Should Startup Businesses Chase Value Or Valuation?

It’s no secret that startup businesses are often focused on achieving a high valuation. But, is this always the best approach?

Some experts believe that startups should instead focus on creating value, rather than chasing after a high valuation. After all, it is the value of a business that ultimately determines its success or failure.

So, what is the difference between value and valuation?

Value is the actual worth of a company, while valuation is the perceived worth of a company. In other words, value is based on objective measures, while valuation is based on subjective measures.

Value refers to the potential of a business to create something new and innovative. This could be a new product or service, a new market, or a new way of doing things. And, that value is only clear when a unmet client need is satisfied, and they are willing to pay for it.

Valuation, on the other hand, is focused on the worth of a business in terms of its forecasted financials and profitability.

There are a number of factors that contribute to value, such as revenue, profitability, growth potential, market share, etc. Valuation, on the other hand, is often based on factors such as investor perception, media hype, and even the personal preferences of those involved in the process.

So, which should startups focus on? Value or valuation?

The answer may surprise you. While it is important to create value, experts say that startups should actually focus on both.

Value is the foundation of a successful business, but valuation can help to attract investment and increase exposure. In other words, value is essential, but valuation can be helpful.

So, if you’re a startup business, don’t chase after a high valuation. Instead, focus on creating value and let the valuation take care of itself.

Startups should be more focused on clarity of their business offering, its product-market fit and revenue model viability. This focus on value creation is not just for the clients, but translates into creating value for their shareholders. An objective approach to business building goes way beyond a subjective valuation, in fact allows for a much stronger valuation as a result of the value pursuit.

Its true that a high valuation is important for attracting investors and employees. But it’s not the be-all and end-all of a startup’s success. Value should be the key indicator of valuation over the long term.

Unfortunately, many startups end up chasing valuation. The focus is on projections and story building for anyone willing to listen to get them to sign a check. Media too seems to celebrate investments made at multimillion and multibillion dollar valuations, and the traditional business metrics are swept aside, only to wake up to a rude awakening when such startups either don’t go on to become truly valuable companies or end up going bankrupt soon. Or if they continue to get funded with bloated valuations and go IPO, it becomes pretty apparent when the business doesn’t hold water as it gets to be measured by traditional metrics in public markets.

Any business worth its name should focus on creating a sustainable business model that can generate long-term value for its shareholders.

Part of the problem also lies with venture capitalists and investors who are chasing the one unicorn, and are willing to make multiple bets hoping that the law of averages may work in their favor when they place enough bets. Startups are often funded by venture capitalists who were more interested in a quick return on their investment than in the long-term success of the company. Yet, well researched due diligence and focus on value creation and startup business plan clarity are key to ensuring that the law of averages works in their favor. There are venture capitalists, for example, who are typically more interested in funding startups that are chasing value rather than those that are focused on valuation. This is because they believe that the potential for value creation is much higher in a startup than in an established business.

So, if you’re thinking about starting a business, don’t get too caught up in the valuation game. Instead, focus on creating value for your customers and shareholders. Only then will you be able to build a sustainable and successful startup.

#planb #planbsuccess #value #valuation #startups #entrepreneurs #entrepreneurship #ventures #venturecapital #privateequity #equity

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