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ALMANZA DM Dissertation.pdf (1.72 MB)

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Heuristics and Bias in New Venture Valuations

Almanza Rueda, Luis Miguel
http://orcid.org/0000-0002-6546-3677
http://rave.ohiolink.edu/etdc/view?acc_num=casedm1653053486518241

Abstract Details

2022, Doctor of Management, Case Western Reserve University, Weatherhead School of Management.
For many early-stage investors, startup valuations are more than science. Due to the information asymmetry, uncertainty, and risk involved, valuations are complex to understand and perform. This mixed-method study explores how investors value new tech ventures when they cannot use analytical methods. We open-ended interviewed fifty-eight investors and analyzed nine hundred seed investment rounds between 2010 and 2020 around the globe. Using qualitative and quantitative techniques, we found that investors are limited in using valuation methods, leaving the valuation process to investor intuition, mental models, prior assumptions, and judgment, causing mental shortcuts and cognitive biases to distort the process. The scarcity effect, signaling, herd mentality, and impact of stereotypes such as entrepreneur ́s school attended, race, gender, and region were found as variables that affect the startup valuation and money raised. Such results are supported by the behavioral economics literature and bring attention to a different perspective to understand a startup's valuation by analyzing the investor behavior.
Yunmei Wang, Ph.D. (Advisor)
Avi Turesky, Ph.D. (Advisor)
Corinne Cohen, Ph.D. (Advisor)
Phil Cola, Ph.D (Advisor)
Sharon Sanger, Ph.D (Advisor)
Jackie Stavros, DM (Advisor)
Roman Sheremeta, Ph.D. (Advisor)
137 p.
Behavioral Sciences; Entrepreneurship; Finance
startup; valuation; cognitive bias; heuristics; behavioral economics

Recommended Citations

Citations

  • Almanza Rueda, L. M. (2022). Heuristics and Bias in New Venture Valuations [Doctoral dissertation, Case Western Reserve University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=casedm1653053486518241

    APA Style (7th edition)

  • Almanza Rueda, Luis. Heuristics and Bias in New Venture Valuations. 2022. Case Western Reserve University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=casedm1653053486518241.

    MLA Style (8th edition)

  • Almanza Rueda, Luis. "Heuristics and Bias in New Venture Valuations." Doctoral dissertation, Case Western Reserve University, 2022. http://rave.ohiolink.edu/etdc/view?acc_num=casedm1653053486518241

    Chicago Manual of Style (17th edition)

casedm1653053486518241
527
© 2022, all rights reserved.
This open access ETD is published by Case Western Reserve University Doctor of Management and OhioLINK.