Entrepreneur:

Dr. Malpani, everyone tells me fundraising is about valuations and term sheets. But the more I talk to investors, the more I realise it’s actually about… control. And ego. And fear. Why is this so hard?

Dr. Malpani:
Because money reveals character.

The truth is simple:
Every fight between investors and founders boils down to two things — valuation and control.
Everything else is just legal paperwork pretending to be important.

 

The Valuation Trap

Entrepreneur:
Let’s start with valuation. Founders want it high. Investors want it low. End of story, right?

Dr. Malpani:
And that zero-sum thinking is precisely why both sides lose.

Founders treat valuation like a vanity metric.
Investors treat it like a negotiating trophy.

Neither is asking the right question.

The right question is:
👉 Is this business becoming more valuable every month?

If yes, valuation will take care of itself.

If no, arguing about valuation is like debating the resale value of a broken scooter.

Entrepreneur:
But won’t a low valuation demotivate founders?

Dr. Malpani:
Only if the founder is in love with paper wealth instead of real progress.

I’d rather own 30% of something growing than 90% of something dying.

The goal is not:
“Look how rich I am on a pitch deck.”

The goal is:
“Look how many customers fight to pay us.”

Control: The Silent Battlefield

Entrepreneur:
What about control? Investors want board seats. Veto rights. Founders want independence.

Dr. Malpani:
Because both are afraid.

Founders fear:

“The investor will hijack my company.”

Investors fear:

“The founder will sink my money.”

So both start installing legal bombs.

Entrepreneur:
So who should really control the company?

Dr. Malpani:
The customer.

Not the founder.
Not the investor.

The moment customers love you —
you gain negotiating power.

The moment customers leave you —
no term sheet can save you.

Trust Is Not Soft. It Is Strategic.

Entrepreneur:
Everyone talks about trust. But it sounds like a vague, fluffy word.

Dr. Malpani:
Trust is not fluffy.

It is economic infrastructure.

Just like roads make trade faster —
trust makes decisions faster.

A high-trust startup raises money faster, hires better, pivots quicker, and bleeds less.

A low-trust startup drowns in lawyers, clauses, and paranoia.

How Founders Build Trust with Investors (Without Brown-Nosing)

Entrepreneur:
So what should founders actually do?

Dr. Malpani:
Three radical habits:

1️. Tell Bad News Faster Than Good News

Most founders hide trouble.

Smart founders advertise it.

Nothing builds confidence faster than:

“Here’s what’s broken and here’s our plan.”

Bad news ages like milk.
Transparency ages like wine.

2️. Treat Investor Money Like Your Mother’s Pension Fund

When founders behave like gamblers,
investors behave like control freaks.

Respect creates freedom.

Waste creates surveillance.

3. Obsess Over Cash Flow — Not PR

Revenue is nice.

Profit is power.

Cash flow is oxygen.

The business that pays its own bills
can choose its investors.

The business that burns cash
gets interrogated by them.

How Investors Build Trust with Founders (Without Acting Like Gods)

Entrepreneur:
What about investors? What should they get right?

Dr. Malpani:

1. Add Brains, Not Just Bank Balance

If you only bring money —
you are a commodity.

If you bring insight —
you are priceless.

2. Respect Founder Psychology

Founders are not employees.
They are emotionally married to their company.

Treat the business like a spreadsheet
and you lose the founder.

Treat the founder like a human
and you win the company.

3️. Praise Publicly. Criticise Privately.

Ego destroys faster than fire.

A founder whose dignity is protected
will protect your capital.

The Frugal Innovation Advantage

Entrepreneur:
You believe in frugal innovation. How does this build trust?

Dr. Malpani:
Because frugal founders are not gamblers.

They are engineers of survival.

They experiment cheaply.
They scale systematically.
They treat capital as fuel, not fireworks.

Investors trust:

• Businesses that survive winters
• Founders who fix leaks before expansion
• Teams that build moats, not castles

Valuation ≠ Respect. Control ≠ Vision.

Entrepreneur:
So what should founders chase instead?

Dr. Malpani:
Three things:

✅ Revenue that recurs
✅ Customers who refer
✅ Teams that stay

When those happen —
valuation becomes easy.

When those are absent —
no valuation is fair.

Final Truth Bomb

Entrepreneur:
If you had to explain trust in one line?

Dr. Malpani:

Trust is built when founders stop selling dreams and start delivering results — and when investors stop seeking control and start offering wisdom.

Closing Advice to First-Time Entrepreneurs

Dr. Malpani:

Don’t think:

“How do I extract maximum valuation?”

Think:

“How do I build a business that doesn’t need rescue capital?”

Don’t ask:

“How do I dilute less?”

Ask:

“How do I create more value?”

Don’t chase investors.

Build something so good that
investors chase you.

And Finally…

Trust is not built in pitch decks.

It is built:

• In late nights
• In honest conversations
• In painful decisions
• And in boring financial discipline

The startups that win long-term
are not the loudest…

They are the most trustworthy.