Confessions of a Tech Consultant: Vol I
Evaluating Business Viability, A Checklist
I’ve had the privilege over the last four years in particular to help build a lot of startups — some wildly successful, some not so much so. I’ve been an employee, a consultant, and a coach. I’ve seen the good the bad and the awe-inspiring. I’d like to impart on my people (people of color, women entrepreneurs, especially)who are serious about getting into a new endeavor with one or a group of folks. Whether you’re deciding to start building your dream, get in on the ground floor of a startup, or consult, remember that you are spending your life energy on the projects you say ‘yes’ to. Opportunity cost is a real thing — so what you say ‘yes’ to, you’re saying ‘no’ to something else in its place. Do your due diligence so that you can make an informed decision on where you’re placing your energy, so that when you do say yes, you’re actually excited to give the best of yourself to something that feeds you. This is a simplified outline but will give you a good starting point with questions to ask yourself.
Learn the people.
Team Strength: Does everyone know their lane and play in it? Do they work well together? Do any of the team have previous experience in starting & scaling a startup? Hiring/firing? Who are the formal advisors and what is their incentive and input in the business? What is the motivation of those who have significant input or involvement (e.g. there for the optics v. there to build something significant)? What is each person’s time commitment to this endeavor each week and is each person realistic with the time they said they can commit (i.e. are they working full time jobs or have they quit to give the business their full attention)? How often does the team meet and what is the method of keeping one another on track and accountable? Get down to the nitty gritty.
Ownership: What does the ownership split look like? (This will affect the way decisions are made). If there is a disagreement in fundamental direction, who gets the final say? When there is a disagreement in small matters, how much autonomy does each person have in having the final say as it affects his/her work (e.g. this is why having a lane and staying in it is important)? Find out what conflicts have already come up and how they’ve resolved them. Set extra clear guidelines if starting a business with friends. This is business, treat it as such.
Purpose: What is driving the major players in the business? Is it profit or a deep desire to build something that’s needed in the world? Is there an inflated sense of value because of who is involved or is the product providing a unique solution that needs to see the light of day? Do all people involved have a personal stake in its mission (i.e. have the founders truly been affected by the problem that’s being solved)? Really identify the driving force behind the business idea because your ‘why’ will be the driving force to keep you afloat when you’re in a downturn (which you absolutely will have).
Learn Who They Really Are: However you decide to engage with a company, understanding the people you’re starting a relationship with is key. A company is its people. And people are people. They will treat you the same way in business as they do in their personal lives. Learn who they really are. Go to a family bbq. Check out their IG; see what they do on the weekends, who they spend their time with, what they write about and post. You’ll find out pretty soon what’s important to them. Ask around to your network about how well they know them and any dealings they may have had. Go out for a bite and get to know one another. Let them reveal themselves to you. Then ask yourself, “can I trust this person with my livelihood?” (because that’s what you’re doing).
Ego: This should be given careful consideration. Are there people on the team driven by ego (this could show up through many forms including how they approach money, titles, ownership, etc.)? Look for people who are driven to build something for the good of the audience being served, who are looking to build beyond themselves. When you know the people you’re working with are not about self, and they’re focused on the greater good, that will include having your best interest at heart.
Influencers: Take into account by whom the founders are influenced including spouses, friends, mentors, etc. It’s important to note the people behind the scenes because the factors you don’t see are those that throw you for a loop. I learned that lesson from watching how my pops moves and who he lets in his circle (its very small, btw).
Mental Stability & Personal Life: What’s going on in the personal lives of the people building the business? Insurmountable debt? Divorce? New baby? Look at possible stress factors that could negatively impact the emotional / mental stability of the founding team. Again, honestly evaluate where each person is in his/her life (not judge), and that includes doing the same for yourself. If you’re not in a place where you can give what you know the team needs, act out of true integrity and find them someone who can instead. You’ll be remembered for the rest of their professional lives.
This isn’t just about evaluating others, this is also about evaluating how you fit into the mix. If you can’t be honest with yourself, then it’s easy to get lied to. That one’s for free.
Pay attention to the money factor.
If it’s not about the money for you, still pay attention to everyone else‘s relationship to it.
Runway & Fundraising: Does everyone involved understand the purpose of fundraising VC dollars or if that’s even the best course of action to take to finance this type of business? Does everyone understand what they’re giving up for VC dollars? Have all financing options been carefully taken into account, including financing business growth through revenue? How is the business currently being funded? How long can all folks on the team have income (runway) with what’s in the bank today? Are folks willing to work for free if the money runs out and if so, for how long?
Capital: How has the money that has already been spent, been spent? Do you have access to the financials or are they kept hidden (yes, this happens)? Does it look like money is being thrown around frivolously or are they penny-pinching when bringing aboard experts to help build? Is there an agreed-upon prioritization of where dollars will first be invested into the business?
Personal Relationship to Money: This is the third mention regarding money because it bears that much weight. Understand each person’s relationship to money? Do they have a scarcity mindset? Do they spend frivolously in their personal life? Are they mindful of their current lifestyle and making shifts to account for starting this new business? I once witnessed a founder live next door to the office (a co-working/ co-living situation) in order to save on funds and save time on a commute. That’s dedication.
Understand the business.
Business Value: Does the business model seem viable? Whether or not it’s an entirely new model isn’t as important as the unique value the business brings to the audience. Make sure you understand the industry landscape and both direct and indirect competitors. Look at what’s happening in the economy. Look at what’s happening in culture. Look at the direction of tech. Look at how your consumer is affected by all of these factors. If the consumer has a similar way to get their need met, understand the uphill battle in proving the value of the product to consumers and to potential investors.
Traction: Where is the team in its beta test? Are you starting from scratch or has some work already been done to prove the business case? What kind of traction has the business gotten that shows proof of concept and is it enough of an indication of how viable a product it is and just as importantly, how well this team works together to get it done? Important note here: I’ve seen instances in which a team will set out to raise money to beta test, but this tends to be a red flag for investors, especially if the team are minority-led. I’m keeping it all the way honest here. And even though there is such a thing as a ‘moving target’ for entrepreneurs of color, don’t make it easy for them to say no. Do the work. Gain insights, make improvements, test again, pivot as needed. Investors especially will evaluate how well you work as a team, especially under the pressure of building a business they’re putting money into. And do put yourself in an investors shoes: if it was your money you were investing, you would want to see a certain level of progress too.
Strategic Thinking: Is there a roadmap? Has the team thought through the such things such as partnership strategy? Content strategy? Marketing strategy? Do the financials make sense for where they are? Again, take into consideration where dollars have gone and are planning to go.
Systems v. Self: Is this business being built with the ultimate goal for it outlive the founders or does it live and die with the people that started it? Are they thinking for today or are they thinking about how to set up systems that allow for scalability 1 year, 3 years, 10 years down the line? Is there a bigger vision for what it could ultimately look like or is the goal to sell it and make lots of money? Intention is everything.
These are only to serve as guideposts, because at the end of the day, you must listen to that voice inside of you that tells you whether or not this opportunity is for you. As long as you know your why, even if it looks crazy to other people, whether you turn down or accept an opportunity, trusting your gut will lead you exactly to where you want to be.
Peace ya’ll.
