Due Diligence in Startup Investments: The GHL India Ventures Framework

Due diligence in early-stage startup investing is fundamentally different from traditional financial analysis. At the pre-Series A and Series A stages where GHL India Ventures deploys capital, startups often have limited financial history but significant potential. Our proprietary 7-layer due diligence framework is designed to systematically evaluate this potential while identifying and mitigating risks that could derail an otherwise promising investment.

Layer 1 — Team Assessment: We evaluate the founding team across five dimensions — domain expertise, complementary skill sets, execution track record, resilience quotient, and coachability. Our experience shows that the quality of the founding team is the single most important predictor of startup success at the early stage, accounting for over 60% of our investment decision weighting.

Layer 2 — Market Analysis: We assess the total addressable market (TAM), serviceable addressable market (SAM), and the startup's realistic serviceable obtainable market (SOM) over a 5-year horizon. We particularly favour startups addressing uniquely Indian market needs with solutions that can scale across the country's diverse demographic and geographic landscape.

Layer 3 — Product & Technology: We evaluate the product's technical architecture, scalability, competitive moats (proprietary technology, network effects, data advantages), and user experience. For deep-tech startups, we engage domain experts from our advisory network to assess the viability and defensibility of the underlying technology.

Layer 4 — Unit Economics: Even at early stages, we look for clear evidence of positive unit economics or a credible path to achieving them. Key metrics include Customer Acquisition Cost (CAC), Lifetime Value (LTV), gross margins, burn rate, and the LTV/CAC ratio. Startups with LTV/CAC ratios above 3x and clear paths to contribution margin positivity receive priority in our investment pipeline.

Layer 5 — Financial & Legal: We conduct thorough financial due diligence covering cap table analysis, previous funding terms, outstanding obligations, and financial projections. Legal due diligence covers corporate governance, IP ownership, employment agreements, regulatory compliance, and any pending or potential litigation. This layer often reveals hidden risks that are not apparent from surface-level analysis.

Layer 6 — Governance & Risk: We assess the startup's governance framework, board composition, information rights, and risk management practices. For our AIF investors, strong governance at the portfolio company level is non-negotiable — it protects their capital and ensures alignment of interests between founders and investors.