Let’s cut the noise: most startup valuations are a lie.
Founders love bragging, “We’re a £20M company!” even when they don’t have steady revenue, loyal customers, or a product that actually works outside a demo.
Here’s the reality:
A startup valuation isn’t what your company is worth. It’s just what an investor agreed to pay for a slice of a dream. That number looks good in headlines, but it’s often built on hype, FOMO, and inflated projections.
Valuations are vanity. Revenue, retention, and cash flow are sanity.
Why Valuations Get Inflated
So if valuations don’t always reflect reality, why are so many startups walking around with billion-dollar price tags? Here’s the playbook behind the inflation:
💸 1. Investor Hype & Competition
VCs don’t want to “miss the next Uber.” So they bid up valuations to get in on the deal, even if the fundamentals don’t add up.
🏃♂️ 2. Market FOMO
When one startup in a sector raises big, every competitor suddenly “must” be worth more, even without traction. It’s a domino effect of hype.
🎤 3. Founders Overselling the Dream
Pitch decks are full of “we’ll be at £100M ARR in 3 years.” Investors know it’s optimistic, but they buy in anyway, inflating the price.
📉 4. Ignoring Profitability
As long as growth looks impressive, losses are tolerated. Many valuations are based on potential scale, rather than actual profit.
🌍 5. Cheap Money Era (Still Lingering)
Low interest rates and abundant capital created a habit: throw cash at growth. Even though markets have tightened, that culture of overvaluation hasn’t fully died.
The Dangers of Chasing Inflated Valuations
Big valuations look good on paper, but they often set founders up for failure. Here’s how:
⚠️ Pressure to Meet Unrealistic Growth
When you raise at a sky-high valuation, you’ve basically promised investors a rocket ship. If growth doesn’t explode, the crash is painful. Just look at WeWork investors bought into a dream of global domination, but the business fundamentals couldn’t keep up with the hype.
⚠️ Loss of Control
The bigger the valuation, the bigger the check and the tighter the grip from investors. Founders often think they’re in charge until the board starts calling the shots. That’s exactly how Adam Neumann lost control of WeWork, despite being the face of the company.
⚠️ Public Perception vs Reality
A high valuation can create the illusion of success, even when the foundation is weak. Theranos is the poster child here; the valuation hit $9B, but the technology didn’t work. When the truth came out, the crash wasn’t just financial; it destroyed trust across the industry.
⚠️ Down Rounds and Morale Crashes
If you raise too high and can’t justify it later, your next round will be a “down round.” Stripe and Klarna both learned this when their valuations were slashed after the funding boom. Employees see their paper wealth vanish, early investors panic, and the company’s image takes a hit.
⚠️ Paper Unicorns Don’t Pay Bills
A valuation doesn’t pay salaries, cover servers, or keep the lights on. Only revenue does. Chasing headlines while ignoring unit economics is how many so-called unicorns end up as cautionary tales.
What Founders Should Actually Focus On
If chasing valuations is a trap, what should founders actually measure success by? Here’s the shift:
✅ 1. Sustainable Revenue
Revenue is proof that people value what you’ve built enough to pay for it. Unlike valuations, you can’t fake cash flow.
✅ 2. Unit Economics
Forget vanity growth. If you’re losing £10 for every £1 of revenue, scaling just multiplies the losses. Strong gross margins = survival.
✅ 3. Retention & Loyalty
Growth hacks can win you downloads or signups. But if customers churn, you don’t have a business, you have a leaky bucket.
💡 Netflix, despite all its competitors, remains strong because retention is its superpower.
✅ 4. Real Market Fit
Better to have 1,000 paying customers who love you than 100,000 free users who don’t care. Market fit is traction, not hype.
✅ 5. Team & Execution
Investors don’t just back products; they back teams that can adapt. A lean, disciplined team beats a bloated, hype-fueled one every time.
The takeaway? A valuation is just a number. A business is what survives when the hype fades.
To sum it up;
A sky-high valuation won’t keep your company alive. It might get you headlines, clout on LinkedIn, and bragging rights at networking events, but it won’t pay salaries, win loyal customers, or build a sustainable business.
What you should know is this: valuations are vanity; fundamentals are survival.
WeWork, Theranos, Klarna, Stripe. The stories are different, but the lesson is the same. Inflated valuations create pressure, unrealistic expectations, and painful crashes.
Founders need to stop asking, “How much am I worth on paper?” and start asking, “Am I building something real, profitable, and lasting?”
Because at the end of the day, investors can walk away. Employees can walk away. Customers can walk away.
But your startup’s survival depends on what’s left when the hype fades.
Wole Oduwole, an SEO & Digital Growth Expert is the Founder of SEOGidi. Harnessing with over 10 years of experience to scaling startups and emerging businesses.
