My 1st Lesson in Valuation: How I Exchanged 5 Pesos for a 20 Peso Bill.

When I was five, my mom would give me spare change every now and then. I guess she wanted me to learn about numbers and money. It started with 50 centavo coins. Then 1 peso coins. Then 2 peso coins.

One day, she gave me a 5 peso bill. Remember those? They were green and had Emilio Aguinaldo on them.

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I was a proud kindergarten student. I actually own 5 pesos! I was ecstatic.

Until my seat mate in school showed me her 20 peso bill.

banknote 20 philippine peso obverse

WTF. Though I was five, I understood the relative value of her piece of paper compared to mine.

Yet, she gave my 5 peso bill a second look.

My 5 peso bill was crisp. It still had that new glow. It was smooth, tucked neatly in my kiddie wallet. In contrast, her 20 peso bill was crumpled. It looked like a few hundred hands had passed through it.

My piece of paper was green. As we were talking, it became clear that she adored green more than orange. She didn’t want the five pesos. She wanted the green, shining, shimmering, splendid piece of paper that was labelled five pesos and had Emilio Aguinaldo’s face on it.

So I did what any sensible five year old would when faced with that opportunity.

Gusto, palitan nalang tayo?” (Would you like to exchange?)

She agreed.

So she got her clean, crisp, green five peso bill. I got my fifteen pesos profit. In five minutes. That translated to an annual return of 31,536,000 %.

Will put on ridiculous fashion for cash.

Me at 5. Will put on ridiculous fashion for cash.

That was probably the best deal I’ll ever do in my lifetime.

That was also my first lesson in dealmaking: that value, like beauty, lies in the eye of the beholder. She believed that the five peso bill was more valuable to her.

(Maybe she had other twenty peso bills and that this twenty pesos was worth less than a new green one to add to her collection. Who knows.).


Today, startups and investors make a similar trade. An investor provides cash in exchange for a percentage of a company that both believe will be worth way more in the future.

Even though an investor is giving you the 20 peso bill in exchange for shares that may not be worth much today (but may be worth A LOT in the future), he must also see the green, shining, shimmering, splendid piece of paper with Emilio Aguinaldo’s face.

Because the odds of the startup succeeding (on a *holy shit* scale) are so mathematically improbable that he must see beyond the numbers and make a decision not based on calculation, but on belief.

That belief is based on you: the entrepreneur. You’re the shiny five peso bill. And in the earliest stages of a startup, that belief comes from a strong sense of self worth.

Last year, I met a team of five talented software engineers from a prominent university. They were working on a startup.  They seemed pretty solid, articulate and thoughtful. One had a master’s degree. All had work experience. It was one of the rare concentrations of engineering talent in the local startup scene; I’d hire them if had a chance.

When asked how much they valued themselves, they said something around the range of a million pesos.

We don’t feel we have what it takes to ask for a higher amount. People might think we’re arrogant.

It’s that experience and talking to countless other startup founders that made me realize that the biggest barrier facing Filipino entrepreneurs is self-worth.

And some unscrupulous investors know this. That’s why we hear stories of so-called “angels” asking for 50-70% of a venture at the seed stage.

So, on self-worth: yes, your investor is giving you cash. But you, the entrepreneur, are  also offering something that is arguably of greater value: the time, energy, blood, sweat, tears and anguish founders face.

In the Philippines, there seems to be a stigma on putting a monetary value on oneself. Blame it perhaps on the communitarian culture. Or that story of Jesus kicking out entrepreneurs from a temple. I don’t know. That’s a topic for a separate post.

It’s ironic that the very people who can propel this country forward (founders)  undervalue themselves; yet those who hold it back overvalue themselves (politicians). I digress.


My new prized possession, the 20 peso bill, was kept in a small plastic box inside a drawer in my room. A few weeks later, my mom found it. She was of course surprised.

She’d never given me twenty pesos. She tought I stole it. I explained the “deal”, but it was so hard for her to believe. I remember crying. And so I moved on to selling “more socially acceptable” merchandise. Like ice candy. Or comic books.


If you’d like to learn more about valuation, my education pet project Action Stack is hosting a workshop on How to Value Your Startup on Monday, November 17, 1pm at A_Space Makati.


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