Title: What matters most in technology venture valuation? Importance and impact of non-financial determinants for early-stage venture valuation

Authors: Christoph P. Wessendorf; Jared Schneider; Martin Arda Gresch; Orestis Terzidis

Addresses: Chair of Entrepreneurship and Technology-Management (EnTechnon), Karlsruhe Institute of Technology (KIT), Karlsruhe, 76133, Germany ' Chair of Entrepreneurship and Technology-Management (EnTechnon), Karlsruhe Institute of Technology (KIT), Karlsruhe, 76133, Germany ' Chair of Entrepreneurship and Technology-Management (EnTechnon), Karlsruhe Institute of Technology (KIT), Karlsruhe, 76133, Germany ' Chair of Entrepreneurship and Technology-Management (EnTechnon), Karlsruhe Institute of Technology (KIT), Karlsruhe, 76133, Germany

Abstract: The valuation of early-stage ventures represents a difficult and often subjective task. In an attempt to operationalise and objectivise valuation of early-stage ventures, thereby reducing uncertainty, we analyse non-financial determinants of early-stage technology venture valuation through means of an analytical hierarchy process (AHP) and a choice-based conjoint analysis (CBC). To achieve meaningful results in a challenging research setting, triangulation methods were applied. The data obtained from 75 venture capital investment professionals enable us to quantify the relative importance of relevant determinants and derive their impact on valuation. Our analysis shows that entrepreneurial spirit is considered the most important determinant for venture capital investors and a key driver of early-stage technology venture valuation. Next, a strong unique selling proposition (USP) impacts value significantly, followed by intellectual property and market growth. Further, our results demonstrate that valuation determinants do not vary significantly by investor type, i.e., business angel or venture capitalist.

Keywords: start-up; NTBF; new technology-based firm; technology venture; valuation; valuation determinants; venture capital; business angel; entrepreneurial finance; AHP; analytical hierarchy process; conjoint analysis; CBC; triangulation.

DOI: 10.1504/IJEV.2020.111536

International Journal of Entrepreneurial Venturing, 2020 Vol.12 No.5, pp.490 - 521

Received: 10 Feb 2019
Accepted: 21 Oct 2019
Published online: 30 Nov 2020 *

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