Post the heady days of 2015 and 2016, we have remained in a consolidation phase. This has meant a slow pace of deal making with investors asking a lot more questions around the business models, scalability and unit level economics among many other aspects. This has also meant that entrepreneurs are focusing more on creating businesses rather than merely focusing on valuations. Given the reset in expectations from both sides, deal quality has improved significantly leading us to believe that when we see these deals maturing, exits will be lot more broad based and returns would be in sync with the value created on the ground by these businesses. This will signify another step in the right direction depicting ecosystem maturity.
We have been involved with startups since 2006 and have had the good fortune of enjoying a ring side view of the ups and downs, trials and tribulations, sweat and glory of the early stage ecosystem. That said, the ecosystem is still nascent and has a long way to go before it matures. The multitude of opportunities that the early stage digital ecosystem throws up are the stuff of dreams. Any asset allocation deserves to have a sliver, if not a whole lot, of exposure to startups.
We presume that since you are reading this newsletter, you are already interested in startups and are most probably sold to the idea of participating in this ecosystem one way or another. As an investor in startups, we keep fine tuning our investment process and ensure that we find the very best ideas and teams to backup. In the following section, our managing partner, Rajesh Sehgal, will share his approach and experience to evaluating startups. What works, what doesn't? What to look for, what’s important, what's not?