Introduction
The world economy operates within a deeply entrenched dichotomy; the categorisation of nations into "developing" and "developed." This label, though often meant as a neutral descriptor, imposes an unspoken hierarchy.
When these terms were popularised, they likely aimed to spur growth and development across less-industrialised nations. However, today, the reality is more complex. This labelling, combined with historical inequities and current economic systems, perpetuates disparities between nations.
The designations maintain a global order that favours established economic powers, while the so-called "developing" countries continue to struggle to gain global recognition
Beyond Net Worth Rethinking Business Value in an Age of Illusions
When a start up enters a landscape dominated by buzz words like “unicorn,” “valuation,” and “net worth,” companies are usually judged on the basis of their potential rather than the profits they make. This culture fuels a fixation on lofty valuations that rarely reflect sustainable operations or real cash flow, masking the genuine financial health of organisations.
As we navigate an economic “winter,” it's essential to scrutinise the metrics by which we assess value, looking beyond net worth and revenue to understand what makes a company truly successful.
This discussion becomes particularly relevant when we look at companies like Wiz, the cloud security startup that recently turned down a $23 billion acquisition offer from Google.
CEO Assaf Rappaport justified the decision by saying the company could grow even bigger, with the potential to become a $100 billion leader in cloud security. But Wiz’s story, along with those of high-profile startups like Byju's and Theranos, raises essential questions; are these valuations meaningful if they are disconnected from profitability? And how did we come to idolise “net worth” over what might be called “cash worth”—the real, operational value that reflects a company’s liquidity and profitability?
Net Worth vs. Cash Worth: The Danger of Valuation Obsession.
In today’s investment culture, net worth—the valuation of a company based on assets minus liabilities—is often seen as a measure of success. However, cash worth, which could be described as the liquid, operational capital a company has at its disposal, a clearer picture of a company’s actual financial health.
Cash worth is the money in the bank, the resources companies can actively use to fund their operations, and a measure of their ability to survive without external financing. When companies and investors focus exclusively on net worth, they risk creating a facade of success that overlooks fundamental weaknesses.
In Wiz’s case, the $23 billion offer and a recent valuation of $12 billion signal enormous potential. However, potential and profit are not the same. While Wiz has been successful in achieving $500 million in annual recurring revenue with a goal of reaching $1 billion by 2025, the valuation raises the question of whether this high market worth genuinely reflects the company’s long-term financial sustainability.
Revenue without Operational Cost Transparency
One particularly troubling trend in the startup ecosystem is the celebration of revenue without accounting for operational costs. Revenue is frequently touted as a sign of success, but it is only part of the financial story.
High revenue does not necessarily mean high profit, especially when companies are spending significant amounts to generate that income. In many cases, companies raise millions—or even billions—in funding but find that their operational expenses are nearly as high as their revenue.
Consider a hypothetical scenario where a company raises $100 million but incurs operating costs of $90 million, yielding revenue between $95 and $105 million. In such a case, the slim margin leaves little room for growth or reinvestment, let alone a sustainable path to profitability.
Yet, this cycle of spending to sustain revenue is often overlooked, leading to valuations that don’t reflect underlying operational risks. Byju’s, the Indian ed-tech giant, exemplifies this dynamic. The company raised billions but has struggled to convert this capital into profit due to high operational costs, aggressive expansion, and debt.
Similarly, "Theranos" provides a stark example of a company that achieved high valuation on potential alone, without proving the technology or profit model necessary for sustainability. These cases reveal the dangers of overlooking operational costs and profit potential in favour of inflated valuations.
Wiz and the Perception of Value in Cloud Security.
When Wiz CEO Assaf Rappaport turned down Google’s $23 billion offer, he cited a belief in the company’s ability to become a $100 billion powerhouse in cloud security.
He argued that cloud security, with its expansive future applications, would eventually surpass traditional sectors like network and endpoint security. Yet, Wiz’s valuation and growth prospects reflect a larger trend in tech; a fixation on potential market dominance over immediate profitability.
