Short Story: I’m an Angel – but I like being the Devil’s advocate

Posting a snippet from a recent conversation I had with one of our investors and mentor. I still love and respect the guy.

The point of this post is two-fold:

  1. As founders we keep reminding ourselves (and at times our mentors and cofounders do so) of the big picture we set out to paint. The fundamentals need to be remembered. The same applies to some of our stakeholders- they need to be reminded of this as well. Even more so as this is not their 24×7 activity – it’s the job of the founders to keep this up.
  2. Since we are kickstarting the next round, this might also help keep the wrong ones away 😉

INV: Read your quarterly update, love your updates! Making this the default template for all my investees. This is good traction to discuss next round with Mr. A and Mr. B and get them on board.

Me: Thanks! Sure, as we’ve discussed, the idea is to avoid individuals unless they bring key strategic or cerebral leverage, prefer to work with institutional funds.

INV: Sure, but do you think with our ask of USD YY M, institutional funds will participate?

Me: Off-course, they would. Couple of them have been flirting. The ticket size is right up their alley.

INV: So how much are we valuing the company at?

Me: Not stuck on a number, but USD YY M is what we want to raise for our immediate goals. I’m guessing, funds have their standard methods to arrive at a value.

INV: Yes, you’re right. So let’s say they take X%, (does his math aloud pre money, post money etc)….. this means the company is valued anywhere between USD 5YYM to 6.5YY M.

 Me: May be, in Hindi it would mean INR 30YY Cr to INR 39YY Cr

INV: (Suddenly realizes, after hearing it in Cr,  that this number is very big!). I’m looking at your billing/ ARR numbers. This would mean a P/E ratio of 30-40!!

Me: You’re right, at current state.

INV: (Laughs out loud) Were we having this discussion 3 years back, I would have laughed louder and dismissed this. I’m still laughing but I know this would fly in the current market. How can companies get such P/E?!

Me: I have two inputs, but before that, have you been hanging out with those ‘Laalaa’ investors from angel syndicates?

INV: Oh C’mon!

Me: (A) I have been investing in publicly listed companies, some of my block buster mid-caps trade at P/Es equal and higher than this. So its not unreal. Check out some of the tech companies as well at NASDAQ. These will eventually correct, however the investors bet on the potential. Large companies with ‘standard’ P/Es dont have a significant growth potential.  

(B) I thought early stage investing was always about betting on the potential. With the current numbers and strong validators we’ve seen, do you not believe that this company can reach earnings of USD 5YY M at all?

INV: Off course-we’re seeing a much bigger opportunity.

Me: Well that earning point is an approximate P/E of 1(one) at current price – you can do your math of whatever is real.

INV: Absolutely- don’t get me wrong, I’m on your side and in this for the long run. I’m just playing the devil’s advocate.

Me: Super! Sir please continue being an angel – don’t take the the devil’s side 🙂

INV: haha!! I’m on for this, and also will take lead in setting up two of these meetings for you. Lets go for it!


When was the last time your reminded a stakeholder about the fundamental vision?