How to Identify a Start Up that could be Successful-Requirements for success

How to Identify a Start Up That Could Be A Success

To begin with all start ups look alike. They are very enthusiastic about the idea they have, how much this is required in the market and how they will be successful in the near future. Many of them project you as the future millionaire moving around in a BMW. But is this going to come true?

If I join these guys will I come out better than I was? Obviously, if you are asking these questions then you may have approached a start up when it has already gone into the stage of hiring some people. This may not happen in the early stages of the start up. It is also possible that you will consider start up to invest as well; then it is even a bigger decision. This could occur at many stages, in the beginning or a little later when the start up is in need of additional capital.

The questions on how to evaluate alternate jobs, whether job hopping is good or not and the kind of questions you might like to ask if you are considering a job with a start up are in the links below.

Let me in this hub include some issues related to investment decision as well. But the points given here are equally relevant to some one considering taking up a job in a start up, because some one looking for an employment too, if satisfied with the answers to questions that I had included in my previous hub (on what to check if you are looking for a job with a start up, links below) I would assume, will be keen on knowing if the start up is likely to succeed and grow. This is not an easy matter because quite a few of them just don’t make it for various reasons. Given below are some signals or features that could help evaluate their strength.

The Quality of the Idea

The product idea that the start up is planning to work on must be good. If there is doubt that it may not be viable or something that the user is unlikely to like then the start up may not be able to go too far. Quite often start up ideas come up because the founder had run into some problem while working at an organization and felt this is the best way to do it. Ideas like Google and Apple succeeded this way. If a start up is born because some one got tired of his job and he had money to invest but no ideas, and they start looking for ideas after the birth of start up it is not an encouraging situation

The Location of the Start Up

Experience shows that location could contribute a lot to the success. One and all involved in the IT business know that a start up around Silicon Valley has good chances. Similarly in India start up around Bangalore are perhaps better placed than others. If you were in auto sector Pune and Chennai could make a difference. The reasons are clear, they can get better employees, they are in touch with the latest developments and they are closer to the core advanced users as well.

Hiring the Right People

This would depend on who the founders are. If the founders are very knowledgeable and well informed technically, it may be reasonable if the other developers are not from the best source. If the founders are commercial guys who ventured into it because it looks good, then it is important that the technical arm should be quite strong. The product quality must not be compromised and must work very well in the hands of the user. There is tendency among some start up founders to be penny wise and to save some money they sacrifice on the quality of the technical guys.

Capability to Launch at the Right Time

The product launch must be timed perfectly, and should not be too slow, or too early, before the market can take it. Many start ups come with excuses to launch the product on time. Sometimes there is also fear and hesitation in information sharing which slows down the progress. The progress made so far can give us an idea on the work left and the time it would take. There are occasions when the start ups are in hurry to beat the competition and release the product. It is dangerous for a start up to take chances and guess what might work. Some testing must be done to generate performance data and evaluate the performance to prevent any loss of credibility.

Founders, Capital and Politics

The number of founders, their capacity for capital and the cohesiveness is critical. It is not uncommon to find a single founder struggling and running out of money. There are also instances where the founders are continuing their job carry on the start up as a part time activity. These start ups are at a very early stage. They perhaps cannot hire at all and spend any money at this stage. For investment also it is too early, because if the founders are confident that their idea will work they will not be keeping their jobs intact and managing this as a part time activity.

Difference of opinions among founders is not a health sign either.

If the founders cannot bring in enough capital they may go for venture capitalists.

Getting venture capital is not something that happens overnight. They take their time and often don’t give an answer either way.

Managing the Post Venture Capital Phase

This phase can set in after the founder capital is exhausted. The venture capitalists have a different perspective. Spending can increase by relocation of the office, more image creation and may be hiring. All this means more politics too. But the VCs are generally in hurry and can exert enormous pressure. This could call for adding external directors as well.

This transition phase can be quite tricky as the start moves from small to some thing larger than it was. The founders may now feel the need for professionals to manage for different reasons—1. The day to day operations should not distract the founders from the core issues and 2. If they are technical persons professional managerial systems may need to come in.

Often there is resistance from founders in this transition and rules can be stipulated to keep control. This in turn can increase the bureaucracy.

Decision

An evaluation of the start up on each of these aspects could throw light on how it is being managed and the likely hood of its success or disappointing us.

Related Hubs for further Reading

http://hubpages.com/hub/What-To-Check-Up-Before-You-Join-A-Start-Up

http://hubpages.com/hub/Ramkkasturis-Job-Hopping-is-it-Good-or-Bad-and-the-Precautions-You-Need-to-Take

http://ramkkasturisbusinessmanagement.wordpress.com/

http://ramkkasturisbusinessmanagement.wordpress.com/2010/06/05/moving-up-in-the-corporate-ladder-why-is-first-job-important/