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

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Abstract

How do business-cycles impact startup-valuations? While several studies explore VC startupecosystems 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 venturecapital 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.
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hal-03872889 , version 1 (25-11-2022)

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Max Berre, Benjamin Le Pendeven. Business-cycles and Cash-on-Market: Pre-money Startup Valuation in the Macroeconomic Environment. 2022 Entrepreneurial Finance (ENTFIN) Annual Meeting, Sep 2022, Bath, United Kingdom. ⟨hal-03872889⟩

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