On May 10, 1996, a team of climbers from the Indo-Tibetan Border Police attempted to summit Mount Everest. The morning weather was clear, and the peak looked close. To the team leader, Subedar Tsewang Samanla, the path seemed straight forward: just one final push and the team will summit.
But as they climbed, the conditions shifted – the now infamous 1996 blizzard began to form, covering the trail in snow and dropping visibility to zero. At an altitude of 8000 meters (Death Zone) the team spotted a peak and mistook it for the summit – a false peak, ignoring the strict 2:00 PM turnaround protocol. At 3:45 PM that day, they believed they had reached the top – but they never returned. This tragedy illustrates a universal truth: in moments of noise and chaos, relying solely on gut instinct leads to trouble.
VC: The Ascent Journey
As we covered in our earlier blog, The Art of Seeing, the venture capital (VC) ecosystem operates in similar conditions, akin to a dense forest or foggy mountain peak with constant dealflow, incomplete information, and every pitch deck presents what appears to be an opportunity. Founders with pedigree tell compelling stories. Markets that look large promise returns.
Without a system to cut through the noise and gather signals, firms rely on instinct — and instinct, like the false perception of a nearby peak, can be wrong. At Auxano Capital, this system is our investing playbook.
The Three Checkpoints
Just as climbers establish camps at specific altitudes before attempting a summit, Auxano Capital has established three checkpoints that every investment must pass.
Checkpoint 1: Base Camp – Foundation Assessment
Before a climb begins, climbers verify their equipment, check weather conditions, and ensure they have the resources for the ascent. Similarly, Auxano Capital verifies the foundation before analysis begins.
The firm checks:
- Legal structure and outstanding issues
- Problem statement validity
- Solution feasibility
- Valuation alignment with fund parameters
While Auxano Capital is sector agnostic, we remain thesis-driven. If the foundation shows cracks (akin to frayed ropes during the ascent), the firm does not proceed. No narrative, regardless of how compelling, overrides structural weakness.
Checkpoint 2: The Ridge – Market Validation
At this checkpoint, Auxano Capital assesses the terrain ahead. In climbing, this means understanding the route, identifying hazards, and determining whether conditions allow for safe passage. In venture capital, this means understanding the market.
For market size figures such as Total Addressable Market (TAM) in pitch decks are never taken at face value. Instead, we ask:
- What is the Total Addressable Pain (TAP)?
- What evidence confirms market growth?
- What drives this growth?
- Why is this team capable of capturing market share?
This checkpoint separates markets that exist on slides from markets that exist in reality. Just as climbers must verify that the route ahead is passable, one must verify that the market opportunity is real and accessible.
Checkpoint 3: The Summit Push – Business Verification
The final checkpoint occurs when conditions are most uncertain and the cost of error is highest. In this zone, climbers must verify their position constantly because false peaks create additional noise over signals. Similarly, Auxano verifies every business across three dimensions:
- Operational Reality: We scrutinize the business model. Is it capital intensive? Does it require heavy upfront investment in assets? Is the company’s revenue growth mostly seasonal? These questions reveal whether the business can operate sustainably or whether it will require constant infusions of capital to survive.
- Financial Sustainability: We dig into unit economics and financial projections (a company growing at at least 40% QoQ gives us the validation on PMF), but growth alone is insufficient, it is important to assess whether the revenue model can sustain itself without depending on perpetual fundraising.
- External Validation: Market reports often provide a limited view, thus we connect with industry experts to understand dynamics that don’t appear in public data (equivalent of a climber consulting with guides who have summited before).
A Tool for “Healthy Friction”
The function of a playbook is not just plain analysis, but also communication, ensuring that each investment decision should be the result of debate and perspectives, not isolated choices.
Instead of saying “the market is saturated,” this encourages the team to ask “what innovation does this company bring?” or “what can these founders do that no one else can?”
Just as climbers rely on friction between their boots and ice, or between their rope and carabiner, to prevent slipping on steep terrain, the playbook creates friction between intuition and evidence which forces examination, and prevents decision making based on false signals/peaks.
The Climb Continues
A playbook cannot predict the future, and it cannot eliminate risk entirely. But having this protocol ensures that when we step into the fog, we aren’t walking blind. We are moving with conviction, backed by data, and guided by a disciplined process.
Author
Tanmay Gajbhiye
