Balancing Story and Spreadsheet: Building Long-Term Value Through the Cycle

The terms “Long-Term Value” and “Valuation” conjure very different images. The former connotes stories of company building, long-term capabilities, and competitive advantage. The latter is the realm of Wall Street, spreadsheets, and financial ratios. These questions are two threads of a fundamental rope, twining together to answer a question: what is a company worth? Spreadsheets are scoreboards that, when combined with current trading multiples, describe what a company is worth. Stories describe what an entrepreneur can build to support the spreadsheet's assumptions. Eventually, the validity of every story is proven in the spreadsheet. 

Both stories and spreadsheets are critical to entrepreneurs and investors alike. They drive not only your valuation but your success at every step of the journey. The relationship between the two determines the following:

Ignore spreadsheets and current values, and you will have to raise money at a more dilutive price than you’d like (or worse yet, not be able to raise). Forget the longer-term story, and you will allow incumbents to catch up or startups to spring up from the weeds and overtake you.