When you meet a founder, who comes to pitch his great startup, there are few basic aspects that you need to be aware of. Here are some tips for investors when interviewing a tech founder for the first time. Yes it’s called interviewing, because at this early stage you are basically “hiring” a team leader, so you need to make sure that whoever you “hire” can make the startup work.
Apart from relevant experience, you might also want to know your potential tech founders motivation and personal views on doing a startup. Are they committed full time to the project, or do they have a full-time job while doing the startup on the side? Also, do you believe in the potential founder’s vision and do you get along with them? You better make sure and do due diligence and verify that these are reliable and trustworthy people.
- Business Model
Remember, the business model will most likely evolve over time. And it’s not a bad thing if the model changes along the way. The most important, is that the business model is working to bring in revenue. At this early stage, your main concern as an investor is: that the business model is tested out in the market and getting some traction.
Traction can really be any kind of forward momentum. But the bigger the better. They might launch a minimum version of some product and it has gone viral on Facebook. Or they might make a partnership with some big players that can open up a first route to the market.
- Market and Industry
It is of big advantage if you come form the same industry and understand the market. Teams also prefer that their investor has some relevant background experience, because then they can get a good advice and important contacts. Another thing to remember, is to make sure that the market your team is operating in is big enough, so that the startup can scale extremely fast.
Is your teams tech unique enough? Who is the owner of their IP? Are they outsourcing their teams? How much is that costing them? Do they have a CTO (a tech person) who can make all of this happen? You have to make sure you get the answers to all of these questions, as it will determine the burning rates and influence the future rounds and exit strategy.
- Exit Strategy
Another important question to ask is: where is this all going? Is your team planning to go on to IPO or to sell the company? Unfortunately, IPO doesn’t happen that often in the UK, so make sure the teams have a clear and realistic view on this. At the end of the day, you want to get a multiplied value of your shares in at least a couple of years time. That is what any startup should aim for.
- Advisory Board
It is incredibly satisfying if a start-up has a well known industry leader as an advisor. If they have a good name on their board, it means that they will get the best contacts and the best mentoring. It also means that the leader believes in the team because he or she is backing them up with their own name.
Try to remember these few main criteria in mind and find out if a founder has clear and realistic answers on most of the questions. It will surely save you a lot of time while making an investment decision.
Blog by Marina Atarova, Co-Founder of Dreamstake the world’s first tech startup platform to match founders with the most appropriate investors using a unique startup rating system. This allows entrepreneurs and investors to monitor startup progress and inject capital and support when most needed. Startup founders can create profiles on the platform and get direct introductions to investors. Investors please contact [email protected]
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