No Such Thing as Value Investing in Early Stages

There are two schools of thought on price in early-stage investing.

Gokul Rajaram has a very clean take: 800+ investments over 20 years have taught him that price is irrelevant at seed, as long as it’s below a reasonable number. If it’s a great company, your entry price doesn’t matter. If it’s not, your entry price doesn’t matter either.

Ritesh Banglani says something that feels equally true. He’s lost several deals on price, some he deeply regrets. But he wouldn’t have wanted all of them back. The problem is you can’t selectively overpay for winners, because you don’t know who your winners are for years. Pay up across the board and you either make fewer bets or own less of each and neither is free. His resolution: instead of offering the lowest price he can get away with, he offers the highest price he can live with.

Both make compelling arguments. But I’ve come to a simpler conclusion: there is no such thing as value investing in the early stages.

The case for price discipline

The argument for being price-sensitive is straightforward, and worth taking seriously.

At seed, you don’t know which companies will become large. That’s not a maybe, it’s a fact. Nobody does. And if you can’t tell winners from losers upfront, being loose on price means you’re overpaying across the board. That either shrinks your portfolio or dilutes your ownership in every company, and both quietly erode your returns.

This is sound logic. It’s the kind of thinking that protects you from a lot of bad outcomes. Makes sense for growth stage/private equity investments.

But I think it optimises for the wrong thing at early stages.

Why price doesn’t matter

If you’re investing at the early stages, you’re swinging for the fences. You’re not trying to be right often. You’re trying to be meaningfully right a few times.

And when one of your companies does become large, truly large, what was the entry price again? A rounding error.

Your job at seed is to get into the right companies. The companies that go on to become 50x, 100x outcomes don’t care whether you entered at a ₹100cr valuation or a ₹150cr valuation. At that scale, the difference is noise.

The real cost isn’t overpaying. The real cost is not being on the cap table at all.

What actually matters is ownership

Here’s where I think the conversation should really be: not price, but ownership.

Every early-stage check gets diluted. That’s just the game. Over subsequent funding rounds, your stake shrinks, more so in consumer companies, because they end up raising a lot more over time. So if you don’t start with meaningful ownership, you end up with very little by the time the great company reaches scale.

This is why ownership matters more than price. The question isn’t “is this priced fairly?” It’s: “if this works, will I own enough for it to matter?”

And that reframes the entire decision. If you can get to your required ownership at a given price, pay it. If you can’t, either invest more to get there or let the opportunity go. The worst outcome isn’t overpaying, it’s owning too little of something that works.

And I can see you rolling your eyes, going, “isn’t being inelastic on ownership the same as being inelastic on valuation?”. I don’t think it is the same thing, because how much you invest can change depending on your ownership target. It changes the line of questioning and the mindset.

The counter-argument and why I still disagree

The natural retort is: if you don’t know which companies will succeed, how can you justify ignoring price? You’d be overpaying for your losers too.

And that’s true. You will.

Let’s make this concrete. Take a 200cr seed fund deploying across 20 companies.

The price-sensitive investor targets lower valuations. They invest ₹10cr into each company at an average post-money of ₹75cr, picking up roughly 13% ownership in each. They pass on anything priced above that. Over time, dilution across funding rounds brings their stake down to about 6-7% by the time a company reaches scale. Of the 20 companies, let’s say 15 don’t work out i.e. write-offs or modest outcomes. Four return 3-5x. And one breaks out, reaching a 5,000 crore exit. Their 6% stake in the winner returns ₹300cr. Solid. The portfolio returns roughly 2.4x overall.

The ownership-focused investor cares less about entry price and more about getting into the right companies with meaningful stakes. They invest in 15 companies instead of 20. Average check size is higher, say ₹15cr, and they’re willing to pay a ₹100-120cr post-money when conviction is high. They pick up 15-17% ownership and end up with 7.5-8% post-dilution. Similar hit rate: most don’t work out, a few return decently. But they didn’t miss the breakout company over a valuation disagreement. Their 8% in that same 5,000 crore exit returns ₹400cr. Overall portfolio return of ~3x and they’re on the breakout’s cap table.

