Close
Where Technology Meets Staffing
Call us anytime: 1-917-720-1080

Understanding Start Ups:
The Good vs. The Bad

We all know the amount of start ups in New York, the United States, and the world are growing at an increasing rate, but how can we distinguish which ones will grow and which ones will crumble?

By looking at key success factors and trends, along with looking at strategic investment, you will be able to gauge if a startup has what it takes to sustain and grow.

                                                                                                                Success Failure

Key Success Factors:
1. The Founders: Founders with experience in the industry. A good mix of coding and business development.

2. The Team: Look for a team that is united.  People who come from similar backgrounds and are passionate about this new idea.

3. Urgency:  See if the product or service has an urgent need in the market at that specific time.  For  example, Netflix became successful because at the time of their start-up, because video started to be recorded on dvd, which was cheap enough to ship.

4.  Uniqueness: Look for a product that is unlike any other.  A product or solution that no other competitor can accomplish.

Investment Approach: Look at investment news, Angel Investors are all tech investors who own their own companies, and know what start ups will see sustainable growth and boast a safe ROI.

Examples:

Reid Hoffman, CEO of Linkedin, invested millions into Facebook, Zynga, and Flickr all as start ups.

Chris Sacca, former employee of Google, invested in photobucket, instagram, twitter, and turntable.fm.

Peter Thiel, cofounder of Paypal, originally invested $500,000 into Facebook for 10% of the company.  Also invested in Friendster, Linkedin, and Yelp.

Chris Dixon, co-founder of Hunch, invested in Skype and Milo.

“That is the most important aspect to the investment. The environment changes, you discover flaws in your original concept, and good entrepreneurs adapt and change. The only way you would’ve seen it is if you’d understood the passion and guts of the people involved.” – Chris Dixon

Lastly, Ashton Kutcher, has made over 40 start up investments and owns his own investment fund.

Look at the founders: Founder’s who understand and have experience in the industry they entered and also to understand the problem they are solving. 

Product Reach: A product or service that will reach millions and keep them engaged.

Unique Value Preposition: A start up that has a clear mission, and can distinguished from their competitors.

Is the product trendy? If the product/service is in a market that is global, and is trending, seed investment will be attractive.  Websites out there that track global business/entertainment/media trends, www.cassandradaily.com, www.trendwatching.com, and www.springwise.com.

Capital Efficiency: Will investors be attracted to invest throughout a startups growth.

Now that we can see what types of tech startups Angel Investors are attracted to, let’s take a look at what they stay away from.

So when are they hiring in the startup cycle?
See visual of start up cycle – startupgenome.cc

  1. Discovery: 1 – 5 people come up with an idea.
  2. Validation: Those founders bring on developers and programmers to see if their product or solution can work.
  3. Efficiency:  Analysts and more developers are brought on to refine the process.
  4. Scale: As growth increases, the company grows strategically.

Interesting Statistics about Founders of Start-Ups. 

*Taken by a Start Up Genome analysis of 3,200 tech start ups in the world.

  1. Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2.
  2. Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth.
  3. Founders that don’t work full-time have 4x less user growth and end up raising 24x less money from investors.
  4. Most successful founders are driven by impact rather than experience or money.
  5. 72% of founders find out that their initial intellectual property is not a competitive advantage.
  6. Startups that haven’t raised money overestimate their market size by 100x and often misinterpret their market as new.

 

http://mashable.com/2011/10/26/how-angels-invest/

Connect with your local Talener office today