Start-up Values Research Articles

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

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.

Lightweight hardware fingerprinting solution using inherent memory in off-the-shelf commodity devices

An emerging technology known as Physical unclonable function (PUF) can provide a hardware root-of-trust in building the trusted computing system. PUF exploits the intrinsic process variations during the integrated circuit (IC) fabrication to generate a unique response. This unique response differs from one PUF to the other similar type of PUFs. Static random-access memory PUF (SRAM-PUF) is one of the memory-based PUFs in which the response is generated during the memory power-up process. Non-volatile memory (NVM) architecture like SRAM is available in off-the-shelf microcontroller devices. Exploiting the inherent SRAM as PUF could wide-spread the adoption of PUF. Therefore, in this study, we evaluate the suitability of inherent SRAM available in ATMega2560 microcontroller on Arduino platform as PUF that can provide a unique fingerprint. First, we analyze the start-up values (SUVs) of memory cells and select only the cells that show random values after the power-up process. Subsequently, we statistically analyze the characteristic of fifteen SRAM-PUFs which include uniqueness, reliability, and uniformity. Based on our findings, the SUVs of fifteen on-chip SRAMs achieve 42.64% uniqueness, 97.28% reliability, and 69.16% uniformity. Therefore, we concluded that the available SRAM in off-the-shelf commodity hardware has good quality to be used as PUF.

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

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

Framework for Start-up Valuation

Framework for Start-up Valuation

Determinants of the exit value in European venture capital-backed technology startups

Purpose This study aims to analyze the impact of different exit alternatives, investor presence and founders’ human capital on the exit value of European venture capital (VC)-backed high technology startups. Design/methodology/approach The empirical analysis is based on a sample of 107 European firms that obtained an exit through Merger&Acquisition (M&A) or an initial public offering (IPO) between 2010 and 2017, backed by VC investors. Findings This study provides empirical evidence on how different exit alternatives, investor heterogeneity and founders’ human capital may affect the exit value of European VC-backed startups. Exiting through an IPO and retaining a larger equity stake are positively correlated with the exit value. The presence of business angels and non-governmental VC firms is associated with larger valuations. Founders’ previous education was positively correlated with the exit value. Originality/value Exit strategies in technology startups are essential to capitalize investors’ efforts and reinvest cash into new ventures, supporting the development of entrepreneurial ecosystems and countries’ competitiveness. The results of this study provide interesting hints for policymakers and contribute to an in-depth understanding of the drivers of exit valuation for startups.

Translocate, to fund or not to fund: challenges in funding an emerging market start-up

Subject area: Financial management – Specifically start-up valuations. Study level/applicability: Honours or masters level (professional or academic). Case overview: The case is around a tech start-up in the informal transport market in South Africa, that has obtained some government funding and developed a working SaaS. However, requires funding to expand and grow. Informal transport is significant in emerging and developing markets and the product is portable internationally. In South Africa, two listed companies (US and SA) were started with similar concepts in Logistics and private client market and are now global in 124 and 24 countries. Management of the venture capital firm are senior and experienced and have invested years and funding into this company, and while willing to offer equity had quite a high value in mind, the venture capital company (with an impact mandate) needs to decide whether to fund the start-up and negotiate a value. Expected learning outcomes: Characteristics of a successful start-up are formulating an appropriate discount rate, using real world data; performing a DCF and relative valuations given limited information; scenario analysis and sensitivity analysis; and the importance of negotiating (understanding managements side). Supplementary materials Teaching notes are available for educators only. Complexity academic level This case was written for use in financial management classes in either an academic full-time student (final year undergraduate/bachelor) or a postgraduate program with working students/professional (MBA) program level. Subject code CSS: 1: Accounting and finance.

