THE DISTINCTION
The number an investor offers you is not the same as what your business is worth.
The number an investor offers you is not the same as what your business is worth.
Most founders find out what their company is worth from the people who are about to buy a piece of it, the number in the term sheet, the number the investor announces- that is a price. It reflects what that investor was willing to pay, given their portfolio, their risk appetite, the mood of the market and what comparable companies raised at recently. It is legitimate information. It just answers a different question than most founders think it does.
Most founders find out what their company is worth from the people who are about to buy a piece of it, the number in the term sheet, the number the investor announces- that is a price. It reflects what that investor was willing to pay, given their portfolio, their risk appetite, the mood of the market and what comparable companies raised at recently. It is legitimate information. It just answers a different question than most founders think it does.
Pricing and Valuation are not the same thing
Pricing asks: what will someone pay today?
Valuation asks: what does this business actually generate and what is that worth?
Sometimes the answers are close. Often they diverge significantly. The divergence is information and most founders never have access to it, because nobody builds them a number of their own.
Prof. Damodaran illustrates this with Coca-Cola and Cott Corporation. Two companies selling a similar product. Completely different values. Not because someone added a "brand premium" on top of Coke's model but because the brand already lives inside the numbers. Higher margins. Stronger pricing power. Longer growth runway. Better returns on reinvested capital. A properly built valuation doesn't need a separate line for what makes a business special. If it's real, it shows up in the cash flows.
The same principle applies to your business. What makes it different from the company an investor is mentally comparing it to : your retention, your margins, your specific growth path doesn't need to be argued. It needs to be modelled. When it's in the numbers, it's defensible. When it's only in your pitch, it's negotiable.
This is the gap most Indian founders never close.
In the US and parts of Europe, founders routinely build their own valuation before entering a raise. They walk in with a number they can defend, built from their own assumptions, independent of what any investor is likely to offer. In India, this habit is rare. VCs don't ask for it. CA valuations are built for compliance, not strategic clarity. Investment banks build valuations for the transaction they're advising, not for the founder's independent understanding. So most founders walk into the most consequential conversations of their company's life without a number of their own.
That's not a knowledge problem. It's an access problem. Nobody built them the other side of the conversation.
Knowing your intrinsic value doesn't stop you from raising at a higher price (multiple), that conversation will happen regardless. But it gives you a floor you understand. It tells you how much of the gap between your intrinsic value and your pricing round you need to close through execution. It tells you what the market is giving you credit for in advance and what you need to deliver on to deserve it.
Most founders know their revenue. They don't know their intrinsic value, their strategic value or the gap between the two.
That gap is where founder wealth is created or destroyed.
Pricing and Valuation are not the same thing
Pricing asks: what will someone pay today?
Valuation asks: what does this business actually generate and what is that worth?
Sometimes the answers are close. Often they diverge significantly. The divergence is information and most founders never have access to it, because nobody builds them a number of their own.
Prof. Damodaran illustrates this with Coca-Cola and Cott Corporation. Two companies selling a similar product. Completely different values. Not because someone added a "brand premium" on top of Coke's model but because the brand already lives inside the numbers. Higher margins. Stronger pricing power. Longer growth runway. Better returns on reinvested capital. A properly built valuation doesn't need a separate line for what makes a business special. If it's real, it shows up in the cash flows.
The same principle applies to your business. What makes it different from the company an investor is mentally comparing it to : your retention, your margins, your specific growth path doesn't need to be argued. It needs to be modelled. When it's in the numbers, it's defensible. When it's only in your pitch, it's negotiable.
This is the gap most Indian founders never close.
In the US and parts of Europe, founders routinely build their own valuation before entering a raise. They walk in with a number they can defend, built from their own assumptions, independent of what any investor is likely to offer. In India, this habit is rare. VCs don't ask for it. CA valuations are built for compliance, not strategic clarity. Investment banks build valuations for the transaction they're advising, not for the founder's independent understanding. So most founders walk into the most consequential conversations of their company's life without a number of their own.
That's not a knowledge problem. It's an access problem. Nobody built them the other side of the conversation.
Knowing your intrinsic value doesn't stop you from raising at a higher price (multiple), that conversation will happen regardless. But it gives you a floor you understand. It tells you how much of the gap between your intrinsic value and your pricing round you need to close through execution. It tells you what the market is giving you credit for in advance and what you need to deliver on to deserve it.
Most founders know their revenue. They don't know their intrinsic value, their strategic value, or the gap between the two.
That gap is where founder wealth is created or destroyed.
That is what Mulyan builds - the number that comes before the term sheet, not after it.
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Mulyan is an independent valuation advisory practice. All analysis published on this website is provided solely for informational and educational purposes and does not constitute investment advice, a recommendation to buy or sell any security, or a statutory valuation under IBBI, SEBI, or any other regulatory framework. Mulyan is not a SEBI-registered Research Analyst or Investment Adviser. Where a regulatory or compliance valuation is required, the engagement of a Registered Valuer or other appropriately authorised professional may be necessary.
Mulyan is an independent valuation advisory practice. All analysis published on this website is provided solely for informational and educational purposes and does not constitute investment advice, a recommendation to buy or sell any security, or a statutory valuation under IBBI, SEBI, or any other regulatory framework. Mulyan is not a SEBI-registered Research Analyst or Investment Adviser. Where a regulatory or compliance valuation is required, the engagement of a Registered Valuer or other appropriately authorised professional may be necessary.
Mulyan is an independent valuation advisory practice. All analysis published on this website is provided solely for informational and educational purposes and does not constitute investment advice, a recommendation to buy or sell any security, or a statutory valuation under IBBI, SEBI, or any other regulatory framework. Mulyan is not a SEBI-registered Research Analyst or Investment Adviser. Where a regulatory or compliance valuation is required, the engagement of a Registered Valuer or other appropriately authorised professional may be necessary.