A startup fund is largely defined by (a) the results it delivers, (b) the process it follows to deliver the results, (c) team behind the process and (d) the underlying thesis of the investments that should deliver superior returns.
Our investment thesis is fairly unique, and deeply embedded in our sourcing, selection & finalization process. Here are the salient points:
- Industry : We’re industry agnostic and have invested in everything from logistics tech to ed-tech, D2C brands to health-tech. However, we’re very sensitive to investing only in domains that we are capable of analyzing in-depth.
- Stage : We typically invest at Pre-Series A stage, where the Product-Market fitment has already been established, the company has delivered revenues with positive operating margins, and is ready to scale to the next level.
- Traction : We’ve generally invested in companies that have crossed Rs. 25L pm in SaaS / product subscription revenue (with 80%+ GM), or Rs. 75L pm in a combination of services & product revenue.
- Founders : In addition to looking for highly driven founders with rock-solid qualifications / pedigree, we also look for experience/maturity and relevance of experience to the field of the startup (Founder-Market fitment). Also, we carefully assess the founding team’s capability to be able to handle organizational growth as the company scales.
- Conservatism : ironically, is the key to our investment style. We have picked-up best practices from private equity (both: growth and value strategies), capital markets and successful VCs. Along with assessing the TAM and opportunity to scale 100x, we also find ways to minimize risk of failure (startup shutting down). There are a lot of direct/indirect levers we apply to make this happen.
- There are no perfect stories : having assessed 2600+ startups, and have analyzed both type-I and type-II errors in startup selection, we have come to believe that there are no picture-perfect startups. If we find clear evidence of the massive market opportunities, and if we are able to understand the current gaps / challenges in the startup’s growth story, we may go ahead with investing with very favorable terms of investment with risk mitigation.
- Big (strategic) picture, combined with micro/execution details : We believe that the big picture is critical (innovation, strategic vision & mission, differentiated business model etc.). However, we also believe that capital efficiency is equally important. We carefully assess the operating model of the venture (how frugal they are, how efficiently they run their operations etc.). We believe that an eye-for-detail at micro-level helps minimize decimation till we reach Series A. From there on, a startup can perhaps afford to compromise efficiency for speed, but not at our stage.
- Potential Category Leadership : Most of our investments are in companies that are already frontrunners in their respective fields, or are on track to become category leaders in that field.
If you have any comments/feedback on our thesis, feel free to ping any of our Partners. We love to keep learning and evolving 🙂