Open Source Collaboration in Digital Entrepreneurship

Emerging digital technologies give rise to digital entrepreneurship and the widespread phenomenon of open source collaboration (OSC) on GitHub for entrepreneurial pursuits. Although openness is a common theme in digital entrepreneurship, it is unclear how digital startups—that is, startups that that have digital artifacts at the core of their business model for value creation and capture—actually realize value from their OSC engagement. We develop a theoretical framework to explain how the engagement in OSC may affect the value of digital startups and how the effect is contingent on the stage of venture maturity (conception, commercialization, or growth) and the mode of OSC engagement (inbound or outbound). In analyses that pool 17,552 matched digital startups with monthly panel observations between 2008 and 2017, we find digital startups in the conception and commercialization stages benefit more from inbound OSC whereas the ones in the growth stage benefit more from outbound OSC. As digital startups increasingly use OSC for ideation, experimentation, and scaling, our contribution is to show whether, when, and how knowledge flows through OSC might affect the value of digital startups. We discuss implications for research on organizing for digital entrepreneurship as well as open innovation.

Oceňování start-upů: přehled přístupů a vliv nové investice na hodnotu start-upu

Oceňování start-upů: přehled přístupů a vliv nové investice na hodnotu start-upu

Improving Funding Operations of Equity‐based Crowdfunding Platforms

Equity‐based crowdfunding platforms enable investors to come together to invest in startups and help lay‐investors to follow the lead of investors with good startup evaluation skills. Crowdfunding platforms often gather users’ inputs to evaluate investors and startups, but such inputs are quite noisy and often rely on past performance. Many investors with good evaluation skills do not have substantial past investment experience but still can lead investment rounds. This helps provide investment opportunities to lay‐investors who otherwise do not get to join investors with proven records. Without identifying such investors with potential, platforms lose the opportunity to put together investors to fund worthy startups and lose business. We develop a Bayesian model to address this problem and improve funding operations of equity‐based crowdfunding platforms. Specifically, the model helps platforms to better assess investors’ evaluation skills, identify lead investors for lay‐investors to follow, and increase funding opportunities on the platforms. To test the effectiveness of the proposed model, we gathered data from 319 actual investors listed on one of the largest crowdfunding platforms in the United States, picked startups randomly for investors to evaluate, and had investors evaluate startups in two ways—our approach and the conventional approach. We also discuss an extension of this Bayesian model that penalizes investors in case investors perform well by randomness. Furthermore, we used a Bayesian framework to help platforms better predict startup valuations accounting for investors’ evaluation skills.

Value drivers of startup valuation from venture capital equity-based investing: A global analysis with a focus on technological factors

Because of the recent surge in the number of unicorns and their role in spurring entrepreneurship and social impacts, venture capitalists, entrepreneurs, and regulators are concerned about how startup firms are valued. This is due to a lack of financial and historical information about startups as well as the need to understand their disruptive technological aspects. The length of observations is 2008–2018. The study uses the average value of variables for cross-sectional estimations. Our study investigates whether the types of recent technologies adopted by startups could serve as key factors to be used in startup valuations. Using a sample of 4903 startup in 13 subregions, we find that financial information (revenues) and nonfinancial information (social media) as well as sectoral and technological differences influence startup equity valuation. Technologies that involve big data, clean tech, mobile and augmented reality are prominent equity valuation premiums, regardless of the subsectors in which the startups originate. In addition, we find that e-commerce and mobile and big data are effective technologies for startup firms to employ for accumulating short-term capital.

