Mythologist | Author | Speaker | Illustrator

December 24, 2012

First published December 23, 2012

 in Corporate Dossier ET

Value, Valuation and Values

Published in Corporate Dossier ET, September 14, 2012.

I run a small web business. My VCs tell me to increase revenues and not worry about the bottom-line. That works well for them as valuations go up but I know that is fundamentally wrong for business. More the losses mount, more I have to pay heed to what they say. How do I manage the tricky relationship. They are my benefactors but the relation is becoming less and less beneficial for me.

The reason you seem to have started the business and why your investors invested in the business are very different. You wanted to create value for your customers, vendors, employees and shareholders. They want valuations: increasing the perceived value of your company so that they can sell it to the highest bidder and thus get a high return on investment. You want to sell a product, maybe a service, to the consumer but they want to sell a dream to another investor. So naturally, you are thinking about viability but they are not. Dreams once sold need not materialize in reality for the money is already in the bank!

We can paint the investor as the valuation-villain and you the value-hero but things are not so simple. In Hindu mythology, Lakshmi (wealth) chases Vishnu. Vishnu has two sides: Kama and Yama. Kama is the irresponsible dreamer of love and life. Yama is the cautious accountant who watches over debt and death. Kama is the CEO who dreams big and attracts followers. Yama is the CFO who has to keep an eye on the balance sheet. Kama has garuda-drishti: the bird’s eyeview and focuses on the woods not the trees. Yama has sarpa-drishti: the serpent’s eyeview and counts the trees and ignores the forest. The two are eternally churning the ocean of milk, each one knowing when to pull and when to let go.

In young emerging markets, like India, where consumption is very low, we need more Kama than Yama to create more demand, new consumers and new markets. In mature developed markets, like in the West, where consumption is high, we need more Yama than Kama, a fierce lookout to ensure that we do not overreach and outspend.

Maybe, observing market potential, your investors want you to stir new buying behavior, hence the focus is on revenue not bottomline. But you would rather be the cautious Yama, and perhaps this may kill the business before it has a time to grow and thrive.

The question is of intention. Do the investors really want to create new consumers, new markets, new consumption patterns or are they only concerned about their pockets? Are they in for the long haul like Kama or are they short-sighted like Yama? This depends on their values, what matters to them: do they see their growth in your future growth or are they focused on their growth, regardless of your future growth? Do they believe in your dream? Or are you merely a product to sell? Only you can answer this question. Once you know the answer, you will know whether to cling to them or find another suitor.

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