business angels, crowdfunding and business accelerators is much smaller and goes mainly to the initial stages of project implementation.

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“…Overall, we can consider that the market value of companies is mostly given by its future growth prospects and profitability. This thinking is especially relevant for startups that have few assets, but considerable growth prospects, especially in their early stages (KÖHN, 2017). From the late 1990s until the late 2000s, the energy sector was significant and relatively stable growth, which provided high valuation prospects for their companies.…”

Section: Figure 1: Top Global Automotive Trends To 2025mentioning

confidence: 99%

The Role of Open Innovation in the Energy Transition

MENDONCA¹

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The determinants of startup valuation in the venture capital context: a systematic review and avenues for future research

Cited by 79 publications

References 89 publications

Startup Company Valuation: The State of Art and Future Trends

Startup Company Valuation: The State of Art and Future Trends

Problem of Assessing the Investment Attractiveness of Risk Projects for Developing Artificial Intelligence

The Role of Open Innovation in the Energy Transition

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