ІНТЕРНЕТ-МАРКЕТИНГ ЯК КОМПОНЕНТА ТУРИСТИЧНОГО БІЗНЕСУ В РОЗУМНІЙ ЕКОНОМІЦІ

The article discusses the contemporary issues related to the application of Internet marketing tools in tourism business along with estimating the growth rates of the global cloud computing and hosting market for 2010–2020 and analysing its structural and functional changes in different time periods. Modern tourism industry is viewed as a highly dynamic and fast-growing sector that not only adapts to market needs but also demonstrates new business practices using advanced cloud technology and business models. A special emphasis is put on the argument that the high growth rates of cloud technologies in recent years have been underpinned by the need to use an integrated database to manage business processes in tourism industry. The study provides insights into modern subject areas and marketing research objectives in the context of tourism digitalization as well as explores the fundamental change in the environment, settings and business patterns of tourism sector actors from the Internet marketing perspectives. The authors also present a concept of a system approach to information, technological and marketing support of a tourist product in the framework of business globalization. The findings justify the need to develop up-to-date strategic solutions by tourism enterprises with a focus on advanced knowledge practices in the context of the COVID-19 pandemic subject to the evolution of digital tools in tourism. The study offers an overview of the European Tourism 3.0 policy which provides for its consistent implementation in the concept of the national sustainable development along with identifying the relationships between the key factors to ensure the effective response of the tourism market actors to global competition challenges using Internet technologies. In addition, the article discusses particular applied aspects of tourism startups that have developed effective cloud technologies as well as demonstrates rapidly growing public value of startups and electronic industry advances as innovative idea generators in the tourism industry.

Everything is (Not) Negotiable: The Gender Startup Valuation Gap

We explore gender differences in startup valuation in a comprehensive sample of 123 venture capital [VC] funded early stage high-tech startups from developed (Europe) and emerging (Latin America) markets. Startups led by female CEOs receive significantly lower valuations than firms featuring a male CEO, controlling for a wide range of startup and founder vocational characteristics.We build on role congruity theory and explore the potential moderation effects of self-initiation and negotiation experience on gender bias in VC deal terms. We find that, in case of female-led startups, self-initiation aggravates the gender gap in company valuation, whereas negotiation experience results in mitigating the gender gap. Further, our results suggest that supply side gender bias plays a stronger role in the gender valuation gap than demand-side bias.

Venture capital contracts

We estimate the impact of venture capital (VC) contract terms on startup outcomes and the split of value between the entrepreneur and investor, accounting for endogenous selection via a novel dynamic search-and-matching model. The estimation uses a new, large data set of first financing rounds of startup companies. Consistent with efficient contracting theories, there is an optimal equity split between agents, which maximizes the probability of success. However, venture capitalists (VCs) use their bargaining power to receive more investor-friendly terms compared to the contract that maximizes startup values. Better VCs still benefit the startup and the entrepreneur due to their positive value creation. Counterfactuals show that reducing search frictions shifts the bargaining power to VCs and benefits them at the expense of entrepreneurs. The results show that the selection of agents into deals is a first-order factor to take into account in studies of contracting.

On Comparison of Two Approaches for Steam Turbine Optimizing Start-Up

According to the operating conditions, operating rules and procedures of the steam turbine, a 300MW steam turbine cold start mathematical model was established, and the finite element 3-D modeling and simulation of the 300MW condensing steam turbine rotor was carried out. By using ANSYS. Calculate the stress value of cold start-up according to the cold start curve under standard conditions. The start-up curve design of the initial working condition is inefficient. This paper uses genetic algorithm and particle swarm optimization algorithm to optimize and analyze the turbine mathematical model, draw a new cold start-up curve, and then load the cold start curve into the model. The ANSYS calculates the optimal thermal stress value. After calculating the stress, compare the results on the initial working condition with the results after two optimizations. In contrast, under the premise of ensuring that the thermal stress value of the turbine rotor does not exceed the limit value of the rotor, the startup time is shortened and the economy is improved.

Life cycle of startup financing

I characterize an optimal, incentive compatible, and renegotiation proof contract of venture capital (VC ) financing of a startup (that may be successful or not) whose rate of arrival of success is a function of the accumulated investment stock. The contract depends on the startup valuation, prior probability of success, and initial capital. Sufficient conditions for existence of such a contract are specified. The paper explains why the startup has to rely on different ways of financing in different stages of its life, and why VC financing is not feasible in early stages of development of the startup.

