The dilution trap
Many entrepreneurs still approach valuation with a deceptively simple formula: Valuation = amount raised ÷ equity stake given away.
On the surface, it looks logical and reassuring. In practice, it creates a false sense of clarity. This calculation doesn’t capture the intrinsic value of a business; it merely reflects the balance of power in a negotiation. Entrepreneurs who rely on it alone enter the discussion on the back foot, facing investors who are far better equipped.
Why one method is never enough
Unlike public markets, the private sphere offers no instant price reference. Every valuation must be built, justified and defended.
The most common approaches all have their shortcomings:
- Sector multiples depend on relevant comparables. Yet in an opaque private market, such data is often partial, inaccessible or unreliable, making the exercise fragile at best.
- Traditional VC methods (scorecards, First Chicago, risk-adjusted NPV) mainly reflect the investor’s perspective, embedding a risk premium that systematically disadvantages the company side.
The outcome: relying on a single approach puts entrepreneurs at a disadvantage. Investors can bring several models to the table—often contradictory—while the company’s argument remains one-dimensional.
Today, platforms such as ScaleX Invest change the picture. By aggregating millions of private-market data points and combining multiple methodologies, they provide a multifactorial valuation framework that is fast becoming the baseline for serious negotiations.
Valuation as a reflection of the business model
A sound valuation reflects the ability of a company to grow sustainably. The relevant metrics differ by sector, but coherence across them is always essential.
- In SaaS, ARR provides a baseline, but churn, Net Revenue Retention and gross margin define the real picture. Two companies with £2m ARR can end up with very different valuations depending on these indicators.
- In e-commerce, GMV or gross revenue are insufficient. The real drivers are customer loyalty, cohort stability and unit economics.
- In marketplaces, GMV is one of the most misleading metrics. What matters is the net take rate, liquidity balance between supply and demand, and the defensibility of network effects.
In short, a credible valuation must show both scalability and resilient economics.
Structuring your valuation to gain the upper hand
A multidimensional approach changes the dynamics of investor discussions.
- The one-dimensional entrepreneur arrives with a target figure based on a multiple or equity percentage. They are quickly destabilised once deeper questions arise.
- The multidimensional entrepreneur brings together several methods, aligns their metrics with sector standards and demonstrates internal consistency in the business model.
This preparation delivers three decisive advantages:
- Credibility: speaking the same financial language as investors.
- Objectivity: shifting the debate from impressions to data.
- Control: knowing which metrics to prioritise in order to optimise valuation over time.
From illusion to informed control
French venture capital is professionalising fast. Fundraising rounds are larger, more complex, and investors more demanding. Mastering valuation has become a necessity, not a luxury.
Valuation is not a simplistic formula but a rigorous construction, grounded in data quality and business model coherence.
Entrepreneurs who continue to rely on percentage-based shortcuts remain at the mercy of investors. Those who embrace a structured approach take back control and negotiate on equal terms.
FAQ: How ScaleX Invest supports asset managers
Why can’t funds rely solely on traditional valuation methods?
Because traditional approaches depend on comparables that are often opaque, partial or biased. ScaleX Invest provides a more reliable view by aggregating millions of private data points and combining multiple methodologies, ensuring valuations are robust and defensible with LPs and auditors.
How does ScaleX Invest strengthen a fund manager’s credibility?
By delivering precise sector benchmarks and a multifactorial approach, the platform enables valuations that are objective, consistent with market standards, and aligned with regulatory frameworks such as IPEV and IFRS.
Does the platform cover all types of private assets?
Yes. ScaleX Invest adapts to a wide range of business models and financial instruments: SaaS, e-commerce, marketplaces, private debt, stock options (BSPCE), and fund of funds. Key indicators (ARR, NRR, churn, take rate, market multiples, etc.) are incorporated to reflect the operational and financial reality of each asset.
👉 See also: The main valuation methods used by investors
