When investing in businesses, founders and investors frequently disagree over a startup valuation. This dispute usually revolves around how much a startup is worth and, as a result, how much its founders can raise in fundraising.
In other words, the topic of this almost daily argument is startup valuations.
Why? Because startup valuations are not one-size-fits-all. Not to add that determining the worth of a business is not easy.
This episode and post will discuss startup valuation, why they are crucial, the dispute between founders and investors, and a novel approach to solving this problem.
Prantik Mazumdar is an entrepreneur and venture capital investor who is a digital transformation catalyst in organizations to drive sustainable change and impact.
He started his entrepreneurial journey with Happy Marketer in 2011, where he spent a decade building and scaling up one of the best and most awarded independent digital marketing services firms in the region that served brands like Standard Chartered bank, Income, Great eastern life, Royal Brunei Airlines, Coffee Bean & Tea Leaf, Starbucks, Starhub, Ping An, Grab, Shop, Kimberly Clark, Singtel amongst others.
In this episode, he shares how we can use startup valuations to drive growth and increase a company’s valuation. Below we have distilled key elements of his approach.
Adapt and pivot with partners.
Adapting and pivoting with partners is an essential lesson for any successful business. This is something that Prantik Mazumdar and Rachit Dayal, the founders of Happy Marketer, learned during their decade-long journey to build an independent digital marketing service firm in the APAC region.
The journey began in 2009 when Rachit and Prantik, two tech-savvy entrepreneurs, decided to create a business to help marketers succeed. They didn’t have a plan, but they knew they wanted to bring data and science to the art of marketing and make it more predictable and accountable.
At the same time, they realized that during times of economic crisis, marketing budgets were often the first to be slashed. This was the impetus for their mission to make marketers happy. So, they set out to create a business to help marketers turn marketing from a cost center to a revenue generator.
The key to their success was their ability to adapt and pivot. Every two to three years, they would assess the market and determine what was needed and what would help their clients. This allowed them to stay ahead of the curve and develop new services, such as training and consulting, to meet the needs of their clients.
In addition to being able to adapt and pivot, they recognized the importance of forming partnerships with other entities. As a result, they partnered with companies like Google, HubSpot, Salesforce, and the Boston Consulting Group to access their expertise and resources. This allowed them to leverage the knowledge and experience of these partners to create more successful projects and services.
The success of Prantik and Rachit’s journey is a testament to the power of adaptability and partnerships. By being able to assess the market and pivot quickly and by leveraging the resources of other companies, they were able to build an award-winning digital marketing service firm. This is a lesson that any business can learn from and use to become successful.
Don’t limit yourself; explore.
Don’t limit yourself; explore. This is the advice that Prantik and Rachit have for businesses. They suggest that companies should be open to ideas, have conversations, and read up on anything and everything. This is important because it allows businesses to gain more knowledge and make more informed decisions. It also allows businesses to be more opportunistic and to experiment with different approaches.
Prantik and Rachit also suggest that businesses should have an exit strategy, especially if they raise capital from investors. This is important because it allows businesses to plan for different scenarios and to keep investors informed. However, they caution that the sole purpose of a business should not be to exit. Instead, a business should have a bigger purpose and strive to grow before exiting.
In conclusion, Prantik and Rachit’s advice to businesses is not to limit themselves. Instead, they suggest that businesses should be open to ideas, have conversations, read up on anything and everything, and have an exit strategy in mind. By doing this, businesses can gain more knowledge and make more informed decisions. This is important for any business to become successful.
Keep it real and simple.
At the same time, Prantik and Rachit emphasize the importance of keeping it real and simple. They suggest that businesses focus on the basics and use metrics that are meaningful and relevant to their business. They also advise businesses to be honest with themselves and their investors, and to track their revenue, cost of goods sold, and profit. Furthermore, they emphasize the importance of keeping track of bank cash, especially in liquidity issues.
Ultimately, Prantik and Rachit’s advice is to focus on the basics and to be honest with yourself and your investors. By doing this, businesses can gain more knowledge and make more informed decisions. This is important for any business to become successful. Keeping it real and simple is the key to success.
Celebrate employee departures.
One of the most important aspects of a business is its culture. Culture is not just about the product or service a business offers but the behaviors that drive the company. Prantik and Rachit suggest two types of actors in a company, passive residents and active citizens. The former are those who wait for things to happen, while the latter are those who take action to solve problems. Leaders must set the tone and precedence to create an active citizenry culture.
One way to foster an active citizenry culture is to celebrate employee departures. The quality of your exit interviews and farewell parties speaks the loudest about your company’s culture. By celebrating employee departures, businesses can show that they value their employees and recognize their hard work.
