Don’t Chase Valuation, Chase Customers

How the Smartest Founders Engineer High-Multiple Companies

Valuation is never just a number. It’s a story. And the best stories aren’t written in pitch decks or data rooms—they unfold in the real world, with customers who renew, expand, and evangelize.

Founders who chase valuation—obsessing over the perfect multiple, the next funding round, or the latest investor sentiment—miss the point entirely. Valuation isn’t created in the boardroom. It’s created in every customer contract, every renewal, every expansion deal.

And the companies that command the highest valuations? They have something in common: customers who stick, spend more over time, and provide a foundation of recurring, scalable, and efficient revenue growth.

Valuation Is an Output. Customers Are the Input.

Sophisticated investors don’t just look at topline growth; they scrutinize its quality. They ask:

• How predictable is this revenue?

• How much does it cost to acquire and retain customers?

• Do customers expand their spend over time, or does revenue churn away?

A company that acquires customers at scale, locks them into long-term contracts, and expands wallet share year over year doesn’t need to fight for valuation—it earns it.

Building a Business That Demands a Premium Multiple

If you want to increase valuation, stop focusing on what investors want to hear. Instead, focus on what customers want to buy—again and again.

🔹 Sticky, Embedded Products – The best customers aren’t just users; they’re dependents. When your solution is so deeply integrated into a company’s workflows that removing it would be painful, you’ve won. Enterprise software with high switching costs (financial, operational, or psychological) commands premium multiples.

🔹 Multi-Year Contracts & Auto-Renewals – Annual contracts are good. Multi-year contracts are better. But the gold standard? Multi-year contracts with built-in renewal mechanisms and COLA (Cost of Living Adjustments) or CPI +X%. This pricing power compounds revenue predictability and inflation-proofs your business.

🔹 Expansion Revenue Is the Growth Engine – Investors love a company that can grow without relying solely on new customer acquisition. Expansion revenue—upgrades, add-ons, increased usage—signals product-market fit at scale. Net Revenue Retention (NRR) above 120% is a valuation supercharger.

🔹 Low Customer Acquisition Cost (CAC), High Customer Lifetime Value (LTV) – It’s one thing to land customers. It’s another to do it efficiently. Investors look for a CAC-to-LTV ratio of 1:5 or better—meaning for every dollar spent on acquiring a customer, they return five or more over their lifetime. If you can acquire and retain customers at scale, the valuation math takes care of itself.

🔹 Network Effects & Competitive Moats – The most defensible businesses create lock-in effects: data moats, ecosystem integrations, and network-driven value. When customers get more value from your product as the user base grows, you create a self-reinforcing valuation driver.

The Investor Perspective: How This Plays Out in a Valuation Model

From an investor’s lens, these factors translate into:

1. Revenue Predictability: Long-term contracts + high retention = lower risk discount.

2. Efficiency of Growth: If every dollar of revenue growth requires massive spending, valuation suffers. If growth is driven by land-and-expand strategies, pricing leverage, and organic demand, valuation multiples rise.

3. Margin Expansion: Enterprise customers with COLA contracts and increasing usage over time lead to stronger gross margins—another key driver of valuation multiples.

What This Means for Founders

The takeaway? Stop chasing valuation. Chase customers.

• Build a business so integral to your customers that they can’t leave.

• Engineer contracts and pricing structures that increase revenue per customer over time.

• Focus on efficient, scalable customer acquisition, not just growth for growth’s sake.

When you do this, valuation becomes a byproduct. Investors will see the strength in your numbers. Your business won’t just be valued higher—it will be worth more.

And that’s how you win.

Let’s talk about positioning your business for the next stage of growth—capital, M&A, or strategic positioning for an optimal valuation.

Tom C. Schapira
Founder and CEO
Imagine Capital Group
E: [email protected]
Website http://www.imaginecapitalgroup.com

Securities Offered through Wellesley Hills Securities. Member FINRA/SIPC