The New Valuation Playbook: What Investors Reward in 2025

Growth vs. Margins: An EM Field Guide

Founders are constantly optimising for growth vs margins – Understanding the market environment in 2025, and projecting forward, how should founders approach this topic?

The answer in 2025 is finally clearer than it has been in years. After the “growth at all costs” frenzy of 2020–2021 and the “funding winter” of 2022, public markets have recalibrated. Today, investors are paying a premium for companies that can grow and generate cash – for business models that scale efficiently rather than endlessly.

From Growth-at-All-Costs → Growth-That-Pays

The shift, however, plays out differently across regions. In developed markets, investors are rewarding free-cash-flow and profit durability. Companies like Uber, DoorDash, and Airbnb have been rerated not because they are growing faster, but because they are sustaining double-digit margins while still expanding. In emerging markets, the story is more conditional. Growth still sells, but only when it comes with a short, credible bridge to self-funded profitability. Investors are no longer impressed by topline only; they’re asking to see cohort payback, contribution margins, and clear visibility to profits.

The new playbook is built around what investors actually underwrite. In developed-market tech, the conversation has shifted from revenue to quality of revenue. Platforms that convert scale into margin – through ads, subscriptions, or fees – are commanding higher valuations. The takeaway is simple: mid-teens growth with durable cash beats 30-percent growth that burns cash.

In emerging markets, the focus is on proving that operating leverage works. India’s Zomato is the clearest example. Once its quick-commerce arm Blinkit started turning a profit, analysts upgraded its valuation methodology from a discounted cash-flow model to a blended P/E and DCF approach – a sign that profitability, not GMV, now sets the multiple. Profitability milestones, not promises, are what move the market.

What market actually rewards in 2025

Metrics matter more than ever. EV/GMV and other vanity ratios hide the real story; they don’t capture monetisation quality. Investors now look first at EV/Gross Profit and its growth-adjusted version, EV/GP/Growth – metrics that reveal how effectively a platform turns demand into contribution. DCFs and “present-value-of-future-value” models still matter, but only when they’re grounded in clear margin trajectories. The companies that can translate city-level density into higher take-rates and stronger free-cash-flow conversion are the ones closing the valuation gap with developed-market peers.

That gap, in fact, has already narrowed. As shown in the first chart, developed-market tech firms trade at roughly 3.5× revenue, while emerging-market peers average 2.8× – only about a 20 percent difference once you adjust for growth. A few years ago, the gap was twice that. Investors are no longer discounting companies simply because of where they’re based; they care about whether growth is translating into cash. The divide now is between businesses that can fund themselves and those still reliant on capital markets.

Retail media has also become the quiet multiple-expander of this cycle. Platforms that host user intent – from rides to food delivery to local search – are sitting on high-margin ad inventory. Ads only work, however, after reliability and repeat behaviour are in place. Get the order right – density, reliability, retention, then monetisation – and your P&L starts to look more like software than logistics.

Zomato’s rerating: A case study

This pattern is what underpins Zomato’s rerating. As its food-delivery and quick-commerce units is estimated to turn profitable around FY26, its market value rose from roughly US$25bn to about US$36bn. The difference wasn’t more orders; it was belief in sustainable earnings. Once investors saw profit visibility, they paid up for the same growth. Zomato’s path illustrates how valuation expansion in emerging markets now follows the same rulebook as in developed ones: prove your economics, then your geography.

For founders, the takeaway is clear. Growth still matters – but in 2025, it’s profitable growth that drives value. Investors are no longer grading on ambition; they’re grading on evidence. Publish your gross profit, not your GMV. Show your bridge from contribution to EBITDA to free cash flow. Build density before expansion, reliability before ads. Because the companies that do these things aren’t just better businesses – they’re the ones the market is willing to pay for.