What are some key aspects of a startup to consider when making a startup investment?
First, consider that 75-90% of startups fail, so most startups you encounter will ultimately not prove to be profitable investments on a one-off basis. This is why FundersClub emphasizes curation and screening, only listing the top 2% of the startups it encounters for investment. Even after careful screening, across a diversified portfolio of high-promise startup opportunities, only a small minority of startup investments are expected to make up the bulk of overall portfolio profits.
With that being said, you should approach each investment with scrutiny. Evaluating a startup for investment entails considering multiple factors. There are often factors to consider that are unique to a given startup’s industry and business model, but there are also some common factors to consider across most startups when considering a startup investment:
- founders & key management team
- addressable market
- product and/or service
- competitive advantage and differentiation
- business model