Valuation Game vs Value Add Game

One of the students in my community came and said, sid, why don't you start a startup? Because you have the community, you have the resources, you have the connections, you have your ideas. Why not build a startup and make it into a unicorn and start playing the valuation game? Because that's like the hottest thing right now. And my response to him was this, that is not my idea. And thanks to the mentors who gave me the vision. I'm not playing the valuation game, I'm playing the value add game. And I'm going to actually share that in this particular podcast on why most people get allured and they get attracted by the, you know, this whole startup phase without really understanding what goes in that space. Okay? So, hi, my name is Sidharth Rajekar. I'm the founder of the Internet Lifestyle Hub where I've helped over 60 people become Karodpaties by implementing the Freedom Business model. And I'm on a mission to help a million people live a lifestyle of freedom and build a business without any office. This podcast is going to open your eyes to a new way of looking at building a business. Let's check it out.

So this is a very interesting topic because most of the people glorified in mainstream media, entrepreneurs glorified mainstream media, are the startup guys who are worth like say a few million or multiple millions. They got funded by some big company internationally and that's what is glorified in mainstream media. But the problem is the mainstream media does not understand or they don't really look at the real guys. The real entrepreneurs are providing opportunities and who are really making a difference and building communities and building like solid products and services that are serving a market and the ones who are paying taxes on time and really, you know, contributing to the country's economy. So in this particular podcast, I want to break it down into the six different types of business models. And then I'm going to do a comparison between the valuation game and value add game. Because one of the members in my community said, sid, you got all these resources. Why not you do a valuation game? Why don't you start building some edtech product or something like that? But again, I've been very clear about what I'm doing. And the beautiful thing about my journey has been that I've got the right mentors to guide me at different stage. And though it works, I'm not like against the valuation game, but it depends on how to approach it. Not just going and doing a pitch and just getting funds into the company just because you have Some basic product, some prototype ready that you want to scale. It doesn't work like that and that's not the approach I would recommend. But, but there's a slightly longer term approach. Okay, so let's first understand there are six types of business models. You have manufacturing companies, you have distribution based companies. So in manufacturing based companies you need more infrastructure, more manpower, more real estate and all of that stuff. Same with distribution. You need more space and more human components in the system. Then you have the services oriented business, the typical MSMEs who are providing services. Now for this, again, you need people, you need place, you need infrastructure costs, and you need multiple factors to run a typical traditional business. And then on the other side now you have franchise based businesses, like businesses in a box. So you can buy a franchise, whether it's a health franchise or a food franchise, and you just launch it with a proven system. And of course not all franchises are successful. The franchisees need to really get the training from the franchisor. And there are multiple factors to it. Yes, you also need human components. You need to have, you know, you need to have the right location, space, and multiple factors need to fall into place for a franchise to be successful. But the beautiful thing about a franchise is you don't have to reinvent anything. You already have a business in a box that you can actually launch and you have. The other fifth kind of business model is what I call as the aggregator based business model, which is what's the hottest thing right now. So, so you build a technology platform, let's say like Uber or Swiggy or Ola or whatever, and then you're connecting the service providers as well as the consumers and then the platform based on the number of users on that, they get valued and they basically become the attractive point for the investors for attracting Silicon Valley investors to come and put money into it. Okay, things like that. So there are many startups, like if you look at Bangalore startups and Hyderabad and Mumbai, there are so many startups that are just sprouting up right now and they're trying to play the aggregator game and building tech and tools and to really capture the market and make a difference. Some of them are doing really well, some of them are still trying to figure out what's going on. And the sixth business model is what I call as a freedom business model, which is what I'm propagating. A business model where you don't need any office, you don't need any employees, all you need is your brains and you're providing knowledge in the form of products, and not just in the form of your time, but you're giving away your products and your knowledge and expertise in the form of digital products. So that becomes much more scalable because you have lesser overheads in the system. You don't need too many people, you don't need an office, you don't need of manufacturing, shipping, handling, logistics. You can scale globally. People from any part of the world can buy a product. So there are many, many advantages of this. But of course, to really crack the freedom business model and to make it sustainable, it takes time. It does not happen overnight. Just in the case of the other five business models. If you look at the startup, the