BUZZ: The Impact of Positive User Sentiment on Startup Company Valuations in the USA

In this paper, I exploit organic user buzz to reveal that investors view
positive user data as a proxy for future user acquisition and company growth.
After conducting venture capital investment analysis, I show that companies
that experience higher degrees of market excitement receive higher levels of
interest from investors. The more user buzz a startup receives, the more
likely it is that it will, first, participate in an additional funding round, and,
second, receive a higher valuation in the next funding cycle. My analysis also
finds that venture capitalists are not yet adept at predicting market
excitement for a particular product at earlier funding stages. Instead, they
are more likely to apply a “spray and pray” early-stage investing approach.