When to invest in a tech company

One could say that I’ve been around the block when it comes to tech companies and start-ups, so a¬†question that I get quite often from investors is “Is this a good investment?”

It’s not a really easy question to answer, but there are some indicators that you can use to weigh your decision. This is by no means a complete list, but it might be a good check list to determine whether further investigation is justified.

  1. Is the technology solid? By this I mean can the engineering team build what they are being asked to build.
  2. Are the people good? This is a more complex question because there are a number of teams inside any start-up. The engineering team needs to be evaluated separately from the leadership team. It’s really important that the leadership team understands the technology as well as the opportunity and this is not always the case. It’s been my experience that if egos are going to be a problem, you will find them in the management team.
  3. Is the timing right? Is the market ready for the new innovation that is being designed? Technology people see the application for innovation years before the buying public and many really good companies fail because they’re ready too soon.
  4. Do you have a channel to market? There are so many options today that didn’t exist in say the 80’s and 90’s. It’s really important that the marketing team has a grasp on how ¬†things like eBay, shopify, google add-words and other innovations have re-shaped the industry. If the marketing team talks about things like trade shows and industry analysis, run away!
  5. Is the work environment innovative? Start-ups require long hours so there has to be a good work environment. Do the employees mix socially and do they include family and friends. Start-ups require buy in from both the employees and their support networks.
  6. Are the employee’s share holders? Being a share holder means that employees are owners. People always work harder on their own projects or when the outcome will effect their own pocket book.
  7. How old is the startup? If the start-up does not realize some success in the first few years of operation, the employees will burn out. The advantages like shares lose their sparkle and there may not be enough momentum left for a pivot.

I could go on for pages but rather than do that, I suggest that you read “The start-up owners manual” for more insight into what makes a successful start-up.

For me, it comes down to technology and people. If those two things work, the rest will happen on it’s own. The people part is the hardest to get right.

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