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This paper aims to explain the fundraising and valuation processes of startups and discuss the conflicts of interest between entrepreneurs, venture capital (VC) firms and stakeholders in the context of startup corporate governance. Further, this paper uses the examples of WeWork and Zenefits to explain how a failure of stakeholders to demand an external audit from an independent accounting firm in early stages of funding led to an opportunity for fraud.

The methodology used is a literature review and analysis of startup valuation combined with the Fraud Triangle Theory. This paper also provides a discussion of WeWork and Zenefits, both highly visible examples of startup fraud, and explores an increased role for independent external auditors in fraud risk mitigation on behalf of stakeholders prior to an initial public offering (IPO).

This paper documents a number of fraud risks posed by the “fake it till you make it” ethos and investor behavior and pricing in the world of entrepreneurial finance and VC, which could be mitigated by a greater awareness of startup stakeholders of the value of an external audit performed by an independent accounting firm prior to an IPO.

An implication of this paper is that regulators should consider greater oversight of the startup financing process and potentially take steps to facilitate greater independence of participants in the IPO process.

Given the potential conflicts of interest between VC firms, investment banks and startup founders, the investors at the time of an IPO may be exposed to the risk that the shares of the IPO firms are overvalued at offering.

This study demonstrates how startup practices can be extended to the Fraud Triangle and issue a call to action for the accounting profession to take a greater role in protecting the public from startup fraud. This study then offers recommendations for regulators and standards entities.

There are few academic papers in the financial crime literature that link the valuation and culture of startup firms with fraud risk. This study provides a concise explanation of the process of valuation for startups and highlights the considerations for stakeholders in assessing fraud risk. In addition, this study documents an emerging role for auditors as stewards of proper valuation for pre-IPO firms.

This paper provides a structural model to value startup companies and determine the optimal level of research and development (R&D) spending by these companies.

This paper describes a new variant of float-the-money options, which can act as a financial instrument for financing R&D expenses for a specific time horizon or development stage, allowing the investor to share in the startup's value appreciation over that duration. Another innovation of this paper is that it develops a structural model for evaluating optimal level of R&D spending over a given time horizon. The paper deploys the Gompertz-Cox model for the R&D project outcomes, which facilitates investigation of how increased level of R&D input can enhance the company's value growth.

The author first introduces a time-varying drift term into standard Black-Scholes model to account for the varying growth rates of the startup at different stages, and the author interprets venture capital's investment in the startup as a “float-the-money” option. The author then incorporates the probabilities of startup failures at multiple stages into their financial valuation. The author gets a closed-form pricing formula for the contingent option of value appreciation. Finally, the author utilizes Cox proportional hazards model to analyze the optimal level of R&D input that maximizes the return on investment.

The integrated contingent claims model links the change in the financial valuation of startups with the incremental R&D spending. The Gompertz-Cox contingency model for R&D success rate is used to quantify the optimal level of R&D input. This model assumption may be simplistic, but nevertheless illustrative.

Once supplemented with actual transaction data, the model can serve as a reference benchmark valuation of new project deals and previously invested projects seeking exit.

The integrated structural model can potentially have much wider applications beyond valuation of startup companies. For instance, in valuing a company's risk management, the level of R&D spending in the model can be replaced by the company's budget for risk management. As another promising application, in evaluating a country's economic growth rate in the face of rising climate risks, the level of R&D spending in this paper can be replaced by a country's investment in addressing climate risks.

This paper is the first to develop an integrated valuation model for startups by combining the real-world R&D project contingencies with risk-neutral valuation of the potential payoffs.

Organizations increasingly use knowledge arbitrage to stimulate innovation and achieve competitive advantage. However, in knowledge management its use in startups is yet unexplored. This study aims to examine the utilization of knowledge arbitrage by startups, specifically during COVID-19.

This study employed an open-ended essay methodology to explore the drivers and barriers that startups face in utilizing knowledge arbitrage. We collected data from 40 participants to understand the role of knowledge arbitrage in startups’ knowledge management practices.

