Three Must-Haves for a Successful Startup
Andy Snyder|March 7, 2022
“She was in a cult,” we said.
“Well, that’s new,” Alex replied, with the sort of tilted-head look you’d expect from a confused cat. “I suppose that’s good for portfolio diversification.”
Indeed, we’d yet to recommend a stake in a company run by a cult member.
And as you’re about to learn why… we still haven’t.
We hopped on a video with Manward’s Associate Publisher Alex Moschina on Friday. It was part of our new Venture Spotlight series, which dives into the red-hot realm of equity crowdfunding.
Over the last two weeks, we’ve looked at a couple of current offerings… and ran them through our key metrics.
These are the must-haves. If we’re going to recommend a stake in a startup to our adoring fans… it MUST match all three criteria.
The ideas are quite simple. We hope you’ll nod along.
Must-Have No. 1: Big Total Addressable Market
First, the company raising money must be part of a big industry. We’re looking for a “computer on every desk” sort of big… not a company that makes a key widget for a very specific gadget.
In the case of the accidental cult member – by the way, she says she got out as quickly as she got in – her company is making an herbal coffee alternative.
Good. There’s a coffee maker in every house.
That’s a fine start.
If her firm can make a big push into the $460 billion coffee market… that’s a lot of potential. Just a 1% slice of that sweet of a pie can make early investors quite rich.
There’s a check mark in that column.
Must-Have No. 2: Novel Product
Next on the list of our three must-haves is a unique product.
We want to see a company doing something new… something nobody else is doing. Apple did it. Netflix nailed it. Mr. Zuckerberg certainly changed the world.
And they all handed their early backers quite a sum of money.
But an herbal energy drink?
Yawn.
We’ll need a tall mug of coffee to get us excited about that one. Dozens of companies already have a footprint in the space. And all of them are competing for a very small subniche of the coffee market.
And besides that… what’s keeping Starbucks or McDonald’s from creating their own version?
Could that tiny subniche be too small to scale?
It sure looks like it.
No check mark.
Must-Have No. 3: Impressive Leadership
And finally, our third must-have… We want a management team that’s held the trophy high over their heads before… and, just being idealistic here, we’d prefer that they aren’t currently and have never been (accidentally or on purpose) in a cult.
This is where we sort out the liars and the cheats from the brilliant and the savvy.
Wall Street is filled with hype. The crowdfunding space is even worse.
We must be careful. We must do our research.
In this case, the company claims its founder has been involved in two previous startups. She’s even listed as the co-founder of one that had a “successful” exit.
We’ll have to agree to disagree on that one.
The facts are sketchy.
Our due diligence puts her as an employee at a tiny company that was picked up in an acquisition that nobody seems to want to talk about.
Perhaps there’s more to the story. Perhaps she made millions on the deal. But we sure couldn’t find signs of it. She certainly has never taken her own company from zero to 100 before.
Definitely no check mark on that one.
No Compromise
Cult member or not… we’ll pass on the deal.
Our three-point checklist makes it simple.
Again, we look for…
- Significant total addressable market (TAM)
- Novel product
- Impressive leadership.
If anything is missing… we move on. There are better places for our money – especially right now.
The startup market is red-hot.
There’s no need to compromise.
Since the start of 2020, the number of private companies with billion-dollar valuations has doubled. There are now more than 1,000 unicorns out there. Each has made early investors very, very rich.
And each, we’d wager, met the three criteria above.
We just opened our brand-new Venture Spotlight feature to the masses. If you want the real scoop on one of the hottest sectors of the economy right now – and want to learn which companies in it meet our marks – we highly recommend you join us and our guests.
It’s easy to sign up. Just click here.
Andy Snyder
Andy Snyder is an American author, investor and serial entrepreneur. He cut his teeth at an esteemed financial firm with nearly $100 billion in assets under management. Andy and his ideas have been featured on Fox News, on countless radio stations, and in numerous print and online outlets. He’s been a keynote speaker and panelist at events all over the world, from four-star ballrooms to Capitol hearing rooms.
