Last night I had the opportunity to listen to Paul Singh present the 500 Startups thesis at the ATDC. He did a great job outlining how things have changed in the tech startup world over the past 10 years as well as making a great a argument for investing in a large number of startups with a structured thesis.
One of my favorite slides was the 500 startups checklist for investing:
- Product solves a problem for a specific target customer
- Capital-efficient businesses – operational @ <$1M funding
- Primarily internet-based distribution – search, social, mobile, location
- Simple revenue models – transactions, subscriptions, or affiliate
- Functional prototype before investment (or previous success)
- Small but measurable usage – some customers, early revenue
- Small but cross-functional team – engineer, design/UX, marketing
I think this is a great list. One item I’d add: co-founders are working full-time on the business and don’t have day jobs (if they need to wait tables at night to pay the bills, that’s fine). Also, design/UX is critical for B2C startups but Twitter Bootstrap makes it less critical for B2B startups.
What else? What are your thoughts on the 500 Startups checklist for investing in a startup?