Kalaari Capital is a $350 million venture capital fund with an eye on nurturing early-stage tech start-ups. Rajesh Raju, one of Kalaari Capital’s managing directors and a pioneer in investing in direct-to-consumer companies in India, talks about what he looks out for when evaluating prospects.

Does the entrepreneur have passion?

The single most important quality for an entrepreneur to have is drive. We look for aggressiveness, which comes from belief in the feasibility of the idea. Passion is a vital intangible; it must be inherent in the individual. Passion cannot be hired; outsiders can neither bring in nor supplement entrepreneurial passion, no matter how qualified and passionate they may be themselves.

Has the problem statement been clearly defined?

How well has the entrepreneur understood what he/she is trying to solve? It should be evident that the entrepreneur has researched the problem well. The problem statement is more powerful than the solution statement because going to market with a solution is only the first step. After user feedback starts trickling in, which it invariably does, the cycle of adapting and improving the solution kicks off. The problem stays the same, the solution evolves.

Does the entrepreneur have sales & leadership skills?

Without taking away from the earlier point, it is equally important for the entrepreneur to be able to convince the venture capitalist why his/her solution is a winning solution—and hence, worth backing. Sales and leadership skills comes in very handy at multiple steps on the entrepreneurial journey—first of course to sell one’s pitch to the ecosystem and thereafter, to make great hires. You can acquire an understanding of technology. Not so the ability to convince, impress upon people and lead.

Is the idea big enough?

As they say, the idea is everything. Most importantly, the idea must have big markets to play in. If the original idea is not capable of generating enough business, in technical parlance we call this having a low market ceiling, then at some point the entrepreneur will have to find other ways to grow the company. That isn’t the sort of start-up a venture capitalist wants to get involved with.

Does a proven revenue model exist?

Actual revenue figures aren’t a priority. The power of the revenue model to skew economics in favour of the business is. We look to see how sound the revenue generation concept is. While seed investors expect to handhold entrepreneurs while they figure out a workable revenue model, venture capitalists expect entrepreneurs to have tested their revenue generating concept before approaching the fund.