Here is my Startup Checklist: some very simple but tough questions that venture capital, angel or industry investors have asked me or my clients over the years. This applies with, or without early adopter customer funding for any startup or spinout tech venture.
Can you describe your opportunity in one sentence – or, at most, in one paragraph?
Ability to Execute
Is your ability to execute feasible for an unknown small start-up?
Intellectual Property Assets
What are your sustainable intellectual property (IP) assets in the face of hyper-competition that characterises all technology markets? No patent or solid copyright = no sustainable IP.
Do you have one or more real pre-committed or actual customers? No customer(s) = no investment.
Sustainable Competitive Advantage
How are you going to effectively compete with incumbents and new entrants? What is the source and long-term sustainability of the company’s differentiation?
Meaningful Value Proposition
What is the serious problem your company is trying to solve? What evidence is there to suggest that there is a compelling need for your value proposition? What value would customers attribute to this problem? What bad things happen if the customer delays or declines a buying decision? Why is no one else offering this solution? Who are the key competitors – current and future?
Return on Investment
What is the clear path, timeline and the return for the (customer as) investor? When does the company become profitable? What size will the burnrate be until profitability? How long is the buying and selling cycle?
Culture and Values
How many hours per week do the founders put in to the business? How will the company conserve cash and get all of its employees to think like owners? What compensation packages does the company intend to offer employees? Are the incentives of key executives, founders and (customers as) investors aligned? What essential elements define the company’s culture? How is the company vision clearly communicated to and understood by all employees? Are the right employees located in the same place as each other? What percentage of the investment goes towards executive team salaries?
What can go wrong and how will you survive it? What alternatives are available to the company if a major risk materialises? Which of these risks could be fatal to the business? What alliances could help the company mitigate risks?
Sales and Marketing
Do you have an experienced sales and marketing player in your leadership team? How do you compensate the sales organisation?