How to identify an outstanding winning startup?
Updated: May 11
There are certain characteristics that differentiate a winner from those who tried, whether in life or in the business world. I have been studying businesses globally since my teen years, and my observations are based on empirical evidence supported by a fair amount of intuition, and these are my viewpoints on how to evaluate startups. If your interest is to make a fast buck with flash-in-the-pan business models, then I wouldn't suggest this read. The underlying principle is to identify high-potential startups that will go on to become sustainable, profitable businesses. Following are some of the most crucial startup selection criteria that I bank on while evaluating startups.
Why have they chosen this business? Can they visualize a future identity and where they will take it? I don't expect every step to be defined; I am testing to see if they know what it will take to win. Have they correctly estimated the effort & input required, or do they have some flaky notion of a utopian future?
2. Commitment & Ethics
Do they really believe in what their business stands for? Will they stay the course when the rose-colored glasses come off? How will they react when the going gets tough and their ethics come under pressure? In the long run, commitment and ethics become one of the most important startup success factors.
The startup identity is strongly influenced by & is almost synonymous with the founders. The right attitude of founders is an important success factor for startups. This metric is more so on the attitude of each founder; do they have the drive for results and the correct attitude toward learning? If they are young & less experienced, do they have the willingness to take advice and learn? If experienced, do they have the emotional maturity to differentiate between what they know and what they need to augment their understanding with? I have met many founders who are so in love with the sound of their own voices that they lose out on valuable insights. While this is less frequent, a check on founders who are easily influenced by every suggestion is also needed. It is the distinction between courage of conviction and conceit.
4. Path to profit
The operative word is 'path'; it is not expected that every business will be cash flow positive right off the bat, but do they have an idea of how & when they will start making money? Is the pricing strategy grounded in reality, and is there an adequate understanding of what it will take to win profitably?
5. Barriers & unfair advantage
Why will they continue to win; what actually makes them special? How will the market and other players react today and over time?
Will this be sustainable over the longer term; does it impact lives in the future, too, without being easily replicated? What is the growth in terms of revenue and returns on investment, whether in time or money?
The questions appear simple and straightforward, but the analysis behind it is anything but, or we wouldn't have the kind of failure rate we have in this ecosystem. Above are my understandings of how to evaluate startups. However, you can apply some methods to the madness of identifying high-potential startups and improve the odds!