Exploring Differences in Early-stage Startup Valuation across Countries

Abstract

Anecdotal evidence suggests that born global startups which typically operate tech-nology-based and, in turn, easily scalable business models often relocate their headquarters from low valuation countries to high valuation countries. To shed further light on these loca-tion decisions, both researchers and policymakers must understand the factors determining the variability of early-stage startup valuations across countries. To do so, we draw on insti-tutional theory and conduct a fuzzy-set qualitative comparative analysis (fsQCA) by analyzing 1,251 startup valuations from 13 countries between 2009 and 2016 that mark the first professional venture capital round. Our findings show that high levels of formal institutions are the basis for high startup valuation. Furthermore, the two identified configurations explaining high startup valuations are attached to high levels of innovativeness respectively favorable informal institutions. The two configurations explicating low startup valuation are both characterized by a combination of a lack of national innovativeness and unfavorable informal conditions. Thus, our findings are relevant for researchers and policymakers, as they unravel the institutional configurations creating a high-valuation environment, and moreover underpin that startup valuation must be viewed in a broader and more complex context than currently discussed in the literature.