5 redflagsofstartups az
TRANSCRIPT
AN INNOVATIVE AND DYNAMIC APPROACH TO VENTURE CAPITAL AND INCUBATION
The 5 Red Flags of Startups
5 Red Flags = 5 Deadly Sins
The Red Flags
• Founder(s) Always Need to be the Smartest Person in the Room
• Target Audience/Customers is Other Startups
• You Don’t Talk about the Startup
• Startup has “Rent” or “Legal” as a Measurable Expense
• Founder(s) are not also Customers
Smart People Need to Be Humble
• Why it is an issue:
• Usually have a hard time listening to customers
• Don’t tend to be good managers
• Think the whole world is like them
• Think that being smart is all that matters
• Always think that they have to have the answers to all questions
Startups Make Bad Customers
• Why it is an issue:
• They never have a lot of money
• They tend to think they can build anything themselves
• There aren’t that many of them
• They tend to disappear!
The Startup Didn’t Move You
• Why it is an issue:
• If you don’t get a great feeling, it isn’t worth caring about
• The people involved weren’t inspirational
• You don’t have a personal vested interest
Lawyers, Accountants, Real Estate = NO ROI
• Why it is an issue:
• Shows that a startup is focused on the wrong things
• Can’t usually be zero, but needs to be close to zero
• Early Stage it needs to cost less than lunch per month
• None of these make a company more valuable, they are just necessary evils
Would The Founder Pay For This?
• Why it is an issue:
• They aren’t passionate about the problem
• They don’t understand the problem
• Have zero credibility as an authority in the space
Key Take Away
None of these items are 100% disqualifiers, but any of them should give you pause as a co-founder, investor, or interested party