The relevance of financial versus non-financial information for the valuation of venture capital-backed firms

S. Sievers, C.F. Mokwa, G. Keienburg, European Accounting Review 22 (2013) 467–511.

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Journal Article | Published | English
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Abstract
This study examines the relevance of financial and non-financial information for the valuation of venture capital (VC) investments. Based on a hand-collected data set on venture-backed start-ups in Germany, we investigate the internal due diligence documents of over 200 investment rounds. We document that balance sheet and income statement items capture as much economic content as verifiable non-financial information (e.g. team experience or the number of patents) while controlling for several deal characteristics (e.g. industry, investment round, or yearly VC fund inflows). In addition, we show that valuations based on accounting and non-accounting information yield a level of valuation accuracy that is comparable to that of publicly traded firms. Further analyses show that the industry-specific total asset multiples outperform the popular revenue multiples but lead to significantly less accurate results than those obtained from the more comprehensive valuation models. Overall, our findings might inform researchers and standard-setters of the usefulness of accounting information for investment companies and provide additional evidence to gauge the overall valuation accuracy in VC settings.
Publishing Year
Journal Title
European Accounting Review
Volume
22
Issue
3
Page
467-511
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Sievers S, Mokwa CF, Keienburg G. The relevance of financial versus non-financial information for the valuation of venture capital-backed firms. European Accounting Review. 2013;22(3):467-511. doi:10.1080/09638180.2012.741051
Sievers, S., Mokwa, C. F., & Keienburg, G. (2013). The relevance of financial versus non-financial information for the valuation of venture capital-backed firms. European Accounting Review, 22(3), 467–511. https://doi.org/10.1080/09638180.2012.741051
@article{Sievers_Mokwa_Keienburg_2013, title={The relevance of financial versus non-financial information for the valuation of venture capital-backed firms}, volume={22}, DOI={10.1080/09638180.2012.741051}, number={3}, journal={European Accounting Review}, publisher={Taylor \& Francis}, author={Sievers, Sönke and Mokwa, Christopher F and Keienburg, Georg}, year={2013}, pages={467–511} }
Sievers, Sönke, Christopher F Mokwa, and Georg Keienburg. “The Relevance of Financial versus Non-Financial Information for the Valuation of Venture Capital-Backed Firms.” European Accounting Review 22, no. 3 (2013): 467–511. https://doi.org/10.1080/09638180.2012.741051.
S. Sievers, C. F. Mokwa, and G. Keienburg, “The relevance of financial versus non-financial information for the valuation of venture capital-backed firms,” European Accounting Review, vol. 22, no. 3, pp. 467–511, 2013.
Sievers, Sönke, et al. “The Relevance of Financial versus Non-Financial Information for the Valuation of Venture Capital-Backed Firms.” European Accounting Review, vol. 22, no. 3, Taylor \& Francis, 2013, pp. 467–511, doi:10.1080/09638180.2012.741051.

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