Burn, baby, burn. No more.

I’ve been grumpy for a few months, possibly for longer than that, about how everyone suddenly loves to talk about startups and valuations, but very few people actually intend to deep dive and take a closer look. Indian media reporting on the startup ecosystem has officially been diagnosed with K-soap-masala syndrome while we have venture capitalists taking digs at successful founders and comparing venture capital to term deposits. Yes, this actually happened.

It is rare to read a business publication today which is not overloaded with stories about tech startups. This is great, but since we all like to spice it up a bit too much, the media serves us exactly that. Stories are about how entrepreneurs secured venture capital and soared to wealth in a very short span of time, or how they amassed excess capital before shutting doors.

If you dream of building a large business, focus on the fundamentals and learn to build it without a VC.

This has led other young entrepreneurs to think that the VC route is the only model for success, that there is absolutely no other way to build a large company, and that they should write business plans, attend conferences, network with investors, and ultimately give VCs control of their venture. The sad outcome is that more founders ask, “How can I get venture capital” rather than “Can I get venture capital,” “Should I get venture capital,” or the critical one, “Can I build my company without raising venture capital or by delaying it?”

The fact of the matter is that hardly any of you will ever get venture financing for your company. Actually, most of you may never get to see the inside of a VC’s office. So, if you dream of building a large business, focus on the fundamentals and learn to build it without a VC. That’s what most of the successful founders did.

Unicorns or donkeys?

Two big changes have happened which are widely known — in the past quarter, the value of some very high profile Indian companies such as Flipkart and Zomato have fallen substantially. Apart from these, many companies have raised down-rounds, consolidated or shut down, all of which haven’t been reported.

First things first, most founders and investors who’ve been in business for a long time foresaw this correction and have been talking about it privately for the better part of last year. Considering how valuations work, being dependent on several parameters, including completely external factors such as availability of capital, this was bound to happen. My point here is that everyone should stop caring about whether a company is a unicorn or a donkey.

 Valuation is more of an art rather than science, and focusing on it too much is only going to derail everyone.

The valuation of a company is just an unreal number in the sense that no one has ever bought the company for that amount, and neither is the company public. Instead, valuations are based on strangled maths, which directly extrapolates from investment rounds the company raises. The fact of the matter is that so-called unicorn valuations are unsupported by conventional financial metrics (most of them are not profitable) or conventional asset valuations (most of them don’t own the assets they sell), so how will we ever know if they are accurate or inaccurate for that matter?

Valuation is more of an art rather than science, and focusing on it too much is only going to derail everyone. So fretting over valuations is never a good idea.

What happens inside the boardroom, stays inside the boardroom!

The lack of clarity on valuations doesn’t take away the fact that many startups wasted the excessive cash VCs dumped on them. I wrote about TinyOwl’s insane burn earlier and the herd mentality of VCs.