Identifying and Grading Factors Affecting New Ventures Valuation by Venture Capitalists

Document Type : Research Paper

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Abstract

The new venture valuation is an important issue in the field of venture capital because it determines the ownership percentage of the venture capital in the investee firm. As a result, it is the main challenge in investment negotiations between entrepreneur and potential investors. This study aims to identify and grade factors affecting new ventures valuation by venture capitalists through a descriptive design and qualitative method. The population under this study consists of all venture capital firms. 12 factors were drawn out as the findings of 11 semi-structured interviews with experts of the industry. In the next step, we assessed the influence of each factor on another, by means of interpretive structural modeling (ISM). The factors ‘academic and proficiency background’ and ‘professional experience’ were in the upper level (L4), means the most influential, and ‘bargaining power’ was in the lowst level (L1), means the most dependent. 10 other factors were among other levels.

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