Startups Valuation in a Rapidly Evolving Entrepreneurial Landscape: A Systematic Review

Introduction

The world has seen an unparalleled rise in innovation and entrepreneurship in recent years, driven by changes in market dynamics, technological advancements, and a growing desire for disruption. As the number of new businesses is rapidly growing, the market share for managerial and growth finance (Ewens and Farre-Mensa, 2020). The valuation of a startup is dynamic, influenced by market sentiment and trends. The startup landscape is evolving rapidly since my last knowledge update in September 2021, with an increasing focus on sustainable growth and profitability. This period of renewed entrepreneurship has resulted in the emergence of various startups, encompassing both creative technology-based businesses and sustainability-oriented businesses. But for these young businesses to succeed, they must make their way through the grounds of startup valuation.

Startup valuation is an important aspect of entrepreneurship that not only influences investment decisions but also sets the stage for these ventures' future growth and sustainability. It is the process of ascertaining a startup's intrinsic value, that provides stakeholders with a foundation for making informed decisions, whether for fundraising, acquisition, or strategic planning. Valuing startups is an important and miscellaneous undertaking with far-reaching implications. Investors rely on it to allocate resources wisely, entrepreneurs rely on it to negotiate fair and sustainable financing conditions, and policymakers recognize its role in economic development. In addition to these considerations, the assessment process also has the potential to unlock the growth potential of startups by providing a roadmap for strategic decision making and resource allocation. Startup valuation is critical for attracting investors, making strategic decisions, and determining a venture's potential success. As a result, the rise of entrepreneurship, innovation and entrepreneurship have become synonymous.

To attract money from angel investors, venture capitalists, and other funding sources, accurately evaluating startups is crucial. Good startups often face stiff competition to raise capital, and high valuations are key to attracting investors. According to a Pitchbook report [Pitchbook - “Venture Monitor 4Q 2020”], venture capital investments in startups reached $288 billion in the United States alone in 2020, highlighting the significant impact of startup price in terms of capital allocation.

According to PwC (2017), the technology sector is growing at twice the rate of the global economy, currently estimated to be more than 7%. It is impossible to overestimate the rapid expansion of startups in terms of result, sales, and valuation. Startups are seen as a means of capitalizing on the exponential growth in wealth and innovation that is being produced by technology. a strategy for early-stage software companies: StartCards focuses on assisting such startups in determining whether their idea is worth pursuing in the first place, as working on an idea without validating it through customer involvement is risky.

Raising capital is essential for technology and innovation startups seeking rapid growth and scale (Deeds et al., 1997; Fisch, 2019; Kotha and George, 2012; Rosenbusch et al., 2013). Human and social capital, as well as the new capabilities of venture capital groups, are expected to significantly boost start-up performance and attract investment (Dimov et al., 2007; Vogel et al. events, 2014; Zarutskie, 2010). We highlight the role of ethnic diversity in startup teams by focusing on groups of employees working in established organizations. Employee groups established by management decision have different motivations and goals than startup groups. In terms of capital raised, ethnic diversity is a key factor in the success of new businesses, supporting the “diversity is an advantage” theory.