Decoding Startup Valuation: The Interplay of Founder, Firm, Industry, and Investor Dynamics
- Publication Type:
- Thesis
- Issue Date:
- 2026
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Startup valuation is more than just a number; it determines ownership structures, shapes funding negotiations, and aligns expectations between entrepreneurs and investors. However, valuing startups is inherently complex due to limited track records, opaque financials, and the prominence of intangible assets. This thesis revisits the jockey versus horse debate by proposing an expanded Jockey-Horse-Meadows-Trainer framework that integrates founder attributes, firm fundamentals, industry conditions, and investor behaviour respectively, into a unified view of valuation dynamics.
Using a dataset of Indian startups founded between 2000 and 2020 and funded by venture capital investors, the study examines how these dimensions jointly influence valuation and access to funding. Startup success is modelled as the likelihood of achieving higher valuations across successive funding rounds. The findings show that firm fundamentals, particularly leverage, liquidity, and operating efficiency, play a dominant role in sustaining valuation growth. Industry attractiveness exhibits a non-linear relationship with valuation, with diminishing benefits at higher levels. Investor behaviour also shapes outcomes, as overconfident investors assign higher valuations, though this effect is moderated in syndicated investments. The study also highlights a divergence between drivers of funding and valuation growth.
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