ENHANCING STARTUP VALUATION THROUGH SUSTAINABILITY

Abstract

Young, agile, innovative are some adjectives that can be used to describe startups. Known to disrupt and change markets they are also early adopters of cutting-edge practices. However, startups do have a very low success rate and a major reason is the lack of funds. Startups operate with limited assets and visibility on profit margins. Investors secure their investment based on the reputation and credit worthiness of startup founders or valuation methods. A pivotal question is, are there missing variables in these valuation approaches? The answer is, ‘Sustainability’. Today there is a need for greater accountability on sustainability in businesses and sustainable funding too is increasing. Startups with a sustainable approach can be more attractive to investors. This paper proposes for startups to adapt a sustainable first approach not only in meeting societal demands but also to enhance the startup’s value. Sustainable valuation will help founders and investors alike in identifying long-term benefits of a startup’s sustainable approach.