In case you missed it, we’ve got other short and easy to digest articles for you focusing on how to value your startup, how to supercharge your value, and why you should focus on value, not price. Let us – and our good friends at Equidam – continue to cover all you need to know about valuations. Let’s go 👇

Price vs Value – what’s the difference?

So what is the difference, wouldn’t they be the same? Well, no, not quite. Even though the terms ‘valuation’ and ‘price’ are often used interchangeably, to quote Equidam, “every funding round announcement, investor pitch, and startup headline boasts a new valuation figure, yet very few actually refer to what that company is truly worth…getting to grips with the difference between valuation and pricing isn’t just a theoretical exercise; it’s also essential for founders who want to raise capital efficiently and manage dilution wisely.”

Makes sense! So to put it in simple terms: 

• Price: a market driven number based on the current market, and ultimately what someone is willing to pay
• Value: the fundamentals that matter and future potential of the startup

So let’s take a look at why it matters, and what you need to do next.

Why is it so important?

Without sounding alarmist, if you don’t think it through (or get our advice!) there could be implications further down the track. Focusing only on the price means you could run into problems later, like overpriced rounds, unrealistic expectations and short term investor thinking. Yikes. Along with the experts at Equidam, we agree that the best startups are valued, not priced, and by following this approach you’ll attract the kind of investors who are looking for the best return on investment over time, which we think sounds like the kind of investors to be associated with. Don’t fall into the trap of getting led by others in the market (founders like you don’t tend to follow the flock anyway!) and keep in mind your goals and ideals for the business you’ve put all that effort into. 

In a nutshell, founders that we see get the best investors:

• Have clear, concise capital needs
• Understand economic models inside out
• Are aware of what’s going on in the market, but not defined by comparables
• Choose investors who understand their long-term vision, by getting to know them and discussing values early on

What’s next?

If you’re reading this article, you are either ready to value your business, or just starting to look at an approximate figure for an idea of what it’s worth. Good news – we’ve got a ton of resources on valuations here, and if you’ve decided to get some assistance (and remove some of the stress) you can get a professional valuation from us here. We do this for startups and scaleups just like yours all the time – we understand what you are going through.  

Remember – your startup valuation is just a number until you successfully raise the funds, the real value is what you do with that funding to then increase your company’s value and/or achieve a successful exit. Get in touch for a chat, we’d love to help.