Earlier this week an entrepreneur casually threw out an idea he had on the side that wasn’t related to his startup. My recommendation: don’t judge an entrepreneur’s idea. Push them to do customer discovery and let the market plus their internal motivation decide if the idea makes sense or not.
Now, as an investor, once you get past the common requirements of a great team and market, there are four quick ways I like to evaluate an idea:
- Must-Have vs Nice-to-Have – If the app is taken away from customers tomorrow, how much do they complain? How replaceable is the app if they just went back to email and spreadsheets?
- In the Path of Revenue – Where the app in the path of revenue? How clear is it that the app helps the company make more money?
- System of Record vs Utility – What functional category does the app fall in? Do people live in the app most of the day? Once a week? Set it and forget it?
- Timing – Where’s the market in the adoption lifecycle? Is it too early? Too late? Timing is 10x more important than people realize.
Evaluating an idea is hard. These four quick ways help me develop a mental model of a startup idea to see if I should pursue it further.
What else? What are some other quick ways to evaluate a startup ideas as an investor?