The Stubbornness Trap: Why Founders Misunderstand Valuation and the Brutal Reality of the Buyside

In venture work, you encounter every imaginable stripe of founder.

Some are sharp teenagers building code in their bedrooms, some are retrenched corporate veterans turning a lifetime of scar tissue into an enterprise, and many are senior-preneurs bringing decades of domain expertise to a brand-new table.

They come from entirely different past lives, socioeconomic backgrounds, and geographic corridors, but almost all of them share one defining psychological trait: they are pathologically stubborn.

This stubbornness generally manifests in two distinct categories that silently kill companies long before they ever reach scale.

Valuation Delusions and Pre-Revenue Hubris

The first kind of stubbornness is structural, centering entirely on valuation.

Founders universally believe their business babies are the prettiest in the room

Pre-revenue, pre-proof-of-concept startups routinely demand multi-million-dollar valuations based on nothing more than a PowerPoint deck and ungrounded optimism.

Even seasoned operators fall into this trap. It is not uncommon to sit across from a founder running a traditional business pulling in a few hundred thousand dollars annually who prices their equity at a valuation more than 100 times their actual net earnings. I know many of such people who're almost always white-collared highly educated sorts.

They confuse historical sentiment and personal sweat equity with actual market liquidity.

The Buyside Holds the Pen

The root cause of these blind spots is a fundamental misunderstanding of market mechanics. Founders constantly frame their struggles around the sellside, treating a lack of traction as a temporary marketing problem.

But in reality, business success is never about the sellside—it is always and only about the buyside

The sellside is defined by a lack of leverage: anyone desperately trying to peddle shares, any company struggling to hire because their budget is tapped out, or any founder waiting for a market that has already moved on.

Conversely, the buyside consists entirely of those cutting checks for equity or holding multiple competing offers.

The buyside holds the power, and their opinion is the only one that actually matters

Yet, sellside founders stubbornly hold on, drinking their own Kool-Aid.

They convince themselves that everything will be fine, that their "white knight" investor is just around the corner, or that the market will eventually recognise their genius. That prospective deal might finally come in. Have faith they said.

It is the exact psychological profile of a stubborn job seeker demanding a CEO's salary at an entry-level firm, convincing themselves that they are a strong, independent worker and that management will eventually wake up and pay them what they are worth.

Never Raise When You Need It

This brings us to the golden rules of financial survival.

There is an old, cynical banking axiom that states banks will only ever lend money to people who don't actually need it. The exact same principle governs the venture and capital markets:

Never raise funds when you need funds; do it when you don't

The worst time to raise capital is when your cash reserves are flatlining, your runway is measured in weeks, and desperation is bleeding through your financial statements.

Investors smell panic the way sharks smell blood in the water, and they will use your vulnerability to crush your valuation.

When you don’t need the money, you hold all the leverage.

When you desperately need it, you are entirely at the mercy of the buyside.

Recognising the Runway

If you are sitting on a massive war chest of capital, generating massive cash flow, and have plenty of strategic options at your doorstep, go ahead and be as picky as you want.

There is no problem with holding your ground when you hold all the cards.

The danger arises when you are burning the candle at both ends and the end of the runway is rapidly approaching.

Old adages exist for a reason: a bird in the hand is worth two in the bush. The rare media headlines shouting about startups selling for billions of dollars overnight are structural anomalies, not repeatable templates for everyday business owners.

If an "ok deal" lands on your table, take it.

If you are terrified of regret or worried about missing out on future upside, structure the transaction cleanly—include call options or earn-outs to maintain a stake as a control for regret.

Modern financial mechanics offer an endless array of tools to bridge valuation gaps and protect legacy. Happy to share over coffee if you pay for it.

Common sense tells us that nothing legitimate yields risk-free double-digit returns year after year, and simple arithmetic dictates that businesses trade on cash flows, not wishful thinking.

Drop the stubbornness, face the buyside realities, and protect your future before the market makes the decision for you.

----------

About the author: Ian has been running SEED Ventures, an MAS-licensed VC since 2013. He part-time teaches in NTU and was a business mentor at NUS. Media contact: ian.gan@smaths.com