MA Thesis

Startup Success Prediction. Example From The US



Published in:

Kyiv School of Economics


startup success predictions

Initially, the idea of this work is to define the factors that influence the private company’s probability to become successful. In this work, a successful company is the one that achieved unicorn status. The term "unicorn" was firstly mentioned by Aileen Lee (Brown and Wiles, 2015) and outlines companies that: raised money via at least one funding round; have always been privately held; are not a division of publicly-traded companies; have their market value of one billion USD or more. Often "unicorns" are the companies, which provide disruptive technology in their industry sectors and, thus, offer the market a product, which solves a critical problem. For instance, in August 2013 Uber - the transportation network company, which matches drivers and riders, raised $319M of private market funding and achieved a $3.7B market valuation. It was the company’s third financing round when it got such a high valuation estimated by top investors while remaining privately held. This transaction demonstrates and is a bright example of a financial market trend that has been evolving over the past decade. It describes a shift, which happened in a way of how private technology firms are raising growth capital. It could be observed that a big number of startups refrain from going public and prefer to stay privately held. Companies, growing at a higher pace have historically made small funding rounds, where they received initial capital for their growth from angels, venture capital (VC) investors, and private equity investors before deciding to go to the public market and make an Initial public offering (IPO) to get larger sums of funding, which was critical to financing their long-term needs. Nowadays, rapidly growing companies can raise growth capital in the private markets to the extent that earlier was accessible only from public markets (Brown and Wiles, 2015).