Skip to main content

LUP Student Papers

LUND UNIVERSITY LIBRARIES

Valuation of Technology Startups: An Empirical Approach

Mrebai, Atef LU (2020) NEKN01 20201
Department of Economics
Abstract (Swedish)
Valuating a company is traditionally a finance subject that requires a deep analysis of a company’s financial history and projections about its future potential to generate revenue. When it comes to technology startups, valuation becomes difficult. Startups are, by definition, newly established companies with insufficient historical data. Future revenue is typically problematic to forecast as they are still in the early stages of their growth. Consequently, investors have developed various models to value different companies and direct their investments accordingly.
This article is an attempt to leverage existing literature to identify factors that affect investors’ decisions when valuating a technology company. Empirical results from the... (More)
Valuating a company is traditionally a finance subject that requires a deep analysis of a company’s financial history and projections about its future potential to generate revenue. When it comes to technology startups, valuation becomes difficult. Startups are, by definition, newly established companies with insufficient historical data. Future revenue is typically problematic to forecast as they are still in the early stages of their growth. Consequently, investors have developed various models to value different companies and direct their investments accordingly.
This article is an attempt to leverage existing literature to identify factors that affect investors’ decisions when valuating a technology company. Empirical results from the analysis of 64 rounds of investment made by venture capitalists and business angels in Swedish companies support the presence of common factors that determine the valuation of a company by an investor. This study finds that the number of employees within a startup, the quality of its founder’s education, the nature of the startup’s customers and the type of investor significantly affect the valuation at which a company raises capital.
These results further explore the under-researched area of entrepreneurial finance and bring more rigor to the existing literature by proposing an empirical model that tests the underlying theories. They also pave the way towards developing a comprehensive and accurate model to valuate early stage technology companies without relying on insufficient accounting information. (Less)
Please use this url to cite or link to this publication:
author
Mrebai, Atef LU
supervisor
organization
course
NEKN01 20201
year
type
H1 - Master's Degree (One Year)
subject
keywords
startup, valuation, entrepreneurship, finance, investor
language
English
id
9026531
date added to LUP
2020-08-29 10:36:29
date last changed
2020-08-29 10:36:29
@misc{9026531,
  abstract     = {{Valuating a company is traditionally a finance subject that requires a deep analysis of a company’s financial history and projections about its future potential to generate revenue. When it comes to technology startups, valuation becomes difficult. Startups are, by definition, newly established companies with insufficient historical data. Future revenue is typically problematic to forecast as they are still in the early stages of their growth. Consequently, investors have developed various models to value different companies and direct their investments accordingly.
This article is an attempt to leverage existing literature to identify factors that affect investors’ decisions when valuating a technology company. Empirical results from the analysis of 64 rounds of investment made by venture capitalists and business angels in Swedish companies support the presence of common factors that determine the valuation of a company by an investor. This study finds that the number of employees within a startup, the quality of its founder’s education, the nature of the startup’s customers and the type of investor significantly affect the valuation at which a company raises capital.
These results further explore the under-researched area of entrepreneurial finance and bring more rigor to the existing literature by proposing an empirical model that tests the underlying theories. They also pave the way towards developing a comprehensive and accurate model to valuate early stage technology companies without relying on insufficient accounting information.}},
  author       = {{Mrebai, Atef}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Valuation of Technology Startups: An Empirical Approach}},
  year         = {{2020}},
}