The arithmetic happening on the other side of the table, and how to check whether the number you’re asking for is survivable.
Founders pick a valuation from ambition and comparables. VCs read it as a claim about who buys you, for how much, and by when.
We asked Hlayisani Capital co-founder and partner Brett Commaille, who has spent around 15 years in SA venture, what actually goes through a VC’s head when a founder names their number…
The move: work backwards from the exit, not forwards from the ask
A VC typically raises a 10-year fund, invests it over the first two or three years, and has to exit before the fund closes. Meanwhile the best companies are 15 to 20-year journeys, so the fund has to catch a business at maximum growth potential and get out. Your valuation is the opening move in that arithmetic, not a standalone judgement of your worth.
“That’s a huge problem whether they’re right or wrong.”
How to sanity-check your valuation with the 10x exit math
1. Multiply your ask by ten
Because most investments in a portfolio go slowly or fail outright, the winners have to win big enough to carry them. That means a VC entering at R500m needs to be looking at something like R5bn on the way out. Take whatever valuation you’re about to name and put a zero on it, because that’s the number the person across the table is quietly testing.
2. Ask whether SA exits at that size actually happen
This is where the check bites. Brett’s question is simply how many South African companies you’ve heard of selling for R5bn, and the honest answer is not many. If your implied exit sits well above what this market has demonstrated it will pay, you’re not asking for a valuation, you’re asking an investor to bet on an event with very little precedent.
3. Check what that exit would require you to have built
Exits at that scale generally mean international buyers, and international buyers don’t engage below a certain size. Which means by exit you’d already have expanded into markets those buyers care about, and growing a business into another market is one of the hardest things any founder attempts. If your number depends on that going right, the odds get thin quickly.
4. Check the number against your actual revenue
The version Brett finds hardest is a R500m ask on R5m of revenue, or none at all: no connection with reality, and so far off that an investor may not be able to talk you back to earth. With revenue, valuation is at least semi-scientific, because there are databases of comparable transactions to reason from. Without it, you’re dividing by infinity, which is exactly why instruments that defer the valuation exist.
The big payoff
Run the maths yourself and you walk in with a number you can defend, rather than one that ends the conversation before your product does. Brett’s own caveat is worth keeping: the only thing he can guarantee about any valuation is that it’s wrong. He’s watched a business valued at R27m grow its turnover from R20m to R220m and still draw a buyout offer of about R30m, which tells you everything about who really sets the price.
“Willing buyer, willing seller. If your product doesn’t sell for rands or dollars across the table, it’s not worth anything.”
Want the full story?
Brett’s full fireside from Founder Collab Live is available to members inside the Founder Collab, where he goes further than we could cover here:
The over-raising trap, and how founders end up with 10% of their own business
Why a VC wants you to have enough runway rather than the cheapest possible equity
The four types of buyer who could actually acquire you, and what each one pays on
The three cues that decide whether you pass a first meeting
Why market is critical but team is everything, and the war story that taught him
You’ll also get access to 40+ masterclasses from SA founders and operators on sales, fundraising, UX, paid media and more inside The Founder Collab.
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