As Blume has grown, we've looked at the empirical data and discovered that the vast majority of our investments were referrals from our contacts in the ecosystem. We invest in about 10-12 of these per year. This includes referrals, cold mails, DMs on social channels etc. We get anywhere between 4,000 to 5,000 ideas pitched to us annually, across the team, across all formats. The above framework helps us shortlist but finally, it is a (increasingly improving) trained gut call that ends up building out the portfolio. Great founders overcome all of this but if we can select such that we have better odds at the starting point, why not? As the funding ecosystem matures, we may shrink weightage of this in the future. We force ourselves to evaluate how much capital may be required to build to exitable scale and how challenging it is to raise that capital. Investability or probability of next rounds of capital: The reality of how the later stage funding market is shaped to take risky bets in the ecosystem is important to consider while funding, especially in young and concentrated ecosystems like India, and that’s why we attribute 20% weightage to this element in India. In every decision, once the other two factors are seen as a go, the clincher element in a yes/no decision boils down to the founding team – their expertise in solving for this space, as well as the integrity, mission, passion and persistence that one can gauge at this early stage of business. At Blume, we try to find a portfolio balance between founders who can chase a large market opportunity domestically or build a tech-led differentiated product for global markets (which increaseįounding teams: These are the most important variables for us or even most VCs at our stage.
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. That said, one has to begin with the aggregate opportunity being very large.
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The best founders know how to reshape a market opportunity and build solutions to fit the largest of the market opportunities. Market size or opportunity: Pick too small a market and even the best team can’t build a large scalable business. Let us double click on these three criteria. Our approximate weightage for Opportunity : Team : Investability is 40 : 40 : 20. 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.
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