Business
The Rise and Fall of Valuation Obsession in the Startup World
courtesy of bothsidesofthetable.com
An Industry Obsessed
In the past seven years, something changed in the startup and venture capital world. The industry became fixated on valuations, taking the joy out of the business for many. But what happened? And how can we find a brighter future in the midst of uncertainty?
A Journey of Joy and Fulfillment
The author reflects on their early days as a programmer, where the focus was on problem-solving and the gratification of seeing their creations come to life. Back then, there was no money train, but that didn't dampen the enthusiasm. However, things started to change in the late 90s.
The Invasion of Money
With the arrival of the browser, the World Wide Web, and the first internet businesses, a golden period emerged. People were building, creating new solutions, and witnessing their ideas come to fruition. But then, money flooded in, driven by public markets and inflated valuations. The "new economy" was declared, and valuations soared without reason.
Caught in the Valuation Game
The author, swept up in the frenzy, started their first company in 1999. They experienced the allure of magazine covers, conferences, and artificial valuations. But when the dot-com bubble burst, valuations became irrelevant. Instead, the focus shifted to building and surviving in a challenging environment.
Learning From the Hard Times
During the difficult years that followed, the author learned valuable lessons about building products, pricing them, selling them, and serving customers. They embraced a mindset of avoiding unnecessary costs and striving for a neutral EBITDA. The absence of money forced a return to fundamentals.
A New Path as a VC
Transitioning to venture capital in 2006, the author sold their companies and embarked on a new chapter. The market downturn during the Global Financial Crisis presented an opportunity for reflection and exploration without the pressure of high expectations. The author discovered the joy of working with entrepreneurs and providing patient capital.
The Era of the Unicorn
In 2013, the term "unicorn" was coined to represent companies with a valuation of $1 billion or more. It symbolized a shift in business fundamentals, where valuations could easily reach $10 billion or beyond. The author expressed their disdain for this culture in a 2015 post, highlighting the obsession with valuations and quick money.
courtesy of bothsidesofthetable.com
The Culture Shift
The era of easy money and low interest rates reshaped the industry's culture. Valuations became the measure of success, attracting capital and talent. The focus shifted from building sustainable businesses to chasing valuation validation. It became challenging to operate differently in a market driven by valuations.
The Hangover and Sobering Up
As of November 9th, 2021, the valuation party came to an end. Companies found themselves worth less, and the market's obsession with valuations lost its appeal. The author acknowledges the need to find a sober equilibrium and observes signs of a new generation of startups untouched by the valuation frenzy.
A Return to Real Businesses
Amidst the changes, the author finds joy in discussions about the ROI benefits for customers and a renewed focus on building sustainable businesses. They appreciate founders who are passionate about their markets, products, and visions, regardless of the economic consequences. While outliers may achieve massive valuations, the majority of the industry thrives on building meaningful businesses.
A VC's Fulfillment
The author concludes by expressing their fulfillment as a VC in the present year, finding joy in working with founders, strategy, go-to-market approaches, and all aspects of building a startup. They are back to building real businesses, which brings them more joy than the obsession with valuations. By focusing on the fundamentals, valuations will naturally follow.
Hello there! I’m Jeremy Ramirez, your go-to guy for all things content marketing and social media at NewsScroller. Currently residing in the vibrant city of Omaha, NE, I’m living my dream of combining my passion for journalism with the dynamic world of digital media.
I’m a proud graduate of the University of Nebraska, where I honed my skills and earned a degree in journalism. My college days were filled with endless learning, coffee-fueled study sessions, and the excitement of discovering the power of storytelling.
Post-graduation, I found my calling at NewsScroller, where I currently lead a team of creative minds in shaping compelling content strategies. Every day is a new adventure here – crafting stories, analyzing trends, and engaging with our vibrant online community.
When I’m not immersed in the digital world, you’ll find me cherishing moments with my amazing wife and our two energetic boys. Our family is completed by Dagwood, our adorable Pug, who always brings smiles to our faces.
Traveling is my escape and inspiration. I love exploring new cultures, tasting local cuisines, and capturing memories through my lens. As a speaker at social media events, I enjoy sharing insights and learning from fellow enthusiasts.
Curious about content marketing strategies or the latest social media trends? Or maybe you want to exchange travel stories? Feel free to reach out. I’m always up for a chat and eager to connect with like-minded individuals. Let’s navigate the exciting world of digital media together!
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