There are many criteria to evaluate a start-up, among many others are fair value, operating in a large enough market, team competence and competition. There is a lot to consider. To keep it simple, break it down to the 3 basics. Look at:
1. Knowledgeable founders
2. A unique value proposition
3. A clear path to growth and scalability
Covering the 3 basics is a solid starting point. And each quality impacts the others.
1. Knowledgeable founders
It’s not enough for a founder to be charismatic and driven. They must also have a strong understanding of the industry they’re operating in. If founders start a company in an industry they do know nothing about, they need to build a team of people who have that knowledge.
2. A unique value proposition
If a start-up is trying to address a major problem that other companies have tried and failed to solve, it needs to take a unique approach. This is where knowledgeable founders or their knowledgeable team excel. They already know what their competitors have done and are doing, and they understand the trends that impact their customers. That knowledge is crucial for creating a truly unique solution.
3. A clear path to growth and scalability
It’s important for founders to show a clear path to growth, regardless of whether they have a finished product or not. A founder’s industry knowledge and unique approach is already a good basic for growth but there is still more you need to know to assess the company’s potential. You need clear answers on the following questions to evaluate a clear path to growth:
How do you plan to expand your product/service offerings?
What’s your plan to acquire customers?
How do you define your success in terms of market share? What are your market share goals for each of the next two years?
Do you plan to expand your team? Which positions and areas of expertise will they cover?
Do you have any partnerships in place? Do you plan to?
Where do you see the company in three years?
Do you have an exit plan?
If you follow the basics and get answers on your questions it gives you a better chance at big returns in this fast growing start-up market.
Sven Franssen