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"New Venture Valuation by Venture Capitalists: An Integrative Approach"

Dingkun Ge, James M. Mahoney, and Joseph T. Mahoney


First Author :

Dingkun Ge
College of Business
Assistant Professor, San Francisco State University
1600 Holloway Avenue
San Francisco, CA 94132-1722


Second Author :

James M. Mahoney
Economist, Federal Reserve Bank of New York
33 Liberty Street
New York, NY 10045


Third Author :

Joseph T. Mahoney
University of Illinois at Urbana-Champaign, College of Business
Professor of Strategic Management
Department of Business Administration
1206 S. Sixth Street
Champaign, IL 61820


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 capitalistsí 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.
Keywords :
Entrepreneurial Finance, Valuation, Venture Capital Investment
Footnotes & Acknowledgements :
We thank Rajshree Agarwal, Mark Glennon, Glenn Hoetker, Yasemin Kor, Jeffrey Krug, Huseyin Leblebici, Steven Michael, Bob Valli, and Zhijie Xiao for comments on an earlier draft of this paper. The usual disclaimer applies. The opinions expressed in this paper are those of the authors and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System.
Manuscript Received : 2005
Manuscript Published : 2005
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