Factors Affecting Valuation of Startups: Evidence from "Unicorn" Companies

This study examines a group of factors influencing the consensus post-money valuation of unicorn companies. The work uses empirical methods to study the correlation between such groups of factors as: a group of factors related to the investor, founder or team of founders, and the degree of media startup and the activity of its presence on the Internet, as well as the characteristics of the company as a whole. These dependencies are modeled on the basis of a sample of 216 companies, information about which was extracted from various sources: CrunchBase, CB Insight, Twitter and Yahoo Finance. The main conclusion of this work is the presence of a significant effect of each of the categories of factors on the assessment of a startup due to the fact that the direct financial analysis of the company is complicated by the ambiguity of future flows, as well as by the private capital structure. To evaluate the model, the FGLS method was used, which solves the problem of heteroskedasticity and gives more effective estimates in comparison with alternatives. Econometric analysis also uses a significant group of controls: indices, company revenue level, coded variable for technology companies, as well as the number of rounds of venture financing until the date of the announcement of the evaluation. The results obtained are resistant to changes in the proxy value of the company, as well as to changes in valuation methods, coupled with variable sets of control variables. From a practical point of view, this work shows the influence of various factors on the company's valuation and will be useful for late financing funds before entering the public market for adjusting internal financial valuation methods. Also, the results of this work will be useful for regulatory authorities, such as central banks, in view of the need to regulate the assessment of startups and limit inflating the cost of companies