aggregator business model, there is going to be a lot of investment that one needs to make in terms of resources, people, space, marketing. You really go all out and have a spot on IPL during IPL time, prime time advertising on television to really capture the mass market to make it work. So most of these aggregators usually burn a lot of money in the first phase until they have acquired a large enough customer base and usually they start making money after a long time. And that's how Facebook also has grown. Okay, if you look at the movie, the social network, the investors came in, they scaled, Facebook became like a mass phenomenon. And now with their Facebook ad platform and buying other platforms like Instagram and WhatsApp and others, you know, all the other acquisitions. So it's a totally different game and a totally different scenario. But this, that path is very rare. Not everybody really makes it. And to become a unicorn in the valuation game space, it's not as easy as what the media portrays by just glorifying all these different companies in the startup space. So let me now tell you about the, I'll compare the valuation game and the value add game. It's not that the valuation game does not add value, but if you look at the intent of the entrepreneur starting a company or something, yes, they want to make a difference in the world, they want to serve people. But it's about, there is some exit strategy and there is something in their mind where they want to make it big and cash out. Okay? So what I believe is the root will determine the fruits. Okay? Now if you look at Mark Zuckerberg or if you look at, you know, Steve Jobs, right till his last day, they were fully vested into the company even though they got the investments. Even now Mark Zuckerberg has a lot of investors, but if you look at the innovations that he's doing with Meta and everything else, there's a lot of pressure from media, lot of pressure from governments, lot of pressure from various different things. But he's still really on it and I really respect him for that. Where he's not thinking about bailing out of the vision that he set. And the same thing with Steve Jobs, his vision is in fact carrying forward on Apple and stuff. So if you actually look at it, let's compare both of these. The valuation game is startups who build a product or they build a service which is platform based, which is scalable, which can go like mass market. Now in a value add game, like what I'm doing, also the freedom business, it is also platform based, it is also scalable, but. But it is based around digital products. Okay? Now the valuation, in the valuation game, the value is based on the user base, the number of users that are there. And of course, even if they're burning money in the initial part just to acquire the users, they look at the lifetime value of the customer, the ltv and then they start to calculate, you know, and create the value for the company. So most of the people, most of the articles you read on your story and other places where they say, you know, like this company is worth so many million or this is so many they've got funded and this is worth so many million billion dollars, billion dollar valuation. It's not that the owner can actually take out a billion dollars and walk out with it. Okay? It's not as easy. And that's what the typical mindset of the market is. If you actually look at the entrepreneur or the founder who's actually running that, or the directors are running it, they have a lot of things that they have to do. They'll be, they may be having a good salary that they're taking off because it's funded, but again, it is, it's not as easy as, it's not as glamorous as what it looks off looks on the different articles that you read. Okay? So and if you look at the value add game, the valuation is the value of, it's not valuation. The value of that particular business is based on the results of the customers. Okay? The more and more you can build communities and build results for people, that's going to increase the value of the ecosystem that you have created. Okay? So if you look at the valuation game, it is just based on user base, but the value add game is based on results. Now let's come to the valuation game. Again, it's mostly comprised of angel investors and capitalists and venture capitalists where whatever money that they put in is going to be moving into marketing on tech, on teams and space. Okay? There are four categories majorly that money will go into. So whatever money that the angel investors or venture capitalists put into the valuation game, it goes into marketing tech, teams in space, which is mainly to scale it up to the next level. Okay? Now even if you look at the value add game of the Freedom business model, the money goes into marketing, it goes into tech and it goes into teams, but the space is again not required. So in any case, in any form of business, you need to put money into these three areas. And of course there's innovation, there's also back into the community experiences and everything else. Okay? And if you look at all of this because it is based on somebody putting money into the company, the angel investor or the venture capitalist, they're all doing this based out of on an exit strategy, okay? So their whole intent is maybe they have a passion towards helping their entrepreneurs scale it up, but at the back of their mind, it's always okay, for how long can I stay in this so that I can move out, I can pull my money out, I can multiply my money so that, you know, I can exit fast or I take it to such a huge level that becomes a unicorn and then, you know, it's like a jackpot for those venture capitalists, okay? And of course now it's become into such a system that they'll be able to evaluate. And there are so many models that check whether a particular business or an idea is scalable, whether it can be profitable or not. But again, there are multiple variables, even