Valuing an Entrepreneurial Enterprise

Entrepreneurs generally lack the marketing capabilities necessary to bring their new product to market. To engage the resources required to do this, they must somehow place a value on the enterprise. However, all of the methods of valuation currently available are based on the use of historical or current revenues, and therefore are not applicable to an entrepreneurial enterprise with a first-time product. In Valuing an Entrepreneurial Enterprise, Audretsch and Link present a valuation method uniquely tailored to emerging technology-based ventures that have no revenue history to lean on. Unlike many traditional methods, theirs does not take into account the track record of companies and products similar to that being valuated. Instead, it draws on economic theory to formulate a solution to the problem. The book develops conceptual ground, including trends in entrepreneurship, models of innovation, and the economics of standards and entrepreneurship policy. The authors review the traditional valuation methods and illustrate them numerically with case studies to show how the traditional approach produces an incorrect valuation. The core of the book presents the new methodology and demonstrates how it avoids the pitfalls of past approaches. The authors also show how public policy on technology and infrastructure changes valuations of start-up firms in areas such as stem-cell products and renewable fuels projects. Valuing an Entrepreneurial Enterprise will serve as a valuable resource for advanced students, economists, financial planners, and valuators interested in new valuation methods and the theory behind them, as well as those interested in entrepreneurship.

About the Authors. Introduction. Innovative Activity: Alternative Economics Frameworks and Policy Approaches. Valuation Methods: Tools of the Trade. Traditionally Used Valuation Methods. Applications of Traditionally Used Valuation Models. Alternative Approaches to the Valuations of Video, Inc.. Toward a Method for Valuing an Entrepreneurial Enterprise. Valuation of Metal Brothers, Inc.. Concluding Statement. References. Index.

David B. Audretsch is Distinguished Professor, Ameritech Chair of Economic Development, and Director of the Institute for Development Strategies at Indiana University. Albert N. Link is Professor of Economics at the University of North Carolina at Greensboro and Editor-in-Chief of the Journal of Technology Transfer.