This study’s findings highlight the significance of knowledge arbitrage for startups. The benefits identified include organizational benefits such as building networks, innovating new products and achieving competitive advantage and financial benefits such as cost reduction and sales growth. The study also identifies several technological and organizational drivers and barriers that startups confront during knowledge arbitrage.

This study contributes to the existing literature on knowledge management by extending our understanding of knowledge arbitrage’s role in startups. Additionally, it sheds light on the importance of knowledge arbitrage for startups and the challenges they face, particularly in a disrupted environment reared by COVID-19. The study provides insights for the scholars and practitioners interested in effective knowledge management in startups.

Most entrepreneurs are continually concerned about their finances. Their companies perhaps not yet profitable, they may have a fear of “running out of dry powder.” These entrepreneurs often have fallen in love with their company's technologies, products, and potential markets, but they require more resources. Invariably these emerging ventures shroud their fear of the grueling capital raising marathon by presenting voluminous business plans to potential investors. They often flaunt their “optimized business models.”” Investors, however, typically want to know why the potential investment is such a good deal. The entrepreneur often wants guidance regarding what to say to whom in a changing financing environment.

In this article, our “Practitioner's Corner” associate editor Joe Levangie collaborates with a long-time colleague Paul Broude to address how businesses should “make their capital-raising initiatives happen.” Levangie, a venture advisor and entrepreneur, first worked with Broude, a business and securities attorney, in 1985 when they went to London to pursue financing for an American startup. They successfully survived all-night drafting sessions, late-night clubbing by the company founder, and even skeet shooting and barbequing at the investment banker's country house to achieve the first “Greenfield” flotation by an American company on the Unlisted Securities Market of the London Stock Exchange. To ascertain how the entrepreneur can determine what financing options exist in today's investing climate, read on.

The purpose of this study is to showcase that the valuation of startups is still considered to be more “art than science”. Moreover, such non-rigorous approaches often lead to valuations, which turn out to be too high, which in turn has become a well-known phenomenon to a broader audience due to shining examples such as We Work. This is reason enough to revisit the important topic of where we stand today with startup valuation procedures and methodologies.

Literature synthesis and exploratory analysis.

While some studies describe sound results about how to assess startups, what the authors found was that many questions remain open or have not been covered at all. This is the reason why the authors needed to apply a substantial amount of reasoning in the analysis of studies, which do not exactly deal with startup companies. The authors provided some interesting impulses for future research.

Based on an original overview of the current state of research about the valuation of startup companies, this paper makes the following principal contribution to both the literature and practice: on the one hand, the authors assess four impact factors on startup values critically; on the other, the authors provide an outlook on promising future research avenues.

Sustainable development research assumes that startups, under extreme financial constraints, cannot sacrifice resources now for benefits later without risking their survival. Furthermore, their non-compliance with environmental regulations adds fuel to the fire. This paper aims to explore the challenges faced by startups in resource-scarce economies and the innovative ways of coping with these challenges.

The data for the study was collected through 17 semi-structured interviews taken from startup owners and industry experts based in Pakistan and Bangladesh. The transcribed data were coded through NVivo 12 and themes were generated by merging 47 open and 14 axial codes.

The findings show that a lack of government support and lack of organisational readiness and motivation significantly affect startups’ frugal eco-innovation. Empirical evidence reveals problems related to the business ecosystem, and internal organisational issues also contribute to challenges faced by startups in attaining a competitive position in the industry.

The study’s findings suggested leveraging dynamic capabilities can help lean startups in frugal eco-innovation. Furthermore, organisational cohesion, business ecosystem, government regulations and assistantship, organisational mismanagement and market realisation are decisive in startups’ competitive position in emerging economies.

The findings of the study will result in a higher adoption rate of more competitive business models, and hence, startups’ sustainability. The results would be an effective and efficient deployment of sustainable technological solutions, creating more customer and shareholder value leading to economic growth.

This research offers a comprehensive analysis of frugal eco-innovative startups by exploring the interplay between different challenges and organisational capabilities. Furthermore, the study contributes to the existing body of knowledge by providing empirical evidence that eco-innovation can be conducted in a resource-constrained environment. This study challenged the scholarly and managerial assumption of the availability of finances as a significant player in eco-innovation. The study also links the Darwin theory of startups to a competitive edge over rivals for startups’ survival.

