Introduction

For venture capital investors, identifying a promising startup involves more than evaluating its business plan, growth projections or market opportunity. The real opportunity lies in understanding how technology can transform an industry, whether a business can build a sustainable model around that change, and whether its founders can execute with limited resources.

Aparajit Bhandarkar, Partner at Varanium Capital Advisors, believes that technology-led transformation remains one of the key factors distinguishing startup investing from traditional private equity. Drawing on his experience across investment banking, fintech and venture investing, Aparajit shared his perspective on identifying long-term opportunities, evaluating early-stage businesses, assessing founders and helping companies grow beyond their initial funding.

His approach highlights a central principle of venture capital: investors need to look beyond the excitement surrounding a sector and understand the underlying changes that could create lasting business value.

Technology Is What Makes Startup Investing Different

Aparajit draws a distinction between startup investing and private equity by looking at the scale of growth that technology can unlock.

In a country such as India, where the economy grows steadily, established businesses can offer attractive opportunities through consistent expansion. However, startups become particularly interesting when technology enables a dramatic improvement in how an existing process or industry operates.

He describes these opportunities in terms of improvements of five or ten times, where technology changes the economics or accessibility of a product or service rather than simply making an existing business marginally better.

His experience in fintech offers a useful example. Between 2014 and 2017, India’s payments ecosystem underwent a significant transformation. Transactions that had traditionally relied heavily on cash and cheques increasingly moved towards digital channels. The expansion of digital infrastructure, including Aadhaar and mobile connectivity, helped establish the foundations for this shift.

Demonetisation accelerated the adoption of digital payments, while the COVID-19 pandemic further encouraged consumers and businesses to transact online.

These changes created opportunities not only for digital payments companies but also for businesses operating in digital lending and wealth management. As consumer behaviour changed and new infrastructure became available, startups could build services around emerging needs that traditional players were not always equipped to address quickly.

For Aparajit, this is the kind of structural shift investors should look for. Whether it is the computer revolution, the rise of the internet, the growth of fintech or the current development of artificial intelligence, major technological transitions can create openings for new businesses to challenge established models.

The important question is not simply whether a sector is attracting attention. It is whether technology is changing the way that sector works and creating a meaningful opportunity for a new business.

Early-Stage Investing Requires Comfort With Uncertainty

One of the defining challenges of venture capital is that investors often have to make decisions before a startup has accumulated extensive financial data.

Aparajit acknowledges that early-stage businesses cannot always be evaluated with the same predictability as mature companies. Established businesses may have years of financial records that allow investors to estimate revenue, costs and future performance with greater confidence. Early-stage startups, particularly those built around new technologies, rarely offer the same level of certainty.

He sees this as a difference in investment approach rather than a problem that can always be eliminated through additional data.

Some investors prefer later-stage companies, where financial performance and business operations are more established. Others are willing to work with ambiguity, provided they have conducted sufficiently strong research and believe the underlying market trends support the company’s potential.

For early-stage investors, therefore, the quality of the research becomes particularly important. They need to understand the technological shift, the market opportunity and the conditions that could allow a startup to grow, even when the available financial information remains limited.

This also requires recognising that uncertainty is part of the investment process. The objective is not to predict every outcome with precision but to make a considered decision based on the strength of the underlying opportunity.

Understanding the Market Before Evaluating the Startup

Aparajit’s investment approach follows a progression from the broader market to the individual company.

The first step is understanding the industry and its technological landscape. Investors need to identify what is changing, why the change matters and how it could influence customer behaviour or create new business opportunities.

The next step is narrowing the opportunity to specific segments within the sector. In fintech, for example, payments, lending, wealth management and insurance represent different areas, each with its own business dynamics. Even within payments, individual products and business models may offer very different prospects.

Only after this broader assessment does the focus shift to individual companies and their capabilities.

This sequence allows investors to develop an understanding of the market before meeting founders. It also helps them ask more informed questions about the business, including its target customers, revenue model, margins, costs and competitive position.

For Aparajit, identifying an attractive sector is only the beginning. Investors must still determine which specific opportunities within that sector can support a viable business.

A promising market does not automatically make every startup operating in it a good investment. The company’s ability to capture the opportunity remains crucial.

