Questions I ask (or should ask) of startups

I spent two hours and change on Saturday taking the testimony of D.C.-area tech startups in three-minute increments. The experience–part of an all-day networking event put on by the D.C.-area tech-community site Foster.ly–was a lot more interesting than that sentence makes it sound.

(The Washington City Paper’s Lydia DePillis, another Foster.ly media attendee, wrote about eight of the more promising startups she talked to.)

Then on Tuesday, I saw another batch of local startups offer their pitches at a Northern Virginia Technology Council event. I’ve done the same thing at multiple gatherings around D.C. and in the Bay Area. As a small businessman myself, I find the whole routine getting more interesting–despite my general allergy to business-plan PowerPoints.

One customary formula for coverage of a startup starts with who invested in it and for how much. I find that boring. There’s so much money sloshing around–sometimes dumped on particular startups in absurd allocations–that I don’t think this provides enough insight on the virtues of a new tech company. Instead, here are the questions I’d rather ask:

What’s the problem you’re trying to solve? What’s the inefficiency, informational asymmetry  or overall inelegance you want to smooth out?

Most people have this answer memorized, but you have to start with it anyway. (In case anybody’s curious, the problem I’m trying to solve with my own work is the surplus of hasty tech journalism reported without benefit of historical insight or simple skepticism and then written with an excessive attention to specifications, momentum or buzz.)

Who else has that goal? Who else–in particular, which large, incumbent firms–might decide they need to join in the fun?

You have to be able to find the competitor and the possible competitor.

How do you make money?

So rude to ask, I know. Bonus points if a company has multiple revenue possibilities in mind. But if you have enough investors lined up to pave your runway a few years into the future, I will cut some slack on this. (A figure-it-out-later strategy seems to have worked fine for Instagram.)

What things beyond your control need to happen before you can make money? Who has a finger on a kill switch for your company?

If your idea depends on massive network effects, you’ve got a steep hill to ascend. I hope your business proposition also works with a small amount of customers… and that it isn’t dependent on a blessing by the App Store, Hollywood, giant telecom firms or corporate IT departments.

Then there’s the question I often forget about, even after being reminded of its importance at a SXSW panel discussion this spring:

If you go bust, what happens to your users’ data?

What questions would you ask?

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2 thoughts on “Questions I ask (or should ask) of startups

  1. Pingback: Weekly output: community broadband, worst Windows, talking to startups, Google apps on Gogo WiFi | Rob Pegoraro

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