Twitter sentiment as a weak signal in venture capital financing

How do venture capitalists (VCs) incorporate weak and strong signals in the valuation of technology-based startups? Based on a sociocognitive perspective of signaling theory, we introduce Twitter sentiment as a novel and weak signal, which we juxtapose with patents as a traditional, strong signal. While we find a positive association between both signals and VCs' venture valuations, our results reveal that Twitter sentiment does not correlate with actual long-term investment success, whereas patents do. Additionally, we identify and test novelty and experience characteristics (i.e., startup age and VC firm experience) as boundary conditions for our proposed signal-valuation relationships.

Tell Me Something New: Startup Valuations, Information Asymmetry, and the Mitigating Effect of Informational Updates

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.

Conundrum Calls (A)

Having just moved from the sales department to the marketing team at a start-up, Lisa is confronted with a dilemma. Part of the reason she switched departments was to improve the strained relationship between the two departments. Her first assignment is to call competitors, pretending to be a customer, to get their pricing information. Lisa doesn't want to lie, but feels a responsibility to her new boss, her old boss who advocated for her, and both her new and old departments. The B case describes her decision and its consequences. Lisa recognizes that she actually had more options to act ethically than she had thought, and decides to be more thoughtful and prepared for similar dilemmas in the future. Excerpt UVA-OB-1352 Giving Voice to Values Feb. 22, 2021 Conundrum Calls (A) Lisa stared out the window while absentmindedly petting the office golden retriever. She had been at the software-as-a-service (SaaS) technology start-up for three years, but this was her first week on the marketing team. Like most sales and marketing departments, the two sides constantly butted heads and suffered from a little bad blood between them. Two years before, when the marketing director, Terri, had joined the start-up part-time, her role and responsibilities were not clearly communicated to the sales team. The sales team had expected a marketing communications head who could whip up sales materials to replace the sales team's homemade PowerPoint presentations and video demonstrations. Instead, Terri, with a Stanford MBA and a big tech pedigree, was a strategist who worked part-time on the marketing vision. Off to a poor start, the relationship between the sales and marketing teams was broken, characterized by disrespect and mistrust. Somewhat ironically, the start-up's values included respect and trust. When Lisa told her boss, the sales director, she was eager for a new challenge, her boss had advocated for her move to the marketing team in hopes that her legacy knowledge of the company and sales process would improve the communication and coordination between the two groups. Lisa had a wealth of product and customer knowledge but minimal marketing experience. Her colleagues in sales were happy about her move but skeptical that she could help. Lisa had a cordial relationship with Terri and personally liked her, but this was their first time working closely together. Lisa wanted to do well for all parties involved. . . .

The Valuation of E-Health and Telemedicine Startups

The Valuation of E-Health and Telemedicine Startups

A Framework to Assess the Valuation Techniques for New Technology-based Firms: A case in an Emerging Market

Valuation of new technology-based Firms and Startups is one of the main concerns of these Firms. The need to expand financial resources and evaluate the potential income of these firms increases the importance of the valuation of these firms for entrepreneurs and investors. In this paper, we represent a comprehensive framework to assess the strengths and the weaknesses of the valuation methods in NTBFs with a focus on the factors in the emerging markets. For this purpose, different valuation methods and their related criteria for NTBFs are extracted and evaluated by experts in terms of applicability and Sufficiency. We categorized the existing valuation methods to 4 different groups: “asset valuation methods”, “intellectual property valuation methods”, “technology valuation methods”, and “startups valuation methods”. Then, the importance of each criterion is determined using the analytical hierarchical process method. Finally, we used fuzzy TOPSIS to prioritize each category of valuation methods and identify their strengths and weaknesses. The results indicate which sets of valuation methods are the more appropriate method to evaluate different kinds of NTBFs. Besides, the results of the model on different criteria proposed different suggestions to improve the existing valuation methods.