How do you evaluate startups for inclusion in your portfolio?

- Management: are this team the right team to solve the problem in front of them? - Market: is the opportunity big enough to generate venture level returns? - Product: is the product unique and has some defensibility, at scale at least if not right now?

The quality of the market you operate in ultimately dictates the fate of many startups. Things you should consider: - How big an opportunity is this, and how broad or narrowly do I need to focus? (will vary hugely depending on business model). - Who else is operating here, or could operate here in the future? - Are users/customers more or less likely to pay for this in 3-5 years?

The very first thing is to recalibrate your data-driven mindset and be curious. This preconceived data-driven mentality suffers hindsight situations and ignores emerging niche markets. So, getting in proper curious and exciting mentality is very necessary. Now, you have a clear conscience, one simplest thing you, with a large capital pool in the pre-seed market, can do is invest one minimum amount like an angel investment in all emerging markets, which are not hyped at least. Start looking at market opportunity not in terms of market size $$$ but the Customer demographics and its size, if the venture gets successful. This is a fee to keep ahead in the VC game.

For us at the pre-seed stage, the team is everything. We want to get a good feel for your unique industry insights, technical capabilities, unfair advantages vs. competition and a strong co-founding relationship - one that is founded on deep mutual respect and trust. These are the key ingredients we look for.

Try to calm your "gut feel" (status quo bias?!) and consider some leading indicators that a team will learn what it takes to lead the scale-up. The Horizon37 fitness test allows investors a cool-headed and structured assessment. It indicates how likely a leadership team is to go on the growth journey and get good at leadership (fast) - for example, by considering how consistent their ambitions are, what level of regard they have for each other, and how ready they are to learn and grow together.

Depending on where you are in your investment phase, you would take into consideration the maturity of the start-up and the timeframe for an exit. Early on in your investment period, you can take the risk on early stage ones as you can hold them for longer. Whilst you are nearing the end of your investment period, you would tend to focus on those with clearer exit opportunities.

If you are raising a pre-seed round, you want to be weary of dilution. Chances are, you are a long way from exit/liquidity and you will likely require more equity raises to further the business. Have a long, hard think about the type of partner you're bringing on and if they are worthy of a seat at the table for the decade+ journey. If you can't find reasonable partners and/or favourable terms, have a think about ways in which you can derisk/validate the proposition further and attract better, more sophisticated investors.

I feel like a lot of what was written above are the same concepts that any individual should consider when looking at any early stage venture deal. If we are truly going to answer the question being "How do you evaluate startups for inclusion in your portfolio?" then I would recommend to begin by looking at the market maps of the industry verticals that your venture fund wants to be in. After that consult with many founders building in that vertical and ideate the ideal points of entry along that stack of products/services. Lastly, begin building your team of subject matter experts and tech founders in that industry vertical and don't bother entertaining anything else that does serve the aligned interests of your new team.

As an investor I look forward to two types of investments. 1. Which makes sense as per my teams experience, expertise and possible collaboration with my existing investee companies. 2. New age ; models / business / customers / technology etc etc. This is because this can be a high risk high reward Alfa investment. For example if I have never invested in automobile ancillary and the project is not new age ; I would not be keen. Example 2 If I have invested in a micro finance company or NBFC or wealth management company and now have the option to invest in mutual fund / insurance new age tech / app ; I may examine synergies.