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Financial and economic analysis of startups at the early growth stage

Vol. 25, Iss. 9, SEPTEMBER 2019

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Received: 10 June 2019

Received in revised form: 26 June 2019

Accepted: 10 July 2019

Available online: 30 September 2019

Subject Heading: THEORY OF FINANCE

JEL Classification: G17, G23, G24, O22, О31

Pages: 1987–2005

Subject The article investigates specifics of startups requiring a unique approach, a different from the existing ones for traditional companies.
Objectives The purpose of this study is to develop a mechanism for financial and economic analysis of startups at the early growth stage, in order to make a decision about their financing.
Methods The article, based on the critical analysis of economic literature (scientific research, reports of consulting companies and industry experts) identifies the prerequisites for creating a mechanism and existing approaches to analyzing the financial and economic condition of companies, such as financial analysis, CPV analysis, and analysis of debt service ratios. For each approach, we performed a bibliographic analysis of works of Russian and foreign scientists and methods they developed.
Results We developed a mechanism for financial and economic analysis of startups, considering their specific features. The paper presents a graphical structure of a typical balance sheet, reveals methods of analysis, calculates the recommended limits for coefficients, and identifies areas for improving the traditional mechanisms.
Conclusions The financial and economic analysis of startups at the early growth stage should be carried out, using the proposed mechanism. This will enable financial intermediaries to identify creditworthy borrowers and assess their development prospects with the help of financial and economic tools; founders of startups to improve the efficiency of business management; investors to reduce the risk of investment non-repayment, which will increase investment in the innovative sector of the economy and contribute to its development.

Keywords: startup, financial and economic analysis, crowdfunding platform, financial intermediary, innovative company


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