# Do Startup Valuations Matter for Investment Returns?
*Published: 2023-10-24*
*Source: https://chrislema.com/do-startup-valuations-matter-for-investment-returns*
---<small>7–9 minute read</small>

We walk through dispersion, power laws, and why entry price still matters in a world of outliers.

## The Myth: “Valuation Doesn’t Matter”

You often hear VCs say, “We’re price insensitive.” In a power-law world, one winner can return the entire fund. But that logic ignores the math behind outcomes.

Entry price defines ownership, and ownership defines exposure.

## Understanding Dispersion

Returns in venture capital follow extreme distributions. The top 10% of deals generate nearly all returns. However, if you systematically overpay, your multiple compresses—even if you pick a winner.

An investor who buys 5% of a company at $20M pre-money versus 10% at $10M pre-money ends up with half the return for the same exit.

## The Power Law Meets Math

Power laws are unforgiving but predictable. Lower entry prices compound returns faster. Price matters less if you have perfect foresight—but no one does.

## Practical Takeaway

Valuations reflect narratives, but narratives change. Discipline in entry price isn’t cynicism—it’s survival.Early-stage investing is still about conviction, but it works best when conviction meets math.