The valuation of young technology startups, often referred to as new technology-based firms (NTBFs), poses significant challenge due to their inherent complexity and uncertainty. These firms are typically characterized by limited profitability, high growth potential and a reliance on intangible assets – factors that often render traditional valuation methods insufficient. This study aims to explore the challenges and effective approaches for the valuation of NTBFs using a qualitative research approach.
The methodology involved conducting semi-structured expert interviews with professionals from leading management consultancies and corporate venture capital firms, each possessing substantial experience in valuation and investment decision-making.
The findings indicate that commonly used valuation methods, such as the discounted cash flow model and the multiples method, are widely applied but exhibit notable limitations. This research highlights the importance of combining valuation methods, integrating complementary non-financial information and considering strategic factors to improve the accuracy and transparency of valuations.
This study underscores the necessity of tailoring valuation approaches to the company’s life cycle stage, triangulating value estimates by combining different methods and prioritizing transparency to address subjectivity. The paper provides a nuanced understanding of NTBF valuation and offers actionable insights for practitioners seeking to navigate the complexities of valuing young technology firms.
