Five Questions for Evaluating Early-Stage Startups

“You’re evaluating our business more rigorously than any of our investors,” I’ve been told on multiple occasions. Of course I am! Investors can have 30 portfolio companies in a single fund and I can only work for one. My standards as an aspiring co-founder and early stage startup employee should be much higher!

From countless conversations I’ve had with co-founders, I’ve found that evaluating early stage startup opportunities is hard but can be codified. Here are five questions that great founders seem to consistently nail and so-so founders struggle with:

1. It’s easy to miss the pain point

For software veterans, it’s easy to envision novel software fueling your new business. But businesses are built on customers having “hair on fire” problems that they will use as though their life depended on it.

2. Getting distribution right is hard

Plenty of great ideas die because they’re impossible to distribute efficiently. Distribution is paramount for any venture-scale tech company, and it often requires a unique insight or leverage point that isn’t widely accessible.

3. Assume every idea has been done before

It’s easy to fool ourselves into thinking there’s a viable business in a market before doing the hard research into its graveyard of failed companies. Remaining skeptical helps push you toward learning. Plus, it shows humility!

4. Not everybody knows why they need a technical co-founder

Some founders just need a buddy and some just need a code monkey. I believe the most value comes from having a strong thought partner that can using building to validate hypotheses at hyper-speed.

5. There’s no obvious playbook

The idea “maze” characterizes this well. It’s important to be clever about getting strong validation as cheaply as possible, for longer than founders usually think is necessary. Building is expensive, and overbuilding early is a common trap.