coming down to the founder and how their operating style and how they're able to scale it up. So if you look at this, the value add game on the Freedom business model, it's all about constant feedback from the community. It is based around a long term community strategy. There is no exit strategy here, okay? That's one big difference. I'm building Internet lifestyle hub in the Freedom business model, not with an exist strategy, not with liquefying my equity or not giving my equity to anyone, because I really value the equity. I own 100% of this, me and my wife together. And it is built like that. And the whole idea is to it's based around a long term community strategy and not looking at selling it and cashing out with multiple millions. That's not even there. So again, the root determines the fruit. And because of that though, I'm more invested into the company, I'm more invested into the long term. You know, community building aspect. I'm more invested into getting results for every single member. And it is not just, okay, let me just hire some new person, let me just get some new space. Let me just buy, you know, something just for like a business expense or whatever, just to show because I've got investor money. So when you have investor money, the whole ball, the ball game changes, okay? And that. Now let's come back to the valuation game. And in the valuation game, there is a pressure to make the numbers work, especially for an entrepreneur. And I know this because in my previous agency, we had brought in an investment of $100,000 from an angel investor. And it was quite a pressure. You know, I was having sleepless nights on how I'm going to be giving this money back, okay? Because it's borrowed money. It feels good when you say that you've been funded by, for whatever, you know, 100k or 200k or $1 million. But the whole idea is there's a lot of pressure in it, okay? And unless you're very sure and you're committed to really take it forward now, even here, there's going to be pressure to numbers work. Like in my current business, there is pressure to make the numbers work, but it's more on my personal sales. I'm showing up every single week. I'm selling in webinars, I'm ensuring that I'm profitable and I'm ensuring that I'm always innovating, improving the products. So pressure is going to be there in both the situations, but the freedom is going to be there more in freedom business model, because you're not borrowing anybody's money. What you're doing is you are reinvesting your profits into scaling up the business. Okay? And that's one thing. Okay, that's one very important thing, is before anyone gets into the valuation game, they need to understand the nuances of money management in a business. They need to really understand, you know, how to really be frugal on, you know, initial expenses in the business and how to move your money in the right way to scale up the business. See these things, you know, very young startup founders and stuff. You know, though, I listen to many podcasts and I'm checking out some of them become becoming really super valuable. But usually this comes out of a little bit more experience and it comes from just having the right mentors. So if they know it's not just about, you know, you have a lot of money, you can just go and buy what we want and just start splurging into the business because you have some funded money. You have to start thinking about, you know, how are you going to be returning that money back to the. Because the investors are looking at, you know, they are looking. They are also in it for. In it for something, right? Which means that you got to not only be profitable, but really profitable for, you know, everything to work. So there's a lot of pressure. And what I've noticed in the valuation game is these startups are usually glorified on all the media platforms. Montrepreneur, Forbes, your story. And all of this, like this company is valued this much, this startup founder has made this much, or whatever the idea. But you know what? The mainstream media is not glorifying the, you know, this form of business. People who are paying taxes on time, you know, the MSME segment, people who are really. Even the freedom business model. Like there are so many people in my community who are doing phenomenally well. They are making a big difference. They have communities of 2000-3000-4000-5000, you know, members that they are nurturing every single month. They are making a difference to their lives. They are paying their taxes on time. And you know what? I feel this segment needs to be more glorified in the media as compared to that. Okay, that looks good, you know, because you can throw some big numbers. But these are the people, I can tell you, my Quantum club members, out of those 50 of them, a good percentage of them, I think collectively, not. I think collectively we have done over 108 crores in revenue sales. And you can imagine the more than 10 to 15 crore. More than that, more than 20 crores would have gone back towards the paying taxes in the government. Just the 50 of us, okay, in the last two or three years, now that is something that needs to be glorified, right? But mainstream media does not look at these things. They're only looking at the startup world. So that's the sad truth, but that's what the truth is, right? And usually the business owner in a valuation game does not have freedom, but they get mainstream fame because they get featured in all these different magazines. They feel really good. And, you know, on one side they feel good, on the other side, they can't express that they are actually living inside a golden cage. But if you look at the freedom business model, the business owner, he has freedom and he has fame. And the fame, what I call as niche fame, it is not mainstream fame. They can walk into a mall and still nobody would know what they're doing. But if they go to an event where their own community members, their