Five Red Flags of Startups

Mention:@TKKuegler

Hashtag: #PHXstartupweek#ChaseBasecamp#yesphx

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