I) Start-Ups

Most start-ups fail ( see some of the reasons below)

reasons_fail20181004

(source: Stephen Harris 2017)

When evaluating start-ups it is best to start by identifying the problem trying to be solved.

"...is it being sold in a unique, differentiated way or is it being sold in a way that anyone else can copy and there are very little barriers to entry..."

Paul Bassat as quoted by Anne Hyland, 2016

Then ask the following questions
- when is it going to be sold?
- have they got the timing right, ie are they too early or too late?
- who is solving the problem?
- do they have the right team to grow a business to a critical mass, eg from 20 to 500 staff, monthly revenue from $ 200,000 to 10 m.?

"...75% to 85% of any business is people; the other 15 or 20% is the business you are in, the strategy or the structure. People are the key..."

Peter Farrell as quoted by Joanna Gray 2015f

People planning is important.

More detailed questions to help "de-risk" start-up investment include
- do you have the right people to do the job, ie commercial nous?
- do you have the right internal people with the understanding of how to get it done?
- is the IP or technology protected?
- do you understand that they will be problems ahead?
Then conduct a financial analysis, ie
- where is the revenue to come from and how much?
- do you understand what to do?
- can you convince others to join you?

"...An imperfect business model with an  incredibly talented team beats an excellent business model with an average team..."

Paul Bassat as quoted by Anne Hyland, 2016

NB need to understand the mind-set that start-ups need to have, eg hunger, focus, horsepower, curiosity, etc; they need to be self-confident and have self-belief;  understand that they do not know all the answers and will need help from their team and other stakeholders. 
Most start-ups are very optimistic about their potential.
Advice to start-ups

"...Be in the moment and perhaps be a little more patient. Understand the importance of the journey and the end goal..."

Paul Bassat as quoted by Anne Hyland, 2016

Internet businesses fall into 2 broad categories, eg focus on
i) raising capital at higher and higher valuations, regardless of the underlying financial performance
ii) building real businesses

"...we are in an incredibly important time when software is leading the world and technology is eating every industry, company and job..."

Paul Bassat as quoted by Anne Hyland, 2016

 

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