Why Founder Capability Matters Alongside Market Size

Market size and technological potential may establish the foundation for an investment decision, but Aparajit also places considerable importance on the founder’s ability to build a business.

He explained that investors should understand the market opportunity before meeting founders, while founder discussions help reveal how the business actually operates. These conversations can clarify how the company earns revenue, how much it retains after paying partners, what its margins look like and whether its operating costs support a sustainable model.

Meeting multiple founders within a segment can also help investors develop a clearer understanding of what strong execution looks like.

Aparajit cited his experience evaluating a founder at Easebuzz, who had built the company with limited external capital and reached approximately ₹3 crore in monthly revenue at the time discussed. The founder’s ability to make progress without raising substantial funding demonstrated resourcefulness and gave the investment team confidence in his capabilities.

The example illustrates why founder evaluation extends beyond a pitch presentation. Investors need to assess whether entrepreneurs can use available resources effectively, understand their business economics and turn an opportunity into a functioning company.

For early-stage businesses, where financial records may be limited and projections uncertain, these capabilities can provide important signals about the company’s potential.

High Valuations Can Create Pressure for Startups

Fundraising is an important part of building a startup, but Aparajit cautions against treating a higher valuation as an achievement without considering its long-term implications.

According to him, raising capital at an excessively high valuation can create challenges for both founders and their businesses. A large capital infusion may reduce the pressure to use resources efficiently, while an ambitious valuation can also create expectations around revenue and growth that the company may struggle to meet.

When founders commit to aggressive targets to justify their valuation, they may feel compelled to pursue growth at an unsustainable pace. In some cases, the pressure can also encourage businesses to take risks around regulatory compliance.

The consequences can extend beyond the fundraising round itself. A company that raises at a valuation it cannot justify through its performance may find it difficult to meet investor expectations or secure subsequent funding on favourable terms.

Aparajit’s view places responsibility on both sides of the investment relationship. Investors must avoid overpaying simply to secure a deal, while founders need to approach valuations with a realistic understanding of what their businesses can deliver.

A well-considered valuation is not merely a negotiation outcome. It can help establish expectations that allow a company to grow without being burdened by commitments it cannot reasonably meet.

Venture Capital’s Role Extends Beyond Writing Cheques

Aparajit believes investors can contribute to a startup’s development in several ways after making an investment. At Varanium Capital Advisors, this has included helping portfolio founders connect with potential customers, access relevant industry expertise and strengthen their businesses.

He described support across areas such as board formation, advisory appointments, capital raising, investor introductions, hiring and the preparation of business pitches. Investors may also help founders connect with experienced professionals, including former regulatory officials, who can provide relevant guidance.

These contributions can be particularly useful for early-stage companies that have developed a promising product but still need help building relationships, hiring the right people or navigating the next phase of growth.

Customer introductions can help businesses access potential commercial opportunities, while guidance on fundraising can prepare founders for future capital requirements. Support with hiring and governance can also help companies establish the capabilities and processes needed to scale.

Aparajit noted that venture capital firms vary in the extent of their involvement, with some providing more hands-on support than others. His account of Varanium’s approach reflects the view that an investor’s contribution need not end when the funding reaches the company.

The value of this support depends on how effectively it addresses a startup’s needs. Capital can give a business room to grow, but access to customers, expertise and networks can help founders use that capital more effectively.

Building an Investment Thesis Around Lasting Change

Aparajit’s perspective brings together several considerations that shape venture investing: technological change, market research, founder capability, business economics and the discipline to evaluate valuations realistically.

His experience across banking, capital raising and fintech has informed an approach that begins with understanding the broader landscape before moving towards individual companies. It also reflects the uncertainty inherent in early-stage investing, where decisions must often be made before a startup’s financial performance becomes predictable.

For investors, the challenge is to distinguish between a sector that is attracting attention and one where technology is creating a meaningful opportunity for new businesses. For founders, the challenge is to turn that opportunity into a sustainable company without allowing fundraising expectations to overshadow business fundamentals.

As new technologies reshape industries, the opportunities for startups will continue to evolve. Aparajit’s insights suggest that identifying the right investment requires more than recognising a trend. It requires understanding why the trend matters, which businesses are positioned to benefit from it and whether their founders can build lasting value around it.

-By Aakriti Jaiswal