The IUP Journal of Applied Finance
Startup Valuation Determinants and Characteristics in Advanced and Emerging Economies: A Strategic Theory Perspective

Article Details
Pub. Date : Jan, 2024
Product Name : The IUP Journal of Applied Finance
Product Type : Article
Product Code : IJAF030124
Author Name : Gaurav Barick and P S Aithal
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 17



Although there has been a significant rise in high-valued unicorns from emerging economies, especially China and India, unicorns from advanced economies have witnessed maximum exits. Therefore, the study intends to explore whether there are any differences in pre-money valuation determinants of startups of emerging and advanced economies. In addition, the study also reflects the differences in valuation characteristics between unicorns/decacorns and earlystage/ minicorn/soonicorn firms. The findings of multiple and binary logistic regressions suggest that pre-money valuation determinants like annual revenue, funding round, country, number of years after receiving the latest funding, latest funding amount and stake acquired are significant in predicting unicorns. In addition, startups from advanced economies get a higher valuation than their counterparts from emerging economies. Therefore, the study involves practical and theoretical implications for policymakers, founders, investors and researchers for enhancing the valuation of startups from emerging economies and enabling seed-stage startups to emerge as unicorns with successful exits.


With globalization in full swing, new business ideas are not restricted just to industrialized countries. Countries like India, Singapore, South Korea, Israel, Kenya and Brazil have emerged as startup hotspots through government-driven efforts and a growing private financing ecosystem, attracting entrepreneurs and investors alike (WEF, 2020a). Data for emerging and advanced economies from Statista and PwC show that 74% of startups' value was concentrated in the top 10 performing cities worldwide in 2020. Similarly, 30% of top global startup ecosystems are situated in the Asia-Pacific region consisting of most emerging economies, and China houses the most highly valued unicorns globally, surpassing the United States (WEF, 2022).

Similarly, the list of global unicorn companies is dominated by China, Indonesia, India, Australia, the United Kingdom, and US (CB Insights, 2022b). Consequently, the literature emphasizes that the traditional segregation of economies is quickly disappearing with globalization, and rapid ICT development is accelerating the transmission and use of information and knowledge (Dicken, 2015; and Skala, 2018). The combination of these forces is transforming the way of living, redefining the course of business across every economic