R&D Partnership – Audencia and Early Metrics

By Anais Masetti - 07 September 2020

At Early Metrics, we have adopted a rigorous scientific approach to the evaluation of startup growth potential and to early-stage valuation. We also strive to continuously improve our methodology in order to provide the most accurate insights to corporate innovators and equity investors. Meanwhile, over the years we have accumulated data and knowledge which can benefit both the academic community and the innovation ecosystem as a whole.

This is why we have built strong relationships with leading universities and academic bodies across Europe. We are glad to count the renowned business school Audencia among our R&D partners, with which we are conducting important research around startup valuation.

What is the Finance for Innovation Chair?

In April 2018, Audencia brought together various European actors from the innovation and financing landscape under the auspices of the “Finance for Innovation” Chair. The Chair enables the joint production of knowledge and competencies by academic researchers and business professionals.

Early Metrics is proud to be among the founding partners of the Chair, alongside Sowefund (one of France’s leading equity-crowdfunding platforms), Fonds b (endowment fund dedicated to Social Impact Bonds) and the European Investment Fund (public investment fund tied to the European Commission).

The Chair’s work centres around five main themes which embrace both the challenges and opportunities of financing cutting-edge innovation and social impact projects:

  1. Startup valuation, which entails the analysis of components, trends, and particular idiosyncrasies that affect the valuation of young ventures.
  2. Social Impact Bonds, with the objective of better understanding the particular idiosyncrasies and implications of these new social innovation funding mechanisms.
  3. Entrepreneur-Investor relations, in order to better understand the relational mechanisms between the financiers and the financed as well as the impact this could have on startup success
  4. Crowdfunding, which remains a method of financing for which the drivers and success factors have yet to be discovered.
  5. Deep Tech investment, with the aim to characterize and understand particular idiosyncrasies of these fundamental and capital intensive technologies.

How do we collaborate with Audencia?

Early Metrics has primarily been involved in the Finance for Innovation Chair’s study of startup valuation drivers. This research project is led by Benjamin Le Pendeven, professor at Audiencia and co-director of the Chair, and his PhD student Maxens Berre. Our involvement entails the sharing of aggregated and anonymised data from our database of over 3000 rated startups. Our methodology experts also provide feedback to the researchers at every step of the research process.

So far, the study has resulted in a thorough review of the existing literature examining the different types of factors that influence the valuation of a startup. You can learn about the key findings of the systematic literature review via this video series:

The study also received media attention, having been featured in Les Echos Societes and Growth Business UK in relations to the impact of the COVID-19 pandemic on valuation.

What’s next in this partnership?

The next step of the research process is to conduct a qualitative analysis of five case studies. More precisely, the researchers will analyse the equity story of young ventures over several rounds, conducting qualitative interviews with entrepreneurs and investors at different points of their fundraising journey. The results of this stage will be released in the fall of 2020 and will inform the last step of the project.

In the third stage of the study, the researchers will conduct a quantitative analysis of the impact of the relevant factors identified earlier on startup valuation. This analysis is planned to be completed by the end of 2020, with several outputs in the first semester of 2021. The study will be conducted on a rich dataset spanning twenty years and almost 3000 deals completed by about 1660 European startups.

Professor Le Pendeven and Max Berre, with support from our team, will attempt to model the effects of various conditions and factors such as the startup maturity, the type of investors involved, the market size, etc. Among these factors, the impact of the different clauses in the shareholder agreements on valuation will also be investigated, thanks to a unique and hand-collected dataset. This is an aspect of the process which has so far received relatively little attention in the academic and business literature, so we hope to bring to light its implications for startup fundraising.

What do we hope to achieve?

Through this academic partnership with Audencia, we aim to provide valuable contributions to the business community, both in the academic and private sectors. We believe that a greater understanding of the influence of different factors on startup valuation will lead to healthier startup-investor relationships and potentially greater success for promising startups.

We will also take on board the findings of this research into our own startup valuation and rating practices. Indeed, the model that will result from the study could help us consolidate our own models and provide an even more accurate picture of a venture’s potential.

Beyond this study on startup valuation drivers, Early Metrics will continue to share knowledge through the Finance for Innovation Chair’s newsletter and educational channels to further greater awareness of important entrepreneurial and investment dynamics.

If you would like to learn more about our partnership with Audencia or if you would like to collaborate on an R&D project, please contact our VP Operations, Edouard Thibaut: edouard@earlymetrics.com

All articles