Why I don’t give a f$#k about valuations and you should too
You see the painting above, it’s a unicorn.
The magnificent and majestic mythical creature we only see on fairy tales. Such a beautiful animal with a solid pristine horn on it.
For startups, it’s a symbol of glorification and bragging rights. It’s a thing that will make people awe you, praise you, and bow down to you. It’s a symbol that you are valued at a minimum of $1 billion dollar.
Well, to be honest, I don’t give a fuck, and here’s why
A number on a piece of paper
A valuation is nothing more than a number on a piece of paper. When a startup is valued at $1 billion dollar, there isn’t (usually) 1 billion sheets of $1 bill in the company. What this really means is IF the company was ever for sale, that is the starting price of the offer. Now anybody can buy it for that amount or no one will buy it.
If I were to open a hot dog stand tomorrow and declare that it is valued at $1 billion dollar. Is it valid? Sure, why not right? As long as I can reason and justify it. I could probably say that the hot dog recipe was from my great great great grandfather that has been well tested for thousands of years. That’s why the price is $1 billion dollar.
I know that’s just an extreme oversimplification of stuff. Most startup valuation doesn’t work like that, there’s some math to it, but I guess you get my point. It’s just a number, sometimes its rational and sometimes not.
It’s not a symbol of success
Okay so you just raised another round of capital, lets call it series X. Great! You know have a company with a bigger valuation and all your friends will ask you to treat them as if you were fucking rich. You feel like a king. Hooray, right?
First of all, it’s not you who’s getting rich with the venture capital’s money. It’s the company’s money, not your own personal money. You might argue that you now can get a salary raise as a co-founder/CEO of your company. Well most co-founder’s really don’t take that much salary, even Mark Zuckerberg takes $1 per year. If you’re a true entrepreneur, you would take what is necessary for your self and focus the rest of the money to grow your company.
All in all, as a startup founder you shouldn’t focus too much on what your current company valuation is. Focus on your customers first. Focus on how your product/services can make your customer happy and ease their pain by solving their problem. I think the startup world needs to get away with absurd metrics such as valuations and GMV, as those two are by any chance not an indicator of success as a company (maybe yes for venture capitalist).
We need a real metric to measure how many customers actually love you, praise you, compliment you, defend your company when its in trouble, refer your product/services to others (without actually being paid for). If there’s such metric that exist and you have a pretty high score on it, then yes, please do brag all day about it. I would be more than happy to give you a standing ovation on it. Stop this unicorn bullshit.