Chapter 10Valuation Fantasies and the Art of Disappointment

During Polarr’s hypergrowth phase, when we were interviewing candidates on a weekly basis, people would often ask about potential exits right after they saw the proposed equity package. It made sense—everyone wanted to do the payout math. I still remember one early interview when a candidate asked, “So, what’s the end game for you guys?” Without hesitation, I said, “We wouldn’t sell unless it’s for a billion.”

I said it so casually and convincingly that the interviewee might have thought there were some deep insights or metrics behind this ostentatious claim. It didn’t. Borui and I were two recent grads with no idea how valuations worked, no real understanding of M&A, and far too many TechCrunch headlines rattling in our heads. Back then, billion-dollar outcomes didn’t feel extraordinary—they felt inevitable. We thought if we simply continued hacking and growing, someone would come knocking with an offer sheet.

What I didn’t understand then is that valuation isn’t a reflection of your effort, your product, or your team. It’s a reflection of timing, buyer strategy, market cycles, and sometimes pure luck. It took me years — and an avalanche of no’s with a couple painful termsheets— to finally appreciate how M&A valuations actually work.

Most acquisitions fall into four categories: acquihire, asset sale, revenue multiple, and strategic. Each one has its own logic, risks, and emotional cost. And while the billion-dollar headlines all come from the last bucket, most deals live and are a blend of somewhere in the first three.

When founders imagine exits, they picture the last type — strategic. The kind where a visionary Mark Zuckerberg calls you up and says your company is the missing piece of his grand plan. But statistically, most acquisitions happen for far less glamorous reasons. The buyer needs a team, a technology, or a customer base. Understanding which lane you’re in will save you a lot of heartache and wasted energy.

Acquihires are the simplest and, in recent years, the most difficult to pull off unless you are a frontier lab full of PhDs working on bleeding edge AI. As the name suggests — “acquire plus hire” — they’re about talent, not product. A buyer has a team gap they need to fill quickly, and they buy yours to do it. Their priorities are simple: can your researchers or engineers pass their interviews, and will they commit to working there for the next two or three years? If the answer to either is no, the deal won’t happen. The economics reflect that reality — most of the compensation comes as retention, not up-front cash. And since 2025’s wave of AI tools has driven engineering supply higher, even those deals have become harder to come by.

When I look back, I wish someone had told me that no one in an acquihire cares about your original vision. They’re not buying your product or your mission — they’re hiring your people. Overselling your big dreams can actually kill the deal. The buyer expects to shut down your old product, redirect your engineers, and move on. It’s not personal; it’s just how these deals work. So if you can’t see yourself — or your team — working at that company for two or three years, it’s better not to even start.

Asset sales generate similar windfalls for the shareholder as an acquihire, but emotionally they can be much harder. They’re what happens when a buyer only wants parts of your company — the codebase, patents, customer contracts, or maybe just the brand name. It’s the corporate equivalent of a clearance sale. The buyer takes what they want and leaves the rest — liabilities, leases, debts — to you and your board. There’s rarely any meaningful equity or cash transfer, and what proceeds you do get are taxed as corporate income before you even distribute them. In some cases, it’s the only viable path forward, but it’s never the dream ending.

Then there are revenue-based deals, usually driven by private equity. Buyers look at your annual recurring revenue, EBITDA, and growth predictability, then assign a multiple — typically 2–3× in slow markets and 4–5× in better ones. These deals usually happen when a company is doing at least $10M ARR or $2–5M in EBITDA with steady, repeatable growth. In most cases the new board hires an outside professional executive team to run the company, and you can walk away from the deal with a very short transition period with cash in hand.

And then there’s the dream scenario — the strategic acquisition. This is where headlines are made and founder myths are born. A strategic acquirer believes your company is essential to their future — the missing piece in a new product line, a defensible moat against competitors, or a key to unlocking a new user base. In these cases, the valuation is not grounded in math; it’s mostly narrative. But that narrative can justify extraordinary numbers if the buyer truly believes in it.

The catch is, you can’t engineer a strategic acquisition. You can’t will it into existence with slide decks or banker outreach. It happens when a specific decision-maker at a company decides you’re their solution — and even then, it’s still unpredictable. The first offer is rarely the best. And before you celebrate, make sure the buyer can actually close — plenty of “strategics” make generous offers they can’t finance. Private stock offers might sound impressive, but they can easily turn into illiquid paper worth nothing.

It took me a long time to let go of the fantasy that valuation was something we could control. At one point, after a couple good quarters, we sketched numbers on a whiteboard and convinced ourselves we were worth nine figures during the boom phase of M&A in 2021. A few months later, we were staring at a term sheet that valued us lower than our cash in the bank. Same team, same products, same metrics — completely different market. That’s when I realized valuation is never a verdict on your company; it’s a snapshot of a buyer’s confidence at a single moment in time.

There are really only two kinds of leverage you can have in an M&A: multiple interested buyers, or the ability to walk away. Most of the time, you won’t have both — but you should have at least the latter. The best leverage we ever had wasn’t a bidding war; it was the knowledge that we could continue running the company profitably without selling. The moment you don’t need a deal, the dynamic shifts completely. Buyers can sense it.

So if there’s one takeaway from all this, it’s this: know what kind of deal you’re really in. Don’t compare your acquihire offer to someone else’s strategic exit. Don’t benchmark your asset sale against a unicorn headline. You’re not playing the same game. The work to close is just as hard in all of them, but the outcomes — and the emotional costs — are vastly different.

Now that you have an internal gauge on the expected valuations, let’s look at ways to get your personal finances in order before embarking on the M&A journey.