| Pub. Date | : Jan, 2023 |
|---|---|
| Product Name | : The IUP Journal of Applied Economics |
| Product Type | : Article |
| Product Code | : IJAE30123 |
| Author Name | : Gaurav Barick and P S Aithal |
| Availability | : YES |
| Subject/Domain | : Economics |
| Download Format | : PDF Format |
| No. of Pages | : 15 |
The study intends to analyze the role of pre-money valuation determinants in the valuation of startups and in predicting unicorns. Secondary data was collected from Indian startups of different sizes-decacorns, unicorns, early-stage startups, minicorns and soonicorns. The initial sample consisted of 3,342 completed deals between 2010 and 2022. In addition, 9 independent variables representing firm characteristics and funding determinants were considered, with pre-money valuation as the dependent variable. Multiple regression and binary logistic regression were applied to predict the value of 9 determinants and compare the pre-money valuation of the two groups, unicorns/decacorns with early-stage/minicorn/soonicorn, respectively. The results from multiple regression highlighted that the variables such as total funding raised to date, funding type/series, annual revenue, funding round, latest funded amount, and stake acquired have a significant impact on the pre-money valuation of Indian startups. The results of binary logistic regression also highlighted that the unicorn/decacorn group had raised higher total funding in a short period than the other group. .
India has emerged as the third largest startup ecosystem, witnessing exponential growth in the past seven years across 56 industrial sectors, including IT (13%), healthcare and life sciences (9%), education (7%), agriculture, professional and commercial services and food and beverages (5% each). Government of India's (GoI) recent data revealed that out of a total of 72,993 startups, 65 are unicorns (valued at over $1 bn), especially during the pandemic in 2020-21, following the rise in increased smartphone user base, digital payments ecosystem and digital-first business model (GoI, 2022). Therefore, till 2022, India saw the birth of 107 unicorns valued at $340.79 bn, of which 44 unicorns valued at $93 bn emerged in 2021, and 21 valued at $26.99 bn in 2022 (GoI, 2022). Investors played a crucial role in the rise of the Indian unicorns, as is evident from the 82.8% increase in funding deals (891) in H1 2022 from the previous year (541).