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

56 Pages Posted: 14 Dec 2022

See all articles by Max Berre

Max Berre

Audencia Business School; Université de Lyon

Benjamin Le Pendeven

Audencia Business School

Date Written: September 8, 2022

Abstract

How do business-cycles impact startup-valuations? While several studies explore VC startup-ecosystems and pre-money valuations, relatively-few delve deeper into the role of macro-level economic factors in influencing those startup deals valuations. Using a dataset of 1,089 venture-capital investments in European Union and European Economic Area markets, this article examines macroeconomic, cyclical and macro-sectoral influences on VC startups pre-money VC valuations. Our findings show that business-cycles impact startup-valuation both directly and indirectly. Beyond DCF factors, startup-valuations are impacted via by business-cycles directly, and via local venture-capital market-size. By using a Structural Equation Model approach, our findings contribute to entrepreneurship and financial-intermediary literature by exploring indirect and endogenous relationship possibilities finding that most determinants are transmission-channels rather than independent drivers. Our findings effectively tie-together startup-valuations, intermediary markets, and macroeconomic determinants.

Keywords: Valuation, Startup, Venture Capital, Entrepreneurial Finance, Business-cycle, Structural Equation Model

Suggested Citation

Berre, Max and Le Pendeven, Benjamin, Business-cycles and Cash-on-Market: Pre-money Startup Valuation in the Macroeconomic Environment (September 8, 2022). Available at SSRN: https://ssrn.com/abstract=4286910 or http://dx.doi.org/10.2139/ssrn.4286910

Max Berre (Contact Author)

Audencia Business School ( email )

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Université de Lyon ( email )

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Lyon, 69008
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+33761586464 (Phone)

Benjamin Le Pendeven

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

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