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Risk-Based New Venture Valuation Technique: Win-Win for Entrepreneur and Investor

Author

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  • Vara Whittington P.

    (Center of Entrepreneurship Innovation, University of Florida, Gainesville, FL 32611-7168, USA)

Abstract

New ventures that lack a financial history and have a future that is not only unknown, but may be unknowable pose unique problems to the investment community. Since conventional valuation techniques do not work in these cases, entrepreneurs and investors resort to techniques that rely more on art than finance. Although a reduction in information asymmetry usually leads to an agreement between two parties, the methods the entrepreneur or investor use to value a new venture tend to increase this information gap. The author proposes a logical, systematic risk-based new venture valuation technique that reduces information asymmetry during this process.

Suggested Citation

  • Vara Whittington P., 2013. "Risk-Based New Venture Valuation Technique: Win-Win for Entrepreneur and Investor," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 8(1), pages 1-26, January.
    • Handle: RePEc:bpj:jbvela:v:8:y:2013:i:1:p:1-26:n:2
    DOI: 10.1515/jbvela-2013-0007
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    References listed on IDEAS

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    1. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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    Cited by:

    1. Scott A. Jeffrey & Moren Lévesque & Andrew L. Maxwell, 2016. "The non-compensatory relationship between risk and return in business angel investment decision making," Venture Capital, Taylor & Francis Journals, vol. 18(3), pages 189-209, July.

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