6 Criteria for Starting a New Business

6 Criteria for Starting a New Business

When we first decided to launch a startup studio, we were excited at the prospect of being able to jump right in and start coming up with ideas. But we quickly realized that we lacked an investment thesis, the guiding vision we should use to vet ideas. Coming up with one overarching and compelling thesis statement proved to be very difficult. In fact, we found that aiming for this type of clarity so early in the process was detrimental and too restrictive for our purposes.

So we took a step back and got to work developing a set of criteria that we could use as a lens to examine an idea’s merit and determine whether it is in alignment with our goals and values. Here’s what we’ve come up with so far: 

 

1. Is this idea something we would be proud to recommend to friends and family?

Following a “don’t do bad things” doctrine seems like a great foundation for any company, but what exactly does that mean and does it allow too much wiggle room? We decided the best way to assess a company’s moral worth was that it must be something that we wouldn’t hesitate to recommend to the people close to us. Put simply, we don’t want to do anything that could be construed as being immoral, illegal, or otherwise icky.

 

2. What is the potential ROI? Is it big? It’s got to be big.

The entire notion of “big” is key here. Anything we do must target large markets ripe for disruption. If we are going to spend our time, energy and money on an idea, we need to focus our efforts on large opportunities.

 

3. Can we add a lot of value in small increments of time?

We have many 10-minute windows in our calendars. All too often these are wasted. We want to apply these opportunities to a project as often as we can to quickly iterate on through to creating a profitable company.

 

4. This isn’t a moonshot, is it?

We love big, world-changing ideas, but we’ve been burned before when investing in bleeding-edge technologies. The risks are too high and the timelines too nebulous. Instead, we want to meet a need that exists today. This means developing projects that riff on brilliant hacks to existing technologies and setting goals where progress can be measured.

 

5. Can this become cashflow-positive in 12 months?

The simplest measure of success for a business is whether or not it can make money. Any company we launch should become profitable within 12 months, not some ever-elusive future date.

 

6. Is this something we can build and scale quickly?

We don’t want to build a lifestyle company that we’ll stick with for years to come. We want to focus on companies that can grow quickly and scale.

 

All part of a process.

I’m sure this list will grow over time, and I’m sure when you talk to us in a few months we will have developed a polished one-line investment thesis that sounds brilliant. But for the time being, these six questions give us just what we need to vet the tonne of ideas sitting on our desks.

 

Photo by Graham Reznick / License: CC 2.0

Mike Benna

I'm a technology entrepreneur that really enjoys the first half a dozen years of a company's life. I have lots of experience in all corners of B2B and B2C software development and SaaS companies. These days my interest lies mostly in business strategy, productive processes, company culture, data driven decisions, randomized trials, marketing, and of course optimizing nearly anything that's worth optimizing (as long as that's not premature).

1 Comment

Tim

about 2 years ago

Good criteria for anything, really.

Comments Closed