Spawning Butterflies — Value Flow across Startup Lifecycle Stages

Startup firms are dynamic entities that undergo fundamental transformations over their lifecycle. Such transformations are the result of value flow to newer firm related factors. However, startup valuation factors are often used fluidly in multi-stage empirical studies resulting in confounding results. The objective of this study is to disentangle determinants of startup valuation across the early-stages and late-stages of a startup's lifecycle. By doing so, the study identifies valuation factors that increase, decrease or maintain relevance across lifecycle stages. We conducted literature survey of entrepreneurship studies that analyzed startup valuation and its determinants and carefully classified these into early-stage and late-stage factors. By seeking stagewise interpretations, we introduce the 'relevance hierarchy' for valuation factors across lifecycle stages. We uncover persistent and volatile factors, i.e. some factors persistently affect firm valuation while others exhibit volatility in its effects. For practitioners, we derive a metamodel of startup valuation that is unique to the two lifecycle stages – early-stage and late-stage. The main contribution of this study is in conducting the literature review on startup valuation through the 'looking glass' of lifecycle stage and this vantage point will allow practitioners to develop focused models of valuation that avoid confounding effects.