Startup valuation by industry and patterns emergent an analysis of venture intelligence data

Abstract

Our goal as a part of this study is to critically analyse as well as determine the attractiveness of industries amenable to investment in the past, and to derive insights and allow for further investment in the future. While most literature surrounding investment by venture capitalists in the past emphasizes qualitative factors of evaluation, like the backgrounds of the founders and the size of the VCs and the hype surrounding the sector overall, we try as a part of this study to bring out the importance of several quantitative factors. Primarily our study hinges on the study of network effects in industries, around two major parameters, the amount invested by the VC for a 1% stake in the company, in effect the valuation of the company, and the revenue multiple of the VC investment, in effect the cash generation ability of the company. These two factors are studied for variations across industries in general, and overall trends found for the entire industry.