Borsa Istanbul Review (Jul 2022)

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

  • Sutan Emir Hidayat,
  • Omar Bamahriz,
  • Nadiah Hidayati,
  • Citra Atrina Sari,
  • Ginanjar Dewandaru

Journal volume & issue
Vol. 22, no. 4
pp. 653 – 667

Abstract

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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.

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