Overvalued assessments — a real obstacle to acquisitions

Anuar Lenzat, city — Almaty, Hokage RS Bootcamp venture studio, investor relations manager at Activat VC, Instagram

In my work — whether within Activat VC or the RS Bootcamp venture studio — we frequently face the challenge of attracting institutional investors to portfolio startups. This is one of the most difficult yet crucial processes: institutional players, whether corporations or funds, can provide not only capital but also become powerful partners in scaling.

However, most startups, especially those from Central Asia, are primarily focused on the local market. Their traction, even if it looks promising locally, is often not interesting enough for foreign funds and corporate partners.

Nevertheless, there are situations where discussions go quite far. We talk about pilots, integrations, and work out the legal structure of cooperation. It seems everything is going well — but suddenly negotiations stall. Why?

Valuation. Specifically, an overvalued assessment with high multiples.

We have observed several times how the process falls apart not because of technology, not because of the team, and even not because of legal or operational difficulties. Everything came down to one thing: the startup is too expensive according to the internal logic of the corporation. For example, a company with a team of 8-10 people and revenue of $20,000-$30,000 per month claims a valuation of $12 million. And while this might be justified for the venture market with certain assumptions, inside a corporation, everything works differently. You can certainly say that valuation is determined by who is willing to invest at that valuation. Yes, venture funds can invest in companies at such valuations, but when a venture fund wants to sell its stakes in the portfolio, it will likely face the same issue, and that's sad.

At first glance, it may seem that $12 million is not such a large sum for a corporation with billion-dollar budgets. But here, it's not numbers but psychology that come into play. For a corporate employee, especially at the middle or even top level, the decision to invest in such an asset is a personal responsibility. It's not about logical justification but about internal risks:

— "What if this startup doesn't survive?"

— "What if its valuation drops threefold in a year?"

— "Will I be fired for this?"

— "Will they say I underestimated the risk?"

A corporation is a complex bureaucratic machine. Even if a person wants to work with a startup, and even if the business unit confirms interest, an excessively high valuation begins to cause internal dissonance. Against the backdrop of a small team, limited traction, and essentially an early stage — the amount seems inadequate to the risks. Therefore, the probability of making a decision approaches zero. Not because it's "expensive," but because it's "personally dangerous." This is certainly not an axiom; there are other cases, but I'm talking about what I've seen myself.

When a corporation sees an interesting product but faces a valuation it is not ready to accept, it doesn't always leave the market. Sometimes it simply starts copying. There have been cases where discussions went far, but due to the high price, the corporation assembled an internal development team or ordered a similar product from third-party contractors. This is, of course, unethical and ungentlemanly. But from a corporate perspective — it's "rational." Especially if the product lacks deep protections: patents, exclusive access to data, or a unique team.

What to do about this?

1. First of all, assess your company realistically if you are not aiming for the global market. Yes, you have the American dream, but we must be realistic. If you definitely know that you want to be acquired by a bank/telecom from Central Asia.

2. Build relationships with several levels within the corporation. Often, one person can "slow down" the deal. The broader the support — the higher the chance that fears will be mitigated.

3. Consider intermediate formats. Pilots, joint products — can become a bridge to a larger deal in the future.

Valuation is not just a number on a slide. It's a signal. And if it's inadequate to the stage and scale of the company, it's perceived not as confidence but as a "threat." It's important for a startup to remember that in the world of corporate institutional investments, the winner is not the one who loudly proclaims their value, but the one who can sell it in a clear and safe way.