own niche is there, their own community folks, they are famous in their own small little micro community that they have. So that's so much better than mainstream fame if you compare that aspect of it. And then usually if you see the valuation game, most of the entrepreneurs, it's like a hit or miss strategy. It's very, very rare to see a unicorn go and sustain. Like you look at Nokia as a company, it was a unicorn at one point of time but got replaced. So to make it sustainable and to stay in that space for a long period of time is very, it's like a hit or a miss. It's very rare that you would find companies like Apple or Amazon or you know, Facebook. And now you have, you know, many of these Indian, a few Indian companies coming up to that kind of a game. And but if you look at the freedom business model and this kind of a business model because the aspiration is not really, you know, get funding money and put it in and scale it up and make it into some big startup. That's not. The aspiration is to build community, build community and go through the different, you know, getting feedback from the community and you know, get visions from the community so that you can improve the product and make it much, much better. So the hit or miss chance of growth here is, it's on the higher side. There's a higher chance of success due to organic growth which is led by the community, which is based on the feedback from the community. And there's a higher chance to sustain through building a community of loyal customers. Because if you're really delivering value, community can see through it. And when you're able to build high ticket recurring revenues coming on the back end of your funnel, which is what I teach, you know, start with low ticket, front end and then have a high ticket backend. Like I have a 10 lakh rupee high ticket product. I have 100 people are paying, you know, 10 lakhs a year. So that's a 10 crore a year business which is recurring revenue, which is, makes it more sustainable. And I don't have, I don't have to depend just on ads, I don't have to, I don't have many odds on delivering that. It is, and I can use a good portion of that, those funds to again put it back into the front end of the funnel to really get more people in so it becomes more sustainable, more predictable and it's not up or down because of the nature of this particular business. Okay. So I hope this has given you some clarity. Just to recap, the valuation game is glorified, but it is very, very difficult and there's no freedom in that. Okay. And the ones who do it, who actually go and self fund their business and get a big investment coming in, they don't realize the pressure that goes behind it in the long run. And because it's based around an exit strategy and even though they may have the passion, yes, if they make it work phenomenal, they can hit the jackpot and really make, you know, cash out into multiple millions. But what I look at is the value add game, like the game that many of my students are playing right now is we are looking at multiple hundreds of crores in revenues. Even if it's going to be, you know, say 50 lakhs a month, 60 lakhs a month, which is actually pretty big. Okay. Many of our, many of my quantum members are earning that much right now with a healthy net profit of at least 20, 30% net profit. After all expenses and paying taxes and paying taxes on time and nurturing communities is so much more fulfilling if you actually think about it. So paying taxes, nurturing teams, having that niche fame, reinvesting that money to build platforms, improving products, changing people's lives and also having that freedom to do what you want, not really worrying about who is going to come back to you if you borrowed some money and stuff and you could take it, take it at your own pace. Like some people, they are very happy making 30, 40, 50 lakhs a month. Some of them are happy making 1 crore a month, some of them are happy making 10 lakhs a month. And the best part is all of these people are paying taxes on time and they are 100% compliant. They are keeping the overheads very less in the business in terms of infrastructure costs and people costs and, you know, multiple other things. So overall I see that if in our country we can encourage more and more people, we can start to glorify more of these, this category of entrepreneurs, we are going to see a big difference in our economy because these are the people that truly need to be put on the spotlight. Yes, the others. The startup world has its own charm. And you know what, I would say that if people have played the value add game long enough for five years, six years, maybe 10 years, they know exactly what their target market is. And maybe at that time they can think about playing the valuation game. But it is not just for mega scale, but it's for really making a difference in the market because of trying and testing their model over a longer period of time and having a loyal community that's there to support them. So I just want to sum up by saying that I'm not against the valuation game, but I'm really for the value add game. And the whole idea is if everyone can make a difference to their own communities by helping people get results, by building products and services that can actually suit that, by keeping overheads low and making it into a habit of inculcating charity and paying taxes on time, and all of this is a part of the, you know, the value system of, of your whole business process that is going to make a huge difference in the economy of the country, the nation, the world and around the world. So with that being said, I hope you found this useful. Please share your notes below. And if you're not a part of my community, if you'd like to be a part of it, go to SID Co Join and join the Internet Lifestyle Hub to learn how you can launch the Freedom Business model for yourself. All the best.

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