Title: Financial valuation of start-up businesses with and without venture capital

Authors: Michael Lerm; Roland Rollberg; Peter Kurz

Addresses: Lehrstuhl für Allgemeine Betriebswirtschaftslehre und Produktionswirtschaft, Rechts- und Staatswissenschaftliche Fakultät, Ernst-Moritz-Arndt-Universität Greifswald, Friedrich-Loeffler-Straße 70, D-17489 Greifswald, Deutschland. ' Lehrstuhl für Allgemeine Betriebswirtschaftslehre und Produktionswirtschaft, Rechts- und Staatswissenschaftliche Fakultät, Ernst-Moritz-Arndt-Universität Greifswald, Friedrich-Loeffler-Straße 70, D-17489 Greifswald, Deutschland. ' Lehrstuhl für Allgemeine Betriebswirtschaftslehre und Produktionswirtschaft, Rechts- und Staatswissenschaftliche Fakultät, Ernst-Moritz-Arndt-Universität Greifswald, Friedrich-Loeffler-Straße 70, D-17489 Greifswald, Deutschland

Abstract: This paper introduces a three-step model for the financial valuation of business ventures based on the principles of the theory of functional business valuation. It distinguishes between start-up businesses not raising venture capital and those raising venture capital. First of all, the entrepreneur's investment programme has to be optimised ignoring the business venture ('basic programme'). Then, the start-up has to be valued to answer the question, whether it is profitable or not without venture capital ('first valuation programme'). In the third step, the start-up has to be valued once more taking available venture capital into account in order to determine its specific contribution to the value of the new business as a basis for decision making ('second valuation programme').

Keywords: valuation theory; functional business valuation; business start-ups; venture capital; linear programming; entrepreneurship.

DOI: 10.1504/IJEV.2012.048597

International Journal of Entrepreneurial Venturing, 2012 Vol.4 No.3, pp.257 - 275

Received: 06 Nov 2010
Accepted: 14 Mar 2011

Published online: 17 Aug 2012 *

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