Valuation is often perceived as a purely analytical exercise driven by models and formulas. In reality, valuation cannot be derived mechanically using multiple methods. More often than not, valuation methods and assumptions are designed to align with a targeted transaction value.
At its core, valuation is about narrative — how convincingly you can sell the story.
Private Valuation vs Public Markets
Private fundraising and pre-IPO valuations are fundamentally different from stock market pricing. Public markets provide daily price discovery, while private valuations are shaped by negotiation power, timing, and context.
A simple analogy is real estate. A house in a prime location will usually command a premium. However, if the seller is under pressure due to debt or liquidity constraints, the same property may sell below its perceived market value. Valuation, therefore, is not just about intrinsic worth — it is equally about circumstances.
Why Do High Valuations Exist?
High valuations are often achievable during early funding rounds or at the time of IPO, especially when optimism is high. However, valuation without execution is temporary.
Over time, only ground-level execution sustains valuation. Investors may tolerate failure, but they do not tolerate lack of intent, misallocation of capital, or deviation from commitments made during fundraising.
Indian Market Perspective
Indian public markets have traditionally been conservative when assigning 10x or higher revenue multiples to startups and unicorns. New-age business models prioritise user growth over immediate profitability, burn cash in early years, and aim to achieve scale before margins — a relatively new way of building businesses.
At the same time, even established blue-chip companies face pressure to deliver shareholder returns. Many hold significant cash reserves and resort to share buybacks as a tool to improve Return on Equity. The pressure to justify valuation exists across the spectrum — from startups to legacy giants.
What Matters More Than Valuation Models
For finance professionals, founders, and operators, learning valuation techniques is important — but it is not sufficient.
What truly matters is:
- Understanding the business model
- Achieving MVP (Minimum Viable Product) and PMF (Product–Market Fit)
- Sound pricing and unit economics
- Disciplined capital deployment And
- most importantly, leadership
The founder is the real hero of the company. Long-term success depends on the founder’s ability to inspire, execute, adapt, and deliver.
Closing Thought
Valuation may get you funded.
Execution determines whether you deserve it.
What are your thoughts on how valuation should really be assessed?
