I got a lot of questions about the assessment of a startup business. «What is the most important metric» or «What is most important on a business model». I reveal my personal recipie how I decide to support a venture or not.

Assessing the business model

What I do first is checking the goto market plan and the revenue estimation for the next five years. The goto market plan has to be based on digital and scalable channels and include at least facebook or LinkedIn. Second, I want a steep revenue prediction with a hockey stick within. I mean what is the reason for a startup without having a huge revenue upside in it? If that doesn’t match my expectations it is already a deal breaker… ok, you really started believing that bullshit already? Sorry for that. But honestly: I do get feedback like this from time to time, but I don’t agree with it. Of course, the idea and the business model are important, but the only really important thing is execution. And only a great founder and team is able to perform on a very high level.

Assessing the startup ability to execute

Now we’re really talking. The best idea will die on the pedestal of great ideas without a team that is able to execute properly. What I do when assessing a startup is to view on it from different angles:

* Human skills
What are the skills already available within the team? This is the most important question for me. A few examples: A founder without leadership need a co-founder with that skill. A founding team without any technical expertise needs a technical leader within the team. A startup team lacking marketing skills needs a marketeer. Sounds pretty easy but it is sometimes hard to asses soft skills like leadership AND to tell the founding team that they are missing that skill.

  • Recruting skills
    Knowing the skill gap, what is the ability of the startup to recruit the missing skills. Do they have the appropriate network? Are they able to attract the right people within the right market?
  • Organisational skills
    Oh, I love that. I’ve scaled more than once organisations from below 10 to over 50 people spread over countries and I can tell you: The organisation and the needs within that structure do change massively. So the organisation must be able to scale and, in addition, to internalise new skills. Imagine a healthcare startup that suddenly needs to be a tech company. Different mindset at all.
  • Product to market fit
    There are only four different questions here: Is there really a problem, are you really solving that problem, prove that the market will pay for it and show me the potential to scale. These four questions are also already showing the financial result based on the revenue streams that were chosen.
  • Marketing and storytelling
    The best product is not worth a dime when nobody knows about it. End of story. Without any good marketing and storytelling the best product will not be successful. And trust me, I do understand something about marketing.
  • Investment plan
    Last but not least. I’ve seen startups that were not able to shift or pivot anymore because of a bad delution plan or not ideal investors. If you want to scale you must have already an investment plan with several rounds and an idea of the delution per round. Otherwise you will not be able to raise money for a series A or a bridge round (even having a great startup already).

As you can see, the assessment of a startup is a rather complicated thing. But at the end it can be reduced to humans, skills and their passion to execute.

Humans with skills and the ability to repeatable and consistent execution of those skills with an extraordinary amount of energy.

Passion equals energy

Allow me a small side-word about passion. For me, passion is no something to be found. Passion is something you’re having. The only way to experience true passion is by start doing. Passion is something you feel when executing. Passion is the enormous amount of energy you can build up to perform a task. It only arises from the inside and only when you are executing. This is why founders are passioned about their startup. They weren’t passioned before the startup but when they started to work on it.

With execution there comes passion. Not the other way around.

Obviously I could talk a lot longer about this topic, but it should remain a side-word here. Maybe I write about that too sometimes. We’ll see. What is your opinion about passion? Let me know.