When celebrating employee departures, businesses should focus on the individual. Recognizing each individual’s contributions to the company and celebrating their successes is important. Companies should also thank employees for their hard work and dedication. This can be done through a farewell party or a simple thank you card.
Businesses should also use employee departures as a learning opportunity. By conducting exit interviews, businesses can gain insight into what worked and what didn’t. This can help them improve their culture and ensure that it is a place where employees can thrive.
In conclusion, businesses should celebrate employee departures to foster an active citizenry culture. Companies can create a positive and productive culture by recognizing the individual’s contributions and using the opportunity as a learning experience. This will help ensure that businesses are successful and employees are happy and engaged.
Choose the arena, players, and market.
When scaling and growing a business, it is vital to consider the arena, players, and market. The arena is the type of business a company is in, the players are the employees, and the market is the potential customers. Therefore, it is important to consider these elements when developing a business strategy.
The arena is the type of business that a company is in. This includes the company’s various products or services, target markets, and competitive landscape. Companies should choose an arena they are comfortable and can excel. This will help to ensure that the company can compete in the market and be successful.
The players are the employees of the company. Therefore, it is important to choose the right people for the job and ensure they are well-trained and motivated. This will help to ensure that the company is productive and successful. It is also important to recognize the contributions of each employee and to create an environment that is positive and encouraging.
The market is the potential customers of the company. Companies should consider their target market and what they can offer to that market. This includes understanding the needs of the customer, the competitive landscape, and the market size. Companies should strive to create a product or service that is competitively priced and meets the customer’s needs.
Businesses must consider their arena, players, and market when developing a business strategy. By understanding the type of business they are in, their employees, and the potential customers they are targeting, businesses can create a strategy to help them succeed. Additionally, businesses should recognize their employees’ contributions and create a positive and productive environment. By doing this, businesses can create a culture conducive to success and growth.
Focus on growth metrics.
One of the most important aspects of creating a successful business is focusing on growth metrics. Growth metrics are the key performance indicators that businesses use to measure the success of their business. These metrics include revenue, profit, customer lifetime value, acquisition costs, retention rate, and employee satisfaction. By focusing on these metrics, businesses can identify areas of improvement and create strategies to increase their performance.
For example, businesses can use customer lifetime value to determine how much money they make from each customer. This metric can help businesses identify which customers are most profitable and which need more attention. Additionally, businesses can use customer acquisition costs to identify how much money they spend to acquire new customers. This metric can help businesses understand how effective their marketing efforts are and identify areas where they can improve.
Businesses should also focus on employee satisfaction. This metric can help businesses understand how employees feel about the work environment and their job. Additionally, businesses can use customer retention rates to identify how successful they are at retaining customers. Companies can create strategies to improve performance and increase customer loyalty by focusing on these metrics.
Ultimately, businesses should focus on growth metrics to create a successful business. By understanding the key performance indicators important to their business, companies can develop strategies to help them succeed. Additionally, businesses should focus on employee satisfaction and customer retention rate to identify areas of improvement and create strategies to increase customer loyalty. By focusing on these metrics, businesses can create a successful business and increase their chances of success.
Surround yourself with goodness.
One key to success is to “surround yourself with goodness.” This means businesses should focus on creating an environment conducive to learning and growth. This includes creating a culture of knowledge-sharing and collaboration. By creating a culture of knowledge sharing, businesses can ensure that their employees are up to date on the latest industry trends and best practices. Additionally, businesses should focus on creating an environment conducive to learning and growth. This includes creating a system that allows ideas from any level of the organization. By creating a system enabling ideas from any level of the organization, businesses can ensure that their employees are engaged and motivated to contribute to the business’s success.
Businesses should also focus on surrounding themselves with knowledge. This includes subscribing to newsletters and other industry publications, following industry leaders on social media, and reading books related to the industry. By doing this, businesses can stay current on the latest industry trends and best practices. Additionally, businesses should focus on creating an environment conducive to learning and growth. This includes creating a system that allows ideas from any level of the organization. By creating a system enabling ideas from any level of the organization, businesses can ensure that their employees are engaged and motivated to contribute to the business’s success.
Build to last.
In addition, businesses should focus on building to last rather than just breaking it. This means building a sustainable business that has a solid foundation. This includes focusing on the top and bottom lines and balancing the CAC to LTV ratio. It also means focusing on creating a culture of innovation and being open to new ideas and perspectives. Finally, businesses should focus on giving, as this will help to create a positive cycle of knowledge and wisdom.
By following these tips and focusing on building to last, businesses can ensure they are well-positioned to succeed and remain competitive in the long term. Furthermore, they can create a culture of learning, collaboration, and innovation that will help them to stay ahead of the curve and remain relevant in the ever-changing business landscape.
