#006 Investment Selection

Investment selection methodology is typically driven by a fund’s investment thesis, opportunities / areas of focus, stage of participation, and target returns.

Yet it’s hard to compare / co-relate investment selection process of one fund with another; one often sees very different looking portfolios emerge from similar kinds of funds!

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In fact, funds with similar investment thesis may tend to make different investment selections - clearly there is more at play here than the obvious quantifiable tangibles!

Intangibles such as the ‘chemistry’ between the fund manager and the entrepreneur make a huge impact on the investment decision. For example, some fund managers like aggressive founders who are highly self-assured and follow their own path, while others like founders who are malleable in nature and could be coached with ease.

Our thinking at Cornerstone is a mix of such factors too. Summarized below:

Tangibles: Quantifiable - therefore measured as a part of the selection process

1. Opportunity - Market Size, Market Characteristics, Solution Uniqueness, Value/Impact Created, Competitive Intensity, etc.
2. Scalability - Growth Strategy, Smart Growth Hacks, Partnerships, No / Low Capex Models, etc.
3. Capability - Domain Depth, Team Strength, Partnerships, Customer Traction, Revenue Pipeline, etc.
4. Monetizability - Business Models, Revenue Models, Value-creation Potential, Exit Opportunities, Ease of Exits, etc.

Intangibles: Learned via. the diligence process and interactions with the founders

1. Alignment of Vision - It’s more important for us to align with the Founder’s vision for the company rather than push our views through
2. Maturity & Fortitude - Entrepreneurship is no easy journey and several meandering paths lead to success; founders need to have the maturity to see through this journey while keeping an eye on the end-goal!
3. Transparency & Forthrightness - Critical attributes that we look for in founders; these typically emerge through our diligence process

- Abhishek

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