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What do I look for in a new venture?

I was asked this question recently, and it is a good one. For me, as either a prospective investor or prospective board member, there are a number of characteristics that I look for:

  • Clarity: Have the founders thoroughly thought through the problem they seek to solve, for whom, and at what value? If so, they will be able to articulate this in just a few sentences.
  • Brutal Honesty: Clarity is critical, but so is the ability to learn and adjust. And only honest assessment allows this to occur.
  • Passion: This is the fuel that drives the venture. It is infectious, and there is no such thing as too much of it.
  • Relentless Pursuit: Success cannot simply be a goal, but must be a need.
  • Ability to Execute: Do you have the ability to recruit an “A” team and put them in a position to succeed? Will the capital in play get you to a truly meaningful milestone yet not leave you stranded there?
  • Market-Product Goodness of Fit: Is the market opportunity worthy of pursuit? How well does your product fit this market opportunity relative to the alternatives? Is it differentiated in a meaningful way? Is this differentiation sustainable?
  • Proof of Concept: How many pieces are already in place? Has your business model been tested and refined?
  • Capital Efficiency: What is your capital multiplier potential? What is your free cash flow projection? Is there an opportunity to accelerate proof of concept? Or to more efficiently go to market?
  • My Ability to Add Value: Going back to goodness of fit, what is my ability to contribute to your effort? If I cannot add considerable value, then both of us have better options.

What is interesting to me about the above criteria is how much of it is people-driven. Yes, the right Market-Product Fit is the first among equals, but it is upon the founders and their ability to deliver that my bet is being placed.

So this is what I use as a starting point, and captures the perspective that I bring to an evaluation.