While different attempts have been made to use artificial intelligence (AI) to codify communicative behaviors and analyze startups’ video presentations in relation to crowdfunding projects, less is known about other forms of access to entrepreneurial finance, such as video pitches for candidacies into startup accelerators and incubators. This research seeks to demonstrate how AI can enable the startup selection process for both entrepreneurs and investors in terms of video pitch evaluation.

An AI startup (Speechannel) was used to predict the outcomes of startup video presentations by analyzing text, audio, and video data from 294 video pitches sent to a leading European startup accelerator (LUISS EnLabs). 7 investors were also interviewed in Silicon Valley to establish the differences between humans and machines.

This research proves that AI has profound implications with regards to the decision-making process related to fundraising and, in particular, the video pitches of startup accelerators and incubators. Successful entrepreneurs are confident (but not overconfident), engaging in terms of speaking quickly (but also clearly), and emotional (but not overemotional).

This study not only fills the existing research gap but also provides a practical guide on AI-driven video pitch evaluation for entrepreneurs and investors, reshaping the landscape of entrepreneurial finance thanks to AI. On the one hand, entrepreneurs could use this knowledge to modify their behaviors, enabling them to increase their likelihood of being financially backed. On the other hand, investors could use these insights to better rationalize their funding decisions, enabling them to select the most promising startups.

This paper makes a significant contribution by bridging the gap between theoretical research and the practical application of AI in entrepreneurial finance, marking a notable advancement in this field. At a theoretical level, it contributes to research on managerial decision-making processes – particularly those related to the analysis of video presentations in a fundraising context. At a practical level, it offers a model that we called the “AI-enabled video pitch evaluation”, which is used to extract features from the video pitches of startup accelerators and incubators and predict an entrepreneurial project’s success.

The role of patents for appropriating (capturing) value from innovation investments has for decades been of major interest to both practitioners and academics in innovation management. Many studies have implicitly assumed that firms appropriate value through in-house creation and marketing of innovative products and services, and that the main function of patents is to protect the exclusive sales in product and service markets. We challenge this assumption in light of the variety of business models, strategies and markets now being available, including different organizational and market forms of open innovation.

A conceptual framework and typology of open innovation markets is developed, and the role of patents for appropriation is investigated in these markets among 172 Swedish technology-based firms.

The results show that the importance of patents has a skewed distribution with some firms rating patents very important and with a fat tail of firms rating patents less important. Most importantly, the results indicate that patents are enabling exchange and technology trade in various types of open innovation markets rather than only supporting vertically integrated business models. Thus patents were found to help rather than hinder the use of open innovation markets.

The paper makes two main contributions. First a theoretical reinterpretation of open innovation with a conceptualization of open innovation markets for appropriation of innovation values. Second an empirical illustration of new roles of patents for appropriating innovation values in these markets. The paper in addition illustrates the use of a counterfactual approach to questionnaire surveys, as well as the complementarities between patents and other means of appropriation.

The purpose of this study is to understand and analyze the key topics on which scholars have engaged in relation to crowdfunding and its starring role in the Gulf Cooperation Council (GCC) countries from an Islamic perspective. A Structured Literature Review (SLR) is used in this study to assess how scholars carried out their studies in order to better understand future research directions.

The study adopted a SLR methodology and considered 89 peer-reviewed studies published between 1981 and 2021 in GCC countries.

The study identified the starring role of crowdfunding from the Islamic perspective, its role in economic development and its role as a source of finance for new business startups in GCC countries.

Because the research was conducted by a single person, his subjective interpretation might have an impact on the results. Furthermore, only journal papers limited to GCC and published between 1981 and 2021 were examined.

Countries in GCC might recognize the starring role of crowdfunding for their SMEs and economic development.

The authors draw avenues for future research by considering the starring role of crowdfunding using SLR from the Islamic perspective. This helps future researchers to identify the starring role of crowdfunding to contextualize in GCC countries.