Wiz has undoubtedly achieved impressive milestones. With $500 million in annual recurring revenue and an ambitious target of $1 billion by 2025, the company is well on its way to an IPO.
However, Rappaport’s comments also illustrate the challenge of balancing high valuations with practical growth strategies. While Wiz has made significant inroads in the cybersecurity market, the company’s risk-averse approach to acquisitions and reluctance to scale indiscriminately are telling.
“Having the money doesn’t mean that you need to be active,” Rappaport noted, signaling an awareness of the potential cultural and financial risks of overexpansion.
However, the question remains; How much of Wiz’s valuation is based on realistic growth projections, and how much on speculation? As Rappaport and his co-founders hold out for further growth, it’s worth considering the lessons from companies like Byju’s and Theranos, where sky-high valuations eventually faltered due to misalignment between valuation and actual cash flow.
A Culture of Valuation: Why We Get It Wrong
The culture of speculative valuation, where companies are assessed based on projected worth rather than actual performance distorts the perception of entire industries. For instance, Wiz’s position in the cybersecurity space elevates expectations for similar companies, leading to sector-wide inflation in perceived value.
This trend encourages founders to focus on valuation milestones rather than building sustainable operations. Investors, too, are often more focused on betting on “the next big thing” rather than supporting sustainable growth strategies.
This model of investing and evaluating companies often results in a focus on the wrong metrics, leading to a glorification of companies that raise vast sums without clear paths to profitability. By centring discussions around valuation and net worth, we overlook fundamental business principles.
The outcome is a business ecosystem that rewards inflated projections over realistic performance, leading to misallocation of resources, unrealistic expectations, and ultimately, economic instability.
Toward a Sustainable Business Paradigm.
If we are to avoid future economic “winters,” it’s time for investors and companies alike to rethink what constitutes value in business. A new framework for evaluating companies could include factors like cash worth—focusing on actual liquidity and operational capital—and sustainable profit margins.
By shifting focus from speculative growth to practical, grounded financials, we could create a healthier startup ecosystem where resilience and profitability are valued as highly as potential.
For CEOs and founders, this approach would mean building a business model that prioritises operational efficiency, realistic profit margins, and cash flow management.
For investors, it would involve a shift away from seeking the next unicorn and toward supporting companies that demonstrate robust, tangible contributions to their industries. As Assaf Rappaport and Wiz chart a course through the competitive cybersecurity landscape, it will be critical to balance ambition with sustainability.
Turning down a $23 billion offer was a bold move, but one that must be grounded in more than just high valuation projections. For the broader market, the lesson is clear; success should be measured not by net worth alone, but by a company’s real ability to generate profit, deliver value, and sustain growth without relying on constant external funding.
Conclusion
In an era where companies are often valued based on potential rather than performance, the business world stands at a crossroads. Wiz’s decision to turn down Google’s acquisition offer is a testament to the promise of high valuations.
However, as we look to the future, it’s crucial to prioritise a business culture that values sustainability over speculation. The economic “winter” that has begun to settle over the tech industry serves as a reminder that valuation alone is not a safeguard against hardship.
Real value lies in resilience, profitability, and the ability to weather economic storms—traits that only sustainable businesses possess. In the end, the “next big thing” in business may not be the next unicorn, but the companies that can demonstrate long-term viability.
Only by valuing real-world profitability over speculative worth can we hope to create a more balanced, resilient, and ultimately prosperous business landscape.
References 1. Privacy International, "Digital Colonialism: Big Tech Exploitation of Developing Countries," 2019. 2. Centre for Research on Multinational Corporations, “Clinical Trials in Developing Countries,” 2020. 3. Amnesty International, "Exploitation in the Cobalt Supply Chain," 2019. 4. International Labour Organisation, "The Digital Economy and Decent Work," 2021. 5. TechCrunch, “Wiz CEO Explains Why He Turned Down a $23 Billion Deal,” 2024.
