Setien lost for the first time since replacing Ernesto Valverde as Barca boss on January 13, going down 2-0 at Mestalla thanks to a double from Maxi Gomez – the first of which took a heavy deflection off Jordi Alba.
The Blaugrana were on the back foot for much of the match, rallying only briefly between the goals, and Setien conceded they had not played well.
The former Real Betis coach was left searching for improvement, suggesting his players had not understood their instructions.
"They still do not interpret [instructions] well or maybe we do not explain them well," Setien said. "Nobody likes what we have seen today.
"Valencia compromised us, they closed us down well. Positionally, there are things that we have to correct. We have given away many aimless passes. We do not work to do this.
"In the first half, we did not play well at all. The best thing was that we went into half-time at 0-0.
"In the second half, the team improved somewhat and we were able to get into the game, but this is not enough for us."
Setien insisted there was no issue with Barca's mentality, though, adding: "It was not a problem of attitude. I have seen how committed they are.
"We were not well positioned, we have not understood some things, while Valencia have raised the game. It has cost us."
Midfielder Sergio Busquets agreed Barca were taking time to adjust to Setien's tactics.
"I think the players have to adapt to the coaching staff's ideas," he said. "There were good things in this game and others that need to be improved."