One of the more popular questions I get is, “What do you look for in a startup?” Startupland is part art and part science, so I’m always looking for frameworks and ideas to increase the chance of success. One of my favorite frameworks for what to look for in a startup is the Triple T: Team, TAM, and Timing.
Everything starts with the entrepreneurs. Where did the idea come from? Why work on it? What’s worked well so far? What hasn’t worked well? What’s next? There’s a story or arc to the entrepreneurial journey. Part of it is listening for examples of uncommon grit and perseverance that will prove beneficial as challenge and obstacles continually present themselves. Part of it is feeling the emotion in the pitch and assessing how that will translate to recruiting team members, finding investors, and signing up customers.
After team, the next area to assess is the Total Addressable Market (TAM). TAM is a way of asking the question: if all goes well, how big can this startup get? The best startup ideas are ones where the TAM is small today, but fast growing, such that in 7-10 years it’ll be a huge market. Of course, predicting the future is terribly difficult. On average, entrepreneurs I talk with don’t spend enough time thinking through TAM and pursue ideas that appear too small in the long run. TAM should be small today and massive tomorrow.
We’ve all heard someone say, “I had that idea years ago.” Being too early is no different than being too late. Much like Goldilocks choosing the bed that was just right, timing needs to be just right. Ideal timing is starting a few years ahead of peak market adoption such that there’s a strong foundation, great team, quality customers, and an excellent story. Then, when the market really takes off, all the pieces are already in place. For timing, be a little early, but not too early.
The next time you’re thinking through a startup idea, or talking to an entrepreneur, use the Triple T framework and assess the team, TAM, and timing.