500 Startups Checklist for Investing in a Startup

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?

4 thoughts on “500 Startups Checklist for Investing in a Startup

  1. For abeo;1-6,8 check. Still working on number 7, Interesting that it is those three roles that I am concentrating on acquiring. I did not realize how critical/difficult recruiting partner grade talent was going to be.

    As for the investing list first I would add, Why?
    What is the purpose of the business, beyond just making money?

    Purpose gets people up in the morning when they don’t feel like it or making that next call, taking that next action when they are totally drained. Purpose leads to passion. How can a start-up succeed without passion?

    Second, and along the lines of why, I would want to know what the values of the founding team are. What is important to them? Their values, regardless of what they are, will determine how they respond to challenges and work with investors.



  2. It is a great list, but I would strongly encourage folks to watch the looooong presentation attached to it. It provides further details on the checklist that provide keen insights on the “why” portion of the bullets. It actually helped me direct my early product development strategy.

  3. Great list, really supportive.

    One piece of hair-splitting however: “Also, design/UX is critical for B2C startups but Twitter Bootstrap makes it less critical for B2B startups.”

    User Experience considerations are present in almost every point in the list, front end design is not the start and end 🙂

    Bootstrap is great for startups needing UI work, as it uses establish patterns, benign visual design and easy to implement code.

    UX in context with startups, addresses the concept validation as well as the usability. These user experience activities are usually held by the founder when discussing the project with customers (as part of validation, not marketing) as well as the rest of the cross-functional team as a frame of mind, rather than a set of build activities. These are ‘softer’ and definitely lean, rather than the rigourous customer/audience insight led work done by a much larger team.

    Put simply, good usability and a pretty presentation won’t create a good user experience. The reason for the user experience failing can simply be a conceptual issue, especially with emerging tech/innovation as there a mental models under challenge with customers/audiences.

    In Australia, where UX considerations in startups is pretty low, I’m working on documenting and providing coaching for startups around this, please feel free to reply with your comments or thoughts.

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