Netflix vs Paramount Bidding War: Part 2 - The Certainty Valuation Multiple
The Startup Lesson: Price x Certainty = True Valuation
Valuation Creates Headlines. Certainty Closes Deals.
The True Valuation Equation
Price x Certainty (index) = Valuation
There’s a foundational startup lesson transpiring real-time in the daily headlines surrounding the Netflix vs. Paramount bidding war for Warner Bros.
The CNBC commentary has now shifted from headline price valuation to “certainty of valuation.”
Headline (or Price) Valuation was the first week’s headlines.
Who bid more?
My valuation is higher!
“My bid Is cash” (but really it’s debt and promises of cash).
That’s the wrong way to view valuation bids.
The right way is how they are talking about this deal now.
Is the cash guaranteed?
Are they willing to put it into escrow upfront?
The real valuation question is:
Will the deal actually close?
In other words…. Certainty > Price
I believe Certainty should be expressed as an index with a baseline of 1.0 and therefore:
Price x Certainty = Valuation
Certainty can be greater than 1.0 due to strategic synergies of combined assets and when a company’s valuation can demand a premium to the fair market value price.
More often than not, Certainty is less than 1.0 and discounts the headline valuation.
Digging into the actual terms of any deal is the work that needs to be done in any potential deal.
Are there terms like ratchets? Or worse, what we saw with Service Titans “Forced Ratchets” hidden inside the terms?
Are there preference multiples or compounded dividends?
Are there Earn Outs that are a large part of your headline acquisition offer?
This is a critical startup/ VC lesson as you learn to scale and value companies.
Valuation Without Certainty Is Just Hope
In any acquisition, boards don’t evaluate bids on price alone. They evaluate:
Certainty of close
Certainty of financing
Certainty of regulatory approval
Certainty of execution post-close
Certainty that the strategic rationale actually materializes
Acquirers certainly understand the “Certainty” metric.
Welcome to the Earn Out portion of their valuation bid.
For Boards/Investors?
A higher bid with lower certainty can be less valuable than a lower bid with higher certainty of closing and a stronger balance sheet.
Don’t ever forget, the “winner” isn’t always the highest bidder. Smart money takes the bid with the highest certainty to expected future value.
Netflix’s advantage in their Warner Bros bid isn’t just their balance sheet, it’s their operational certainty.
Proven global distribution
Existing content monetization engines
A history of integrating assets at scale
A clear strategic narrative the board and shareholders and future shareholders can believe in
2 Key Lessons to Apply Here:
Certainty reduces risk.
Risk discounts value.
This Is the Investor - Founder Value Alignment Problem
Founders obsess over valuation.
Investors obsess over certainty of realizing that value.
You may have heard a few phrases along the way such as:
“De-risking the deal” or “the company has solved the technology risk and only has the GTM risk remaining”.
Or
“You name the price, I’ll name the terms”.
In startups, value is not what your board deck says. It’s what the business can reliably convert into growth and cash and strategic partnerships.
The Bottom Line Lesson:
Most startups struggle to raise money not because of the opportunity to create future value. (Value Creation)
They struggle to raise money due to investor confidence + lack of certainty of capturing the future value opportunity. (Value Capture)
To get specific, here’s where startups confuse value vs certainty:
1. Revenue Potential vs. Revenue Reality
Value claim: “This market is massive.”
Certainty question: Can you reliably win and monetize it?
2. Product Capability vs. Adoption Certainty
Value claim: “Our product is better.”
Certainty question: Will customers switch, onboard, and expand?
3. Pipeline Value vs. Close Probability
Value claim: “We have $20M in pipeline.”
Certainty question: What percentage closes and when?
4. Strategic Optionality vs. Execution Capability
Value claim: “We could expand into three new products”
Certainty question: Do you have the team, systems, and focus to execute even one?
The “Certainty Questions” above are how the smart money values companies.
Why Investors, Boards, and Acquirers Price Certainty Higher
Certainty shows up as:
Repeatable sales motions
Predictable unit economics
Stable leadership teams
Clear decision ownership
Systems that scale without heroic juggling
This is why boring companies with predictable execution are often valued higher than “exciting” companies with a great story but chaos under the hood.
2 More Key Lessons
Certainty compounds
Chaos is a huge valuation tax
The CFO / COO Lens: You Are the Certainty Architect
This is where your finance and operations leadership becomes critical.
Your real job is to increase the certainty of future value:
Turning numbers into narratives
Turning narratives/stories into more certain numbers
Turning forecasts into confidence ranges
Turning strategy into structured operating systems
Turning plans into execution rhythm and rigor
When certainty increases:
Your valuation goes much higher
Capital gets cheaper
Your Exec Team, Employees, and Board/Investors all lean in instead of leaning back. “Winning” does that to everyone.
Strategic optionality becomes real vs PowerPoint theoretical
A Simple Test for Founders
Ask yourself this:
A: “If someone acquired us tomorrow, how much of our value is already locked?”
B: “How much of our value depends on ‘if everything goes right’?”
A - B = The Certainty Gap
Close The Gap, Increase Your Value
Final Thought
Netflix vs. Paramount isn’t about who values Warner Bros. more on paper… inside the terms of a legal bid.
It’s about which bid has more certainty of future value and certainty the deal on paper can actually close.
The same is true for your startup.
Valuation today = short term psychological value
Price x Certainty = long term actual value
The smartest Boards don’t just ask:
“Who offered more?”
They ask:
Who will actually close?
Who can integrate better?
Is the resulting combined future product better?
Who can execute the synergies on paper?
Startups are no different.
Most founders overestimate value and underestimate how much “certainty” discounts their company value, and they don’t fully realize how to increase certainty in order to increase their value.
Predictable execution beats sexy narratives over the long term every time.
If your value depends on “if everything goes right,” expect the market to price you accordingly.
Value x Certainty is your real company multiple.
