How to know you’ve got a winning business idea, in three words
How do you know if a business idea or startup will thrive or fail? It’s a question that all tech entrepreneurs and investors ask themselves.
After pitching and evaluating ideas for more than a decade, I’ve gotten pretty good at pattern recognition. Sometimes, you just know certain startups are going to make it, while others are dead in the water.
It’s not rocket science. It doesn’t necessarily require an MBA or an advanced degree in finance. Most of the time, it comes down to three words: talent, technology and traction. This is a framework I use myself, and it’s how my company evaluates its acquisitions.
Businesses that check these three boxes are more likely to get funding and, more importantly, more likely to succeed. Whether you’re an entrepreneur pursuing an idea or an investor thinking about funding one, it helps to keep these simple criteria in mind.
Is there talent?
Great business ideas are everywhere. Great implementers are one in a million. I always start assessing a business by gauging the entrepreneur and the team behind the effort. Paramount to me is evidence of fanatical dedication. Part-time entrepreneurs, those who might be starting a business as a side gig or maybe have a bunch of pots on the boil, really don’t cut it.
The reality is that entrepreneurs face a monumental task — creating something out of nothing. To succeed in this primal act of creation, you need cult-like devotion to your cause. Weekdays and weekends make no difference. Ditto for job titles. An effective entrepreneur must be willing to wear multiple hats — from salesperson and designer to customer service rep and dishwasher.
. This is one reason why I feel that having a critical mass of “can-do” entrepreneurs — an entrepreneurship golden ratio, so to speak — is critical inside any business, whatever stage it’s at.
Is there technology?
This happens to me all the time. An entrepreneur presents a solid business idea, runs through an awesome pitch, then concludes by saying, “ … and all I need is to find someone to handle the tech part.”
Tech is not an afterthought. Especially in the online space, it’s the underpinning of most every successful company today. And it’s not easy to get right. Behind all those tools and platforms we use and take for granted — from social media networks to Uber to Airbnb — is game-changing technology. The nuts and bolts of code and engineering itself is just as important as the “business idea,” if not more so.
For that reason, I’m a fan of a co-founder model for startups, or some variation on it. One classic formula is to have one individual dedicated to technology (who eventually becomes CTO) and another dedicated to everything else (who goes on to be CEO). This model ensures that technical considerations are tackled early and head-on. The alternative is to race forward with a concept — securing funding, initiating marketing, lining up customers — without any real assurance that you can “walk the walk” and deliver a viable, scalable product when the time comes.