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New Venture Valuation by Venture Capitalists: An Integrative Approach

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  • Ge, Dingkun

    (San Francisco State U)

  • Mahoney, James M.

    (Federal Reserve Bank of New York)

  • Mahoney, Joseph T.

    (U of Illinois at Urbana-Champaign)

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    Abstract

    How to valuate accurately a new venture is a critical and under-researched question in entrepreneurial financing. Leveraging established theories in strategic management, this research study develops an integrative theoretical framework to examine whether venture capitalists' valuation of a new venture can be explained by variables identified in the strategy literature as important to predicting firm-level economic performance. A systematic linkage between well-developed theories in strategy and venture capital valuation practice are corroborated empirically. This research study proposes a complementary method to extant valuation methods to valuate a new venture.

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    File URL: http://www.business.illinois.edu/Working_Papers/papers/05-0124.pdf
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    Bibliographic Info

    Paper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number 05-0124.

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    Date of creation: 2005
    Date of revision:
    Handle: RePEc:ecl:illbus:05-0124

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    Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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    3. Siegel, Robin & Siegel, Eric & Macmillan, Ian C., 1993. "Characteristics distinguishing high-growth ventures," Journal of Business Venturing, Elsevier, vol. 8(2), pages 169-180, March.
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    6. Zacharakis, Andrew L. & Meyer, G. Dale, 1998. "A lack of insight: do venture capitalists really understand their own decision process?," Journal of Business Venturing, Elsevier, vol. 13(1), pages 57-76, January.
    7. Rah, Joongdoug & Jung, Kyungjin & Lee, Jinjoo, 1994. "Validation of the venture evaluation model in Korea," Journal of Business Venturing, Elsevier, vol. 9(6), pages 509-524, November.
    8. Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
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    17. Macmillan, Ian C. & Zemann, Lauriann & Subbanarasimha, P. N., 1987. "Criteria distinguishing successful from unsuccessful ventures in the venture screening process," Journal of Business Venturing, Elsevier, vol. 2(2), pages 123-137.
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    20. Dean A. Shepherd, 1999. "Venture Capitalists' Assessment of New Venture Survival," Management Science, INFORMS, vol. 45(5), pages 621-632, May.
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    22. Hoang, Ha & Antoncic, Bostjan, 2003. "Network-based research in entrepreneurship: A critical review," Journal of Business Venturing, Elsevier, vol. 18(2), pages 165-187, March.
    23. Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, vol. 50(1), pages 301-18, March.
    24. Mechner, Fracis, 1989. "Present certainty equivalents and weighted scenario valuations," Journal of Business Venturing, Elsevier, vol. 4(2), pages 85-92, March.
    25. Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November.
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    27. Hall, John & Hofer, Charles W., 1993. "Venture capitalists' decision criteria in new venture evaluation," Journal of Business Venturing, Elsevier, vol. 8(1), pages 25-42, January.
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    Cited by:
    1. Van Deventer, Bart & Mlambo, Chipo, 2008. "Factors influencing venture capitalists' project financing decisions in South Africa," MPRA Paper 24970, University Library of Munich, Germany, revised 28 Feb 2009.
    2. Block, Joern H. & De Vries, Geertjan & Schumann, Jan H. & Sandner, Philipp, 2014. "Trademarks and venture capital valuation," Journal of Business Venturing, Elsevier, vol. 29(4), pages 525-542.

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