We always talk about valuations as if they were ~facts of reality, such as “This X startup is worth A”. But in practice, valuation a framework to align interests, to benchmark progress, to structure risk, and to negotiate ownership.

Most VC educational materials present startup valuation courses titled “Valuation methods”. However, these courses should be titled “Valuation as a tool”.

The same startup can be valued at $30 million in one term sheet and $60 million in another, depending on preference stacks, liquidation terms, or even just investor appetite for scarcity. Both numbers can be “right”, because valuation is shorthand for a moment in time with a specific group of actors.

A VC’s valuation exercise helps justify an investment thesis. A founder might use valuation to motivate a team or attract credibility in the market. An investor “calculates” valuation to model risk, ROI etc. These are not the same exercise, they just use the same word. In summary, purpose defines the metric.

Also, a valuation often encodes things that cannot be modeled, such as trust in the founding team, belief in a macro trend, or even the narrative pull of being in “the category winner.” Valuation spreadsheets never reveals those intangibles, but they sit in the number nonetheless.

When as GP, an LP, a Founder, you stop treating valuation as absolute truth, you start seeing its real role. It is a tool for decision-making, alignment, and storytelling. And that shift changes how you use it, for instance instead of asking “Is this valuation real-fair-legit?”, the sharper question is “What is this valuation for?”.

Startup valuation is not a single truth, it is a lens. And like all lenses, it can distort as much as it can clarify.

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