Build for sustainability.
Sustainability is an important concept for businesses in the modern world. With the rise of environmental consciousness, businesses are increasingly held accountable for their actions and environmental impact. As a result, businesses need to focus on sustainability when building their operations.
Building for sustainability involves considering a company’s operations’ environmental, economic, and social impacts. It involves understanding the long-term consequences of a business’s decisions and taking steps to ensure long-term sustainability. This includes considering the environmental impact of the company’s operations, such as how much energy and resources it uses and how much waste it produces. It also involves considering the economic impact of the company’s operations, such as how much money it is making and how much it is investing in its operations. Finally, it involves considering the social impact of the company’s operations, such as how it treats its employees and engages with its customers.
One of the most important steps in building sustainability is ensuring that the company focuses on the long-term. This means that the company should focus on creating a sustainable business model that can withstand the test of time. This involves creating a resilient business model that can adapt to changing market conditions and customer needs. It also involves creating a profitable business model that can generate enough revenue to sustain the company’s operations in the long-term. Finally, it involves creating a socially responsible business model that considers the needs of its customers, employees, and the environment.
In addition to focusing on the long-term, businesses should also focus on creating a culture of learning, collaboration, and innovation. This involves creating an environment where employees can share ideas and collaborate on projects. It also involves creating an environment where employees are encouraged to learn, grow, and develop new skills and technologies. This will help businesses stay ahead of the curve and remain competitive.
Finally, businesses should focus on creating a recognizable and respected brand. This involves creating a brand that is associated with quality and reliability. It also involves creating a brand associated with sustainability and social responsibility. By creating a recognized and respected brand, businesses can ensure they are well-positioned to succeed and remain competitive in the long term.
Surround yourself with goodness.
Surrounding yourself with goodness is important to living a successful and fulfilling life. By surrounding yourself with positive people, experiences, and ideas, you can create a life that is both meaningful and enjoyable. Let’s explore how doing so can benefit you financially and emotionally.
Surrounding yourself with goodness can have a positive impact on your finances. Prantik explains that if you make sustainability part of your business model, your business will be more sustainable. This can positively affect your company’s financial metrics, such as growth, LTV, and CAG. Additionally, sustainability can be a weapon in your armor regarding valuations. Therefore, you can increase your company’s value by making sustainability part of your business model.
Surrounding yourself with goodness can also positively impact your emotional well-being. Prantik recommends that, even if you are just a good citizen, you should still do it with a selfish financial bend in mind. This means that you should focus on the positive aspects of the situation and how it will benefit you in the long run. In addition, Prantik suggests that you should surround yourself with knowledge and enrich your mind. Doing so can help you crystallize and share your perspective with others.
In conclusion, surrounding yourself with goodness can positively impact your financial and emotional well-being. You can increase your company’s value by making sustainability part of your business model. Additionally, consuming knowledge and sharing your perspective can enrich your mind and help you become a better version of yourself. Therefore, it is important to surround yourself with positive people, experiences, and ideas to create a life that is both meaningful and enjoyable.
Some topics we discussed include:
- Why is it important to estimate the value of a startup
- Northstar and metrics that companies should focus on in the growth phase
- In what ways can companies go for a blended valuation
- Which are the most popular valuation methods
- Picking the right method for your stage
- The appropriate lens with which to view business exits and revenue related north star metrics
- The place for blended valuations
- and much much more …
Listen to the episode
Related links and resources
- Check out Merkle Inc
- Learn from Seth Erickson – Storytelling For Startups: 7 Tips For Powerful Growth
- Learn more from Liam Carnahan- Content Marketing for Startups: How to Drive Growth With The Right Strategy
- Learn from Ramesh Dontha – How to Use An Agile Mindset to Scale Your Startup Growth
- Learn from Millie Hogue – Demand Creation: How to Build Revenue Engines That Drive Growth
- Learn from Ryan Dohrn – How to Drive Growth by Selling to 3 Types of Buyers With Understanding
- Learn from Aaron Beashel – Digital Marketing Attribution: How to Drive Business Growth Made Simple
- Learn from Oren Schauble – How to Use Customer Acquisition Strategies to Drive Growth
- Learn from Bryan Rutberg – Client Relations: 10 Techniques to Drive Growth and Profit
- Learn from Thomas Douglas – Innovation in Change Management: How to Use IT to Drive Growth
- Learn from Angeley Mullins – Brand Tracking: Why You Need it to Drive Growth And Brand Health
- Gain insights with Nils Vinje – How to Gain The Soft Skills of Leadership to Drive Growth
Connect with Prantik
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