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

Author

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  • Max Berre

    (Audencia Business School, Laboratoire de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon, Université de Lyon, UJML - Université Jean Moulin - Lyon 3 - Université de Lyon)

  • Benjamin Le Pendeven

    (Audencia Business School)

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.

Suggested Citation

  • Max Berre & Benjamin Le Pendeven, 2022. "Business-cycles and Cash-on-Market: Pre-money Startup Valuation in the Macroeconomic Environment," Post-Print hal-03872889, HAL.
    • Handle: RePEc:hal:journl:hal-03872889
    Note: View the original document on HAL open archive server: https://hal.science/hal-03872889
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    References listed on IDEAS

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