Now the scenario that actually matters. What if the price-sensitive investor passed on the breakout company because it was priced at ₹120cr instead of ₹75cr? They deploy that ₹10cr into another “reasonably priced” deal that returns 2x. Their portfolio still has the four decent outcomes, but the fund barely returns capital. The ownership-focused investor, who paid up, still has their ₹400cr. The gap between the two portfolios isn’t marginal—it’s the difference between a forgettable fund and a great one.

And here’s the final twist. What if the breakout company doesn’t exit at 5,000cr but at 10,000? Now the price-sensitive investor who passed is staring at a 600cr miss. No amount of discipline on the other 19 deals makes up for that hole.

The math keeps pointing in the same direction. At the early stages, the cost of missing your winner is almost always greater than the cost of overpaying across the portfolio. Price discipline feels prudent in the moment. But it compounds into regret at exactly the scale where it hurts the most.

As they say in venture, better to avoid acts of omission over acts of commission.

There’s an India-specific nuance here worth acknowledging. India hasn’t yet produced the kind of 100x+ exits en masse that the US sees almost every fund vintage. The private markets aren’t deep enough yet, and the exit landscape is still maturing. So a lot of investors here optimise for more moderate outcomes and in that world, price sensitivity makes sense. If your best case is a 2-5x, entry price genuinely affects your returns.

But I think that’s a bet against the market deepening. And I’d rather position for the India where those outsized exits do start happening, because when they do, the investors who optimised for ownership over price will be the ones who benefited most.

I find myself reminding people over and over again - in the early 2010s, if you were investing in Indian public markets, how many companies did you think would cross $50bn in market cap by 2020? The answer, looking back, is effectively zero for most of that decade. Nobody would have thought India would have $50bn outcomes.

India’s entire listed market cap in 2010 was only around $1.6-1.7tn. In the early 2010s, not a single Indian company sat consistently above $50bn. By mid-decade, maybe Reliance and TCS occasionally touched that mark. Even by 2017-2019, the count was only 3-4 at peak - Reliance, TCS, HDFC Bank, and perhaps one more.

Fast forward to 2025: India’s total listed market cap is around $5.5tn, and there are 8-10 companies above $100bn - Reliance, Tata Group, HDFC Bank, TCS, Bharti Airtel, ICICI Bank, SBI, and others.

The market didn’t just grow; it created an entirely new tier of scale that didn’t exist fifteen years ago.

Now imagine an investor in 2012 who was price-sensitive about buying Reliance or HDFC Bank because “the valuations felt stretched” or “the upside was capped”. The ones who cared too much entry price missed one of the greatest wealth-creation decades in Indian market history.

The ones who focused on owning the right businesses and staying in them would have done extraordinarily well. The same logic applies to private markets, just with a lag.

The founder is the real diligence

If price isn’t the gating factor, then what is? The founder.

At seed, almost everything about the business will change, the product, the market positioning, sometimes even the market itself. The one thing that stays constant is who’s building it. So the diligence that matters most isn’t on the business plan or the TAM slide. It’s on the founder.

The challenge is that in the early days, you just don’t know. Founders who look generational sometimes aren’t. And founders who seem unremarkable at first sometimes turn out to be extraordinary. Which is exactly why founder diligence - deep, honest, reference-heavy diligence, is the most important work an early-stage investor does. If you get the founder right, the price takes care of itself. If you get the founder wrong, no amount of price discipline saves you.

Closing thought

I don’t think there’s a universally right answer to the price question. Your stance on it probably says more about your temperament than your model. I’ve discussed this at length in my previous post - Conviction is the only business model in Venture

But if I had to simplify how I think about it today: price is not the variable that determines whether an early-stage portfolio succeeds or fails. Ownership is. Get into the right companies, own enough for it to matter, and let the outcomes take care of the rest.

The alternative is looking back at a company years later and thinking—I should have found a way to own more of that.