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Welcome to Cutting Through The Fog.
Each week I share the thinking and frameworks I’ve used (and learned the hard way) to help you build with more clarity, more momentum, and fewer avoidable mistakes.
This week it’s valuation: “How do I put a valuation on my company?”
How to value your company.
Here’s a “formula” that always works.
It’s not exactly mathematically precise.
But it 100% reflects how investors think.
Valuation = Potential × Evidence × Momentum
1) Potential
In the early days, potential is all you have.
This is you claiming you can change the world.
Or at least, change a meaningful part of it.
But “potential” isn’t just a big market slide.
It’s the combination of:
A real problem
A clear customer
A credible insight
A believable path to scale
And a team investors can imagine surviving the hard bits
At this stage, because there is little evidence, the emphasis is on you, the founder.
Your judgement.
Your experience.
Your ability to learn fast.
Most investors will also discount what you say.
Don’t take it personally, they have seen thousands of people in the same place
you are right now.
They’ve learned that early-stage assumptions RARELY survive contact with reality.
So they apply their own internal “belief haircut”.
That’s why this stage is subjective.
And, frankly, judgemental. BUT, you can use that.
2) Evidence
Then something shifts.
As you build evidence, the conversation becomes more objective.
Because evidence reduces uncertainty.
Evidence is not just revenue.
It’s anything that confirms your assumptions:
Customers behaving the way you predicted
Retention or repeat purchase
Short sales cycles
Strong unit economics signals
Distribution working
A growth channel you can repeat
A product people come back to without being chased
This is also the phase where some assumptions will be disproven.
That’s completely normal, so don’t get nervous if you are here.
Your valuation will be protected by your ability to ADAPT.
From my experience, this is what the best founders
are able to do time and time again:
They can learn and pivot without losing momentum.
3) Momentum
Momentum is when the machine starts to feel real.
By now you’ve tested most of your key assumptions.
Many are confirmed.
Some have been amended.
And the fundamentals are much clearer.
The conversation becomes less:
“Does this work?”
And more:
“How aggressively can this grow?”
You’re often near break-even at this stage.
You’re not raising to survive.
You’re raising to accelerate.
Roll-out.
Distribution expansion.
International growth.
Hiring to scale systems and execution.
So, now you know how the formula works and what every stage looks like.
However, there is a small piece missing here.
And it starts with this: some valuations make absolutely no sense.
A word on valuation bubbles
In the recent past there were, quite frankly, some crazy valuations in consumer goods.
Driven by trends.
And FOMO.
We saw it in pockets of meat and dairy alternatives, among others.
That bubble has largely burst.
Many businesses that raised at inflated valuations then struggled to raise again at the next round.
Either the valuation couldn’t be justified.
Or the business couldn’t be funded at all.
It’s difficult to avoid getting sucked into hype when a category is overheating.
But I have seen this time and time again.
The one thing is almost guaranteed after an over-inflated round:
A down-round later.
So beware of it.
The takeaway
If you’re trying to understand your valuation, don’t start with a number.
Start with the components.
Ask yourself:
How strong is our potential, really?
What evidence do we have that reduces risk?
And do we have momentum, or just activity?
Because valuation isn’t a single argument.
It’s a compounding one.
And it changes from one stage to the next. So, always be ready.
