This guide covers key startup evaluation areas: background/founders, financials, market size/competition, product/service, legal/IP, funding/equity, exit strategy, risks, customer growth strategies, and company culture/diversity. It aims to assess a startup's potential, execution capability, market viability, financial health, legal standing, growth strategies, and workplace ethos, ensuring investors make well-informed decisions.
What Due Diligence Questions Should Women Investors Ask Before Committing to a Tech Startup?
This guide covers key startup evaluation areas: background/founders, financials, market size/competition, product/service, legal/IP, funding/equity, exit strategy, risks, customer growth strategies, and company culture/diversity. It aims to assess a startup's potential, execution capability, market viability, financial health, legal standing, growth strategies, and workplace ethos, ensuring investors make well-informed decisions.
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Company Background and Founders
What is the company's mission, and what problem is it solving? Who are its founders and key team members, and what is their track record in tech and business? Understanding the company's mission and the problem it aims to solve helps assess its potential market impact and longevity. Knowledge about the founders and key team members’ backgrounds can provide insight into the startup's ability to execute its business plan.
Financial Health and Projections
What is the current financial state of the startup, and what are its future revenue projections? Evaluating the startup's financial records and projections will help you understand its growth potential and scalability. It’s crucial to assess whether the startup has a realistic and sustainable business model.
Market Size and Competition
What is the size of the market the startup targets, and who are its main competitors? Analyzing the market size and competitiveness can reveal the startup’s potential for growth and market share. Understanding its positioning and differentiation strategy against competitors is essential.
Product or Service
What stage is the product or service in, and what customer feedback has it received? This question aims to evaluate the viability and market fit of the product or service. Knowing its development stage and gathering feedback from early users can give insights into potential future success.
Legal and IP Considerations
What legal structures are in place, and does the startup have any intellectual property or patents? Understanding the legal structure of the startup and any intellectual property or patents it holds is crucial to assess its capability to protect its offerings and operate without infringing on others' rights.
Funding History and Equity Structure
What is the startup’s funding history, and what is the equity structure? Knowing who has previously invested and the equity distribution among founders, investors, and employees can highlight the startup's financial stability and growth prospects. It also helps in understanding your potential stake and influence in the company.
Exit Strategy
What is the startup’s exit strategy? Inquiring about the exit strategy is essential to understand the potential return on investment. Whether it's through acquisition, merger, or an IPO, knowing the planned exit strategy can help align your investment goals with those of the startup.
Risk Assessment
What challenges and risks does the startup foresee, and how does it plan to address them? This question is vital to grasp the potential hurdles the startup might face and its preparedness to tackle them. A robust risk mitigation plan indicates the startup’s resilience and strategic foresight.
Customer Acquisition and Growth Strategy
What are the startup’s customer acquisition and growth strategies? Learning about the strategies for acquiring customers and scaling the business can provide insight into its growth potential. Effective and innovative customer acquisition strategies often highlight a company’s potential for success.
Company Culture and Diversity
What is the company culture like, and how does the startup value diversity and inclusion? Understanding the company culture and its stance on diversity and inclusion is essential, especially for women investors looking to support equitable and inclusive workplaces. A positive culture can also be indicative of the startup’s sustainability and employee satisfaction.
What else to take into account
This section is for sharing any additional examples, stories, or insights that do not fit into previous sections. Is there anything else you'd like to add?