Research Question: Usually When a Startup is being Funded or Acquired or Merged with other Startup, Funders do the Valuation of the Firm.Several FactorsEffect the Valuation of a Firm. Sometimes, it is the Annual Revenue, Sometimes it is the Profit Startup is Making, Sometimes based on the Funding Startup Received over a Period of time (Eg. Flipkart), sometimes based on the Technology, Designs, Patents, Copyrights and Intellectual Property Developed by the Startup, the Valuation of the Firm is Decided. Post 2010, we know how the New Technology, Ecommerce firms gained huge valuations just based on huge VC funding; despite they were loss making firms. Thus, Based on a list of 20 Startups data, as on 2024, the objective of this Data Insight is to find:
- Is there any relationship between Organizational Age, Organizational Revenue, Organizational Profit, Funding Done and the Valuation of the Organization?
- Is there any effect of Organizational Age, Organizational Revenue, Organizational Profits, Funding Done on the Organizational Valuation?
Data Collection: Please consider Table-1 comprising list of 20 startups and their data.
Dependent Variable: Organizational Valuation
Independent Variables: Organizational Age, Organizational Revenue, Organizational Profit, Funding Done.
Table-1: Startups – Age, Revenue, Profit, Funding, Valuation (2024)
| SL. No. | Startup Firm Sector | Age (Years) | Revenue (Crores) | Profit (Crores) | Funding Done (Crores) | Valuation (Crores) |
| 1 | Nuts, Fruits, Berries | 4 | 192.80 | -11.70 | 326 | 1450 |
| 2 | Fashion Brand (Clothes, Youth, Men, Women Wear) | 3 | 168.00 | -28.40 | 127 | 577 |
| 3 | Luxury Furniture | 7 | 130.00 | 1.20 | 260 | 1200 |
| 4 | Silver Jewellery | 3 | 84.60 | -19.10 | 460 | 1050 |
| 5 | Coffee Shop Chain | 8 | 75.00 | -12.20 | 360 | 500 |
| 6 | Online/Offline Retailing | 2 | 41.90 | -17.10 | 165 | 500 |
| 7 | Generic Medicines (e-pharmacy) | 3 | 53.10 | -15.30 | 210 | 580 |
| 8 | Used 2-Wheeler Seller | 7 | 23.00 | 20.00 | 275 | 221 |
| 9 | Online Gifting Flower Shop | 9 | 435.00 | 11.50 | 201 | 2520 |
| 10 | Ecommerce to Rural | 10 | 237.00 | -27.00 | 248 | 900 |
| 11 | Colleges Admissions Portal | 7 | 84.00 | -60.00 | 400 | 1400 |
| 12 | Skill Development-Make Students Industry Ready | 3 | 25.00 | -32.00 | 411 | 5310 |
| 13 | EdTech Learning Startup-Employability | 2 | 10.00 | -42.80 | 145 | 395 |
| 14 | K-12 Education (online) | 6 | 15.00 | -179.00 | 370 | 1200 |
| 15 | Online Children Education | 6 | 9.80 | -25.00 | 293 | 798 |
| 16 | Real Estate Investment Platform | 7 | 2.00 | -5.08 | 384 | 1280 |
| 17 | Financial Infra, Automation, FinTech | 4 | 5.00 | 4.20 | 124 | 490 |
| 18 | Educational Loans (FinTech) | 4 | 33.00 | -5.90 | 290 | 724 |
| 19 | Working Capital Provider (FinTech) | 5 | 18.60 | -11.20 | 450 | 1180 |
| 20 | Alternate Financing App-Corp.Loans (FinTech) | 3 | 5.80 | -3.00 | 315 | 240 |
(Source: Outlook Business Magazine, April 2024)
Apply Statistics: after applying Correlation and Regression techniques on the above table, Correlation Matrix is Presented in Table-2 and Regression Matrix is Presented in Table-3.
Table-2: Correlation Matrix
| Age (Years) | Revenue (Crores) | Profit (Crores) | Funding Done (Crores) | Valuation (Crores) | |
| Age (Years) | 1 | ||||
| Revenue (Crores) | 0.480855 | 1 | |||
| Profit (Crores) | 0.021441 | 0.19391 | 1 | ||
| Funding Done (Crores) | 0.174754 | -0.23156 | -0.22027 | 1 | |
| Valuation (Crores) | 0.040031 | 0.219024 | -0.09034 | 0.36343 | 1 |
Table-3: Regression Table
| SUMMARY OUTPUT | ||||||||
| Regression Statistics | ||||||||
| Multiple R | 0.535196 | |||||||
| R Square | 0.286435 | |||||||
| Adjusted R Square | 0.096151 | |||||||
| Standard Error | 1066.699 | |||||||
| Observations | 20 | |||||||
| ANOVA | ||||||||
| df | SS | MS | F | Significance F | ||||
| Regression | 4 | 6851211 | 1712803 | 1.505302 | 0.250509 | |||
| Residual | 15 | 17067702 | 1137847 | |||||
| Total | 19 | 23918914 | ||||||
| Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% | |
| Intercept | -232.275 | 842.086 | -0.27583 | 0.78644 | -2027.14 | 1562.589 | -2027.14 | 1562.589 |
| Age (Years) | -131.908 | 123.9834 | -1.06392 | 0.304193 | -396.173 | 132.356 | -396.173 | 132.356 |
| Revenue (Crores) | 5.06655 | 2.818666 | 1.797499 | 0.092413 | -0.94129 | 11.07439 | -0.94129 | 11.07439 |
| Profit (Crores) | -1.80104 | 6.175952 | -0.29162 | 0.77457 | -14.9648 | 11.36269 | -14.9648 | 11.36269 |
| Funding Done (Crores) | 5.429945 | 2.567763 | 2.11466 | 0.05161 | -0.04311 | 10.903 | -0.04311 | 10.903 |
Research Findings:
- From Table-2, it is evident that There is close to Strong Relation between Age of the Firm and the Organizational Revenue. (correlation: 0.480855)
- Age of the Firm is very little to do with Valuation of the Firm. Very weak relationship.
- The Important Finding is, There is no relationship between Funding done and Revenues gained by the firm (negative correlation). We observed this specific phenomenon experienced by several ecommerce firms in industry.
- Revenue and Profit have Positive correlation; Similarly, Firm Valuation is also Positively Related to firm Revenue.
- Among Organizational Age, Organizational Revenue, Organizational Profit and Funding Done; Funding Done is comparatively strongly correlated to Organizational Valuation. This is very much true with respect to 21st century startups in India (funded by several venture capital firms)
- Coming to Knowing the Effect on Organizational Valuation; here also Funding done has relative effect on Organizational Valuation to compare with Other independent Variables. (based on regression result).
Usually, these startup valuation questions come to the minds of young entrepreneurs, and business learners. Now, we have seen with a sample of 20 startups data and the relationships between these variables. In Summary, Organizational Valuation is very little to do with age, revenues and profits; majorly in current days, Organizational valuation is dominated by the amount of funding went into it. This is true in case of current day startups.
Hope this is useful. Thank You.
Best Wishes,
Dr.Goparaju Purna Sudhakar
References:
- Data Source: Outlook Business Magazine, April 2024