Over 250 startups are now launching at Ycombinator, TechStars, TechCrunch50, and DEMO. The startup community is alive and well. How do investors evaluate all these very young startups? Here are some things to consider.
- Startups change rapidly - If you saw Google or Facebook at 3 months old you wouldn’t have been impressed either. A year from now, and 3 years from now these companies will look very different. Look for the vision, not the current reality.
- Great ideas are never obvious - Of course the idea isn’t obvious, or seems too simple. If it was obvious many companies would have already done it. You should scratch your head and say Huh? at this point. Was Facebook or Twitter obvious? Only a year or so later. Entrepreneurs can see around corners. The rest of us…not so much.
- Elevator pitch isn’t the whole story - It is not possible to show everything and convey the full vision in a 6 minute demo. The press can’t accurately put the company in context, and extrapolate the vision, as they write in real time for just a few lines, and publish within minutes. Investors react faster, are better at pattern matching, and size up people quickly.
- Been done before - They may not be the first to do something. Google wasn’t the first search engine either…more like the 14th entry. But, the Next Big Thing may be the old thing done in a new way. Innovation happens all along the product life cycle. Sometimes disruption happens much later.
- Just a feature, not a product - Many companies start as just a feature and evolve into a full product set and successful company. At just 3 months old it is hard to predict which ones will successfully evolve and which ones won’t. Microsoft started out with just the BASIC programming language. The DOS OS came later, and other products much later.
- Too small and insignificant – Remember that every company was once a startup. Two people and an idea. Microsoft started when Bill Gates and Paul Allen were students. Google started when Larry Page and Sergey Brin were students. Apple started with just Steve Jobs and Steve Wozniak. We should remember this when looking at young startups.
- Unimpressive presentation – The pundits and skeptics are quick to say “not impressed”, “nothing new here”, or “poor presentation”. They should remember that startup founders are usually not polished marketing guys experienced at presenting in front of large audiences. Startup founders at TechCrunch, Ycombinator, TechStars, etc. are incredibly bright, passionate, risk takers…and usually young geeks with no experience. Don’t underestimate them.
I have read the snarky comments from pundits and skeptics in the TechCrunch comments section. It is easy to criticize…much harder to create. They should remember there are 3 kinds of people; Those that MAKE it happen, those that WATCH it happen, and those that wonder WHAT happened. These startups are people that MAKE it happen. They should be respected and supported by those of us in the later two categories.
I hope to see many of you at TechCrunch50 next week. Please stop by and say hello.
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