How to Analyse an Indian Startup Before You Invest

1. The three questions before you open a spreadsheet

Most investors make the mistake of jumping straight to financials. Before you look at a single number, three qualitative questions filter 90% of deals — and if the answer to any of them is no, no spreadsheet will save it.

2. What matters at each stage

The metrics that matter are completely different depending on where the startup is. Applying Series A metrics to a pre-seed company is a common mistake — and will cause you to pass on the best early deals.

The scoring tool at the bottom weights metrics by stage automatically — a pre-revenue company is not penalised for empty LTV/CAC, a Series B company is heavily penalised for weak unit economics.

3. The financial metrics that matter

These are the numbers to stress-test once you have passed the qualitative filter. For each one, I have included the benchmark that should prompt a follow-up question.

Runway

Runway = cash in bank ÷ net monthly burn (burn minus revenue). This is the most important number in any early-stage company. It tells you how much time the team has before they need to raise again — and whether this raise is from a position of strength or desperation.

LTV / CAC ratio

Lifetime value divided by cost to acquire one customer. This single ratio tells you whether the business model is economically viable at scale. A ratio below 1x means you are losing money on every customer you acquire — and growing faster just accelerates the losses.

Payback period

Months to recoup CAC from a single customer. Under 12 months is healthy at Seed. Under 24 months is acceptable for B2B SaaS with annual contracts. Over 24 months and the business is a ticking runway problem — every new customer delays profitability instead of accelerating it.

Gross margin

Revenue minus cost of goods sold, divided by revenue. This tells you what percentage of each rupee of revenue is available to cover operating costs and eventually profit. Software businesses should be 70%+. Consumer and marketplace businesses 30–60%. Anything below 20% needs a clear explanation of why it improves at scale.

MoM growth rate

At seed and pre-Series A, 15–20% month-on-month revenue growth is considered strong in India. Below 10% consistently is a signal that product-market fit has not been achieved. But be careful of early-stage companies cherry-picking months — ask to see the full monthly revenue history, not just selected data points.

Burn multiple

Net burn divided by net new ARR. This measures how efficiently the company is converting capital into growth. A burn multiple above 2x means the company is spending ₹2 to acquire ₹1 of new revenue — unsustainable at scale. Below 1x is efficient. This metric matters most at Series A and above.

4. Cap table & valuation sanity

Three things to pressure-test here: is the price fair, are the founders still motivated, and what is your actual ownership share after future dilution.

Revenue multiple — the quick valuation check

Revenue multiple = Post-money valuation ÷ Annualised revenue. Example: ₹100Cr post-money with ₹2Cr ARR = 50× revenue multiple. Rough Indian ceilings by stage:

Capital efficiency — what did they do with the money?

Capital efficiency = Annualised revenue ÷ Total raised to date. A startup that raised $10M and has $2M ARR is at 0.2× efficiency (burned $5 to make $1 of revenue). At Seed+ stage, 0.5× is healthy, 0.2× is worrying, under 0.1× is a capital sinkhole. This metric is particularly useful when the company is on its third or fourth round and you want to know whether previous capital was deployed effectively.

Reading the cap table

• Founder equity: At seed stage, founders should hold 50%+ combined. Below 40% before Series A is a sign of early over-dilution — often from friends and family rounds at bad terms or a poorly negotiated accelerator deal. Misaligned founders are a leading predictor of failure.
• Clean structure: Ask for the full cap table, not a summary. Look for shell companies, promoter-controlled SPVs, or related-party investors. Circular ownership structures are a red flag — they can indicate attempts to inflate valuation or complicate future rounds.
• Liquidation preferences: In India's early-stage market, most angel-stage deals are straightforward equity or SAFE notes. At Series A and above, check for 1× non-participating liquidation preferences — standard. Multiple liquidation preferences (2×, 3×) are aggressive and will hurt your returns even on a good outcome.
• Your ownership: Ticket ÷ post-money valuation = your ownership percentage. Model what that looks like at different exit valuations — and factor in dilution from future rounds (typically 20–25% per round). A 2% stake today might be 0.5% at exit after three more rounds.
• Pro-rata rights: The right to invest in future rounds to maintain your ownership. For angels, this is worth negotiating. Without it, good companies will dilute you significantly as they grow.

