BlumeBold

In our framework, we look at three criteria to evaluate startups – size of market or opportunity, team quality and finally, investability or probability of the next round of capital. Our approximate weightage for Opportunity: Team : Investability is 40: 40 : 20

Market size or opportunity: Pick too small a market and even the best team can’t build a large scalable business. The best founders know how to reshape a market opportunity and build solutions to fit the largest of the market opportunities. That said, one has to begin with the aggregate opportunity being very large. For example, are Ola and Uber a ride hailing app or a large scale urban transportation business? The market size expands 5-10x when the latter is applied. Conversely, we had some of our Fund I companies being too narrow in their definitions of market – one said we’ll build the best product for rich media collaboration by designers, architects, advertising professionals. That’s a tool business that will take very long to differentiate and charge a premium for and the base is narrow. It may turn out to be a great $10m revenue business that is highly profitable, resulting in a $100m exit value business over 10 years. With this model it is definitely not easy to build a VC-endearing $50-100m revenue business.

We invest in startups that are Indian at heart or origin, but are willing to conquer the world market if needed to build scale. About a third of our portfolio is of this nature – taking Indian engineering skills to build products for global markets. Unfortunately, We DO NOT invest in startups that are international and have NO strong Indian connection / founders. We are also strong believers that to invest as a ‘generalist tech VC’ as we are, we need to be more and more focussed on a particular geography. We need to see as much of the available annual pipeline to know that we’ve truly picked 10 great founders / startups to invest in. We have no such advantage when we are looking outside the country; which is why we stay away from the temptation of looking at pipeline from international markets.

With our new Fund, our fourth since inception, we are looking to invest about 60-65% of the new fund in domestic-heavy sectors such as healthcare, financial services, commerce and brands, jobs and education, and digital media and entertainment across B2B as well as B2C. The other 35-40% of the fund will focus on software tech (Cloud, AI, analytics, SaaS, vertical software) and deep tech (agritech, security, robotics, IoT, blockchain) companies, typically in B2B, that can innovate and engineer with local talent pools, and yet scale globally.

We like both. India is a consumer market that is poised to explode, as people move to the digital economy to spend an increasingly larger share of their wallet’s purchasing power. That makes it attractive to build a strong consumer proposition in India. And thus our B2C portfolio. We are also now very good at taking our science and engineering skills in software and other areas, and building commercial applications at scale, often for the global market. These constitute the majority of B2B ideas in our portfolio and we like this space a lot.