In the early stages of startup development there really is not much to show investors; but investors still want to see if the team has accomplished anything. The basis on which you can assess the work done and where the entrepreneurs want to go. Often the founders do not resign from their main workplace, spend a year in the market and look for the money to start promoting the venture. This does not look good, as much can be done this year. For example, creating the same prototype, creating a visualization video or at least writing a business plan. When the money is received, the project will then have the opportunity to make a significant leap. If the founders do not worry about it, the project is subpar and not attractive for investment.
How to Evaluate the Quality of the Business Founder
A start-up requires an active and intelligent leader. There can also be two leaders, but with a clear division of responsibilities. For example, one being responsible for business development and the other for technology. A highly motivated team is required to know where things are headed. Most investors review and evaluate the team according to several criterion. Here are some criteria to evaluate:
1. Motivation – The desire to make money is not bad, but it should not be the main goal of the company’s founder. It is advised not to focus on money, but on who will supply it. The desire to do something useful and also to earn the right motivation.
2. Priorities – The founder must be ready for hard work. Start-ups are not the place for conversations about personal life and work-life balance. Business is the main and only destination, at least in the beginning. Therefore, if the developer does not respond to emails over the weekend, it is not attractive for investment.
3. Personal Opinion – On one hand, an entrepreneur must have one, on the other hand though, the entrepreneur must be able to listen and hear. Wanting to argue constantly or alternatively accept any criticism without appeal is not a good sign.
4. Attention to Detail – This feature differentiates between a beginner and a manager. Start-ups, are the home of the entrepreneur and they must take care of it accordingly. For
example, if the entrepreneur walks around seemingly aloof – this is a potential red flag as it is an indication that they are calm and complacent. The correlation between this and how the business is managed is very high.
5. Experience and Achievements – If the entrepreneur is young, they probably never started a company, but they have some experience, sales or something else. There must be some success. Even if they are an accomplished professional athlete that is certainly better than nothing.
Business operations should be carefully planned. Even if there is no real activity yet, a leader and their team need to understand who their competitors are, what markets they are targeting and how the business will evolve. When the founder does not want to plan and explore the market, it is not ideal. The start-up must solve a problem or address a real need and have the potential for continuous growth.
A team must look for and investigate their competitors. We often hear from entrepreneurs who claim to have no competitors. There are always indirect or potential competitors and it is important to understand who they are. If you have a cool idea, do you really think there is no one out there that wants to do the same thing in a more quickly and at a cheaper price? The same potential competitor can have far more capabilities and resources than you have.
Finally, some people believe that innovation is the most important thing in a venture, but a solid business model and potential for growth are much more important to private investors.
Of course, these are not all of the assessment criteria, rather they are an indication of business planning and the possibility of understanding whether there is potential for investment.