5. Sector benchmarks — what "good" looks like

A 45% gross margin is terrible for SaaS, great for Consumer/D2C, normal for Healthtech. Apply one-size-fits-all benchmarks and you'll over-penalise the D2C and over-reward the SaaS. Rough typical ranges for Indian startups:

Typical Indian post-money valuations by sector × stage (all in ₹ Cr):

A Seed-stage SaaS at ₹250Cr post-money is expensive (top of range). A Seed-stage D2C at ₹250Cr is overvalued (well above the band). Use these as sanity checks, not dogma — every outlier needs a coherent story.

6. Round trajectory — the down-round signal

If you can, always ask: what was the last round's valuation, and when? Then compare to what they're raising at now.

Down-rounds aren't automatic disqualifiers. Sometimes the earlier valuation was set by a friends-and-family round at an absurd price, and the new one is fair. Sometimes the company genuinely pivoted and the new number reflects new reality. But always get the why — on paper, from the founder, before you commit.

7. NRI essentials — FEMA, vehicle, tax

The four specifics that distinguish an NRI cheque from a resident Indian's:

1. FEMA route

• Automatic route ✓ — the default for most sectors. Just wire the money, no RBI approval needed. Works for fintech, SaaS, consumer, healthtech, edtech, deep tech.
• Approval route — some defence, telecom, broadcasting, pharma. Adds 4–8 weeks and uncertainty. Avoid unless you have a strong reason.
• Restricted ✗ — real estate trading, lottery, gambling, atomic energy. Cannot invest as NRI.

2. Investment vehicle

• Direct equity (CCPS / equity shares) — cleanest. You are a shareholder.
• SPV (LetsVenture / AngelList syndicate) — you invest through a special-purpose vehicle. Tax-efficient, less paperwork.
• AIF Cat I (early-stage VC fund) — you become an LP in a fund. Fund picks companies. Good for passive capital.
• AIF Cat II (PE / growth fund) — same structure, later-stage focus.
• Convertible note / CCD — debt that converts to equity at next round. Standard but watch conversion discount terms.

3. Funding source

• NRE account → fully repatriable on exit. The default. Compare 7 NRI banks →
• NRO account → repatriation capped at $1M/year. Still workable.
• Foreign account → inward remittance. Works, bank will flag for FEMA compliance. FX spread matters at scale — on a ₹1Cr wire, 2% difference = ₹2 lakh. Check rates →

4. Tax residency this FY

If you are Indian-tax-resident this financial year (RNOR or Resident), Indian LTCG rules apply to your exit (12.5% if held >24 months). TDS 10% is withheld by the buyer at sale. NRI status while holding means slightly different treatment — confirm with a CA before signing.

8. Red flags specific to Indian startups

Some warning signs are universal. These are the ones that are more common or more severe in the Indian startup context specifically.

9. The due diligence checklist

Before committing capital, work through this list. The checklist is ordered by what takes the least time first.

10. Startup Scorecard

Put the numbers in. The Scorecard calculates runway, unit economics ratios, your ownership percentage, and a weighted score (RED, AMBER, or GREEN) based on what you have entered. Stage-aware and sector-aware. Scores financial health and diligence completeness, not whether you should invest.

11. What I got right and wrong on Rippl

I invested over $60,000 in Rippl (formerly Redesyn), an Indian social commerce startup, after meeting the founders at a pitch event in Mumbai organised by Prime Securities. It is the investment that led me to build this site. Here is the honest version of what I did and did not do.

What I got right

• I met the founders in person. The pitch event gave me a chance to watch how Shikhar and Smriti handled questions, how they talked about their market, and how they responded to challenge. That qualitative read was more valuable than anything in the deck.
• I understood the problem. Social commerce — buying through community recommendation — is a pattern I had seen work in China and Southeast Asia. The Indian market had the right conditions: mobile-first, price-sensitive, socially networked. I had genuine conviction about the market before I wrote the cheque.
• The round had other credible investors. Co-investing alongside people who had done more due diligence than me gave me some additional confidence. Not a substitute for your own work, but a useful signal.

What I got wrong

• I did not do enough customer reference calls. I spoke to one customer. I should have spoken to five. The product had genuine fans — but I would have understood the retention dynamics better with more conversations.
• I underestimated the FX cost. Wiring $60,000 to India through my bank cost me significantly more than it should have. I did not compare rates before transferring. That was the direct frustration that became NRI Money Matters — and it was entirely avoidable.
• I did not model dilution carefully enough. Early-stage investing involves multiple future rounds. I did not think carefully about what my ownership would look like after Series A and Series B dilution. Model this before you invest, not after.