Considering a start-up? Start with these 4 considerations

One of the oddities of a recession is that is also when many start-ups are launched. More colleagues of mine have considered start-ups for the first time in their careers. If you are considering a start-up, here are four items that will help indicate their chance for success. As I am in a start-up, I can vouch for these!

ONE: Experienced management team
The experience is they have succeeded in the industry, commercialized similar products or launched start-ups. These are critical factors as there is simply limited room for repeated errors – so the team simply needs to have a rock solid business plan.

TWO: Large addressable market
There are loads of good ideas, but you really need to understand how big market is for the product. To attract capital, there needs to be a large market.

THREE: Protectable Intellectual Property
The intellectual property is essential to the value of a company; it’s what draws customers and investors. The intellectual property may be possessed at the start of a venture, via a patent or process, or built over time like a customer database.

FOUR: Capital plan
Understanding the capital needs for growth is critical. A common shortcoming of early stage company business plans is an assumption that one round of funding is enough. Typically it takes several rounds of fundraising to achieve moving from product development to beta testing to initial rollout to full distribution.

I’ve met with several dozen start-ups and these are the items that I initially look into. If you cannot get a good feeling on these items, then don’t bother with reading the business plan.

On my website there are a couple of tools to help you understand the basics fundraising and reviewing business plans.

Good luck today!

Mark Richards

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