I remember the first time Sandeep Aggarwal called me to tell me about his new idea, Droom (‘To dream’ in Dutch). It was almost exactly a year ago. I knew then that if Sandeep was starting something new, we had to be involved. We’ve known Sandeep from the time he started Shopclues. There was no Lightbox then. But as a group of individuals, the now Lightbox partners made an angel investment in his vision, his passion and his determination to succeed. And through that investment, we built a relationship, a friendship, based on trust and mutual respect.

So, when Sandeep called, you can imagine I was all ears. Partly because it had to do with cars, but mostly because it was Sandeep. In fact, it was Sandeep 2.0 - along with the passion, the vision and the determination, now came a battle tested entrepreneur with a tremendous amount of exposure and experience in the Indian market and in scaling businesses.

Outside of Sandeep though, I understood very little about opportunity and he was looking at a large round with a sizable investment from us. Now that we’ve done the deal, I can tell you it was a major decision for us. Droom is the largest series A bet we’ve ever made. And since it was such a big deal for us, I thought this was an ideal opportunity to walk you through how we decide to make investments in general.

When we dive into prospective investments, we normally ask the same 3 core ques-tions. First, Does the space excite us? Second, how differentiated in the model? Finally, is the founder someone we want to work with - this last one is so critical for us. As a fund, we maintain a very small number of investments, mainly so we can work closely with our entrepreneurs. If we can’t see ourselves being able to create a long term partnership with the founder, its very difficult to make the investment - irrespective of how promising the deal looks.

Quickly, let me tell you what Droom does - It’s an online marketplace to buy, sell and service used automobiles.

Okay, let’s talk about how we dissected Droom!

Let’s discuss the space. Suffice it to say that the used automobile industry is gigantic and really, really fragmented (you can read more about how big it is on Sandeep’s blog). Besides being large, three things really grabbed our attention. One, in 2012, the used automobile market became larger than the new automobile market. That’s a fundmental shift in consumer behaviors and thinking. And an important one in this context.

Two, as more and more people were looking to buy used cars and bikes than ever before, no one had been able to solve the inherent issues with the process - even in the West, the experience is marred with confusion, frustration and distrust. In India, it gets even more cumbersome. There are no guidelines on pricing. Almost anyone can be-come a dealer. Liquidity for specific models is almost impossible to find. There is almost no ecosystem for evaluating the condition of the vehicle or any regulation that protects buyers from bad deals. The issues go on and on. And yet, no one in India was looking at addressing this issue head on. Competition in the space was mainly playing the listing or lead generation game. There was an opening here that Droom could address.

Three, as the larger vehicle market was growing, the opportunity for ancillary services was growing along with it but it was even more fragmented than the vehicle market- and again no one was helping aggregate all these small operators who were offering services that weren’t readily available at scale. Services from car inspection, to road side assistance to even car washing services. This was a wide open market for anyone who could bring it together.

We were sold on the space.

Which then brought us to the question of the model. Sandeep’s plan was simple. His platform needed to remove the frustration of finding, negotiating and ultimately buying or selling a used automobile. The best way to do that, in his opinion, was a market-place. A model he understood intimately.

It didn’t take us long to agree with him. The biggest issues buyer and sellers had were based on trust and transparency. As I mentioned earlier this had to do with everything from price, to condition, to hassle of the purchase itself, to post purchase services. A marketplace, by its very nature, would solve these issues. Running a marketplace is not easy. Globally, there are only a handful of companies that have been able to scale a marketplace successfully. You have to create significant liquidity, especially for supply, and then curate that liquidity effectively. But most importantly the entire platform needs to be built on trust. Building trust is key to marketplaces, because transactions carry risk. Luckily for us, we had an expert. I’m not sure we would have made the decision to invest otherwise.

Finally, the founder - a second time entrepreneur, someone who had built and scaled a a similar model before, and someone we knew personally. Sandeep checked that box in spades.

So that’s that. We closed the round a few days ago. There’s a lot to be done, but we’re looking forward to the journey. Personally, I’m also looking forward to working with my friend again.

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