What do I look for in a New Venture?
What do I look for in a new venture?
I was asked this question recently, and it is a good one. For me, as either a perspective investor or perspective board member, there are a number of characteristics that I look for:
Have the founders thoroughly thought through the problem they seek to solve,
for whom, and at what value? If so, they will be able to articulate this in
just a few sentences.
Honesty: Clarity is critical, but so is the ability to learn and adjust.
And only honest assessment allows this to occur.
This is the fuel that drives the venture. It is infectious, and there is no such
thing as too much of it.
Pursuit: Success cannot simply be a goal, but must be a need.
to Execute: Do you have the ability to recruit an “A” team and put them in
a position to succeed? Will the capital in play get you to a truly meaningful
milestone yet not leave you stranded there?
Goodness of Fit: Is the market opportunity worthy of pursuit? How well does your product fit this market opportunity relative to the alternatives? Is it differentiated in a meaningful way? Is this differentiation sustainable?
- Proof of
Concept: How many pieces are already in place? Has your business model been
tested and refined?
- Capital Efficiency: What is your capital multiplier potential? What is your free cash flow projection? Is there an opportunity to accelerate proof of concept? Or to more
efficiently go to market?
- My Ability
to Add Value: Going back to goodness
of fit, what is my ability to contribute to your effort? If I cannot add
considerable value, then both of us have better options.
What is interesting to me about the above criteria is how much of it is people-driven. Yes, the right Market-Product Fit is the first among equals, but it is upon the founders and their ability to deliver that my bet is being placed.
So this is what I use, and captures the perspective that I bring to the evaluation. How about you? How do you answer this same great question?