Startup Validation

Doc for Investors

Disclaimer: We currently lack expertise in startup valuation and validation. We therefore do not have an established valuation system and clear investment framework yet.

Team & Roadmap

Motivation & Formation

What has been your motivation to start your startup? Who was the original founder of the startup?
How long is the Team already working together? How did you find each other? Why did you decide to work together?
Which other career option did you consider? Why did you decide to join a startup opposed to joining a corporate?
How is equity and voting power split?
Which values are important for your company? Which goals are important? Do different team members bring different accents into this?
What are the background situations and personal goals of each team member?
Does any of the core team members have a side hustle or is this startup the side hustle?
How do yo structure team events? Do you spend time in your free time together?

Workflow

How is the team working together? How do you imagine the company will work together? (Remote, in-person etc.)
How are important decisions taken?
How do you split work?
Are there core beliefs or principles that shape your work?
Do you have one official managing director/ceo?
Which tools does the team use for planning, coordination, communication, documentation etc?
How is your workflow during a typical week?
What is the work-life balance of team members?
How do you resolve conflicts? Did you already have any first major conflicts?

Skills

Which previous and relevant experience do team members have?
How & why did every team members choose their area of study and work? What are you the most excited or passionate about?
Do you have prior startup or leadership experience?
Are all necessary skillsets presented in the team to make it a success? If no: Which skills are missing?
Which areas in the startup building process will be first time challenges for team members?
How do you tackle new problems? How do you accumulate new knowledge?
How do you take decisions when limited informations are available?

Roadmap

Do you have a built out roadmap? How did you construct that roadmap? How do you decide what to focus on? Are you willing to share that roadmap?
Do you have concrete plans to pivot if plan A is failing?
How far into the future did you plan ahead?
How do you prioritize work? How do you measure progress?

Recruiting

Which positions are you going to recruit for first? Why?
What are you looking for in your first employees?
How do you plan to build your recruiting funnel?
How are you planning to retain important employees?
Do you have any prior experience with recruiting? Do you already have employees?

Service providers

Do you have strong established partners and service providers e.g. law firms to work with?
With whom are you working?
How much budget do you allocate to different functions?

Budgeting

What costs did you have over the last years/months (since inception)?

Do you currently have a budgeting plan? Are you willing to share it?
If you are not cash flow positive do you know how long your cash will last before you need to cancel the project? e.g. 9m month run away cash.
How much money are you planning to raise in your next round?
How are you planing to spend that new cash? Do you already have concrete mapped out budget plans and projections? How much runway will you have?
Do you see a way to grow faster (or more sustainably) by making certain investments (hiring developers, hirings sales reps, advertising)?
Are you planning (costly) investments in the near future? (Capex)
Do you currently receive a salary? What will your salary be after a successful funding round?

Are you well prepared on the tax front (monthly payment of payroll tax, VAT) to avoid unexpected tax payments? What processes do you have in place for accounting/ tax and how automated are these? (Checklist here (starting with "1. How to start Finance?"): https://www.florianhuber.de/blog/know-your-numbers-finance-and-controlling-in-early-stage-startups/)

Vision, Market, Product & Competition

Vision & growth journey

What is the Mission and Vision of your company?
Where do you want to be in 5 or 10 years?
How do you see your further growth journey? (e.g. further VC-Rounds, Exit)
How fast do you need to grow in order to succeed? How long do you think the window of opportunity will stay open?
How soon can you achieve profitability? How much do you want to optimize for profitability vs. growth?
Which kind of longterm margin do you think is realistic? Why?

Market

How would you describe your business model?
Why does the market opportunity exists? Why did no one else capture that market yet?

Can you quantify the current & future demand for your product? (Revenue)

How big is the total addressable market? How large is the serviceable available market? Which assumptions did you make in your calculations?
Which % marketshare do you think you can obtain and hold longterm. Why?
How much revenue did you generate so far?
How much realistic revenue can you generate within your current step one niche/vertical/strategy? Do you have revenue growth plans and projections?
Do you have expansion plans beyond that? Which verticals are you going to tackle next? When will you tackle those verticals?
What are you revenue growth projections? What kind of assumptions, targets, kpis did you set yourself? What is currently the limiting factor for growth?
How do you market your product? How high are your Costumer acquisition costs and costumer lifetime value?

Product

What makes your product stand apart from competition? What is your USP? Do you have an unfair/sustainable advantage over your competition?
Which part of your product are you most proud of? In which area do you need to get better?
Are there any (technical) explanations/demonstrations of your product available so we could get a better understanding of it?
How could we independently validate the quality of your product?
Has the product gone through iterations? For how long is the product already in its current iteration?

Can you sketch the growth curve during the different product interaction stages?

Competition & Moats

What is the endgame in your market? How strong are network effects? How much consolidation are you expecting to see?
What is the most valuable resource in your business? What will be the deciding factor which businesses are going to be successful in your market?
How will one business be able to take market share from the other? (Better product, pricing etc.)
Which types of moats are you hoping to build for your business?
Are there any moats that competitors have which are not obtainable by you?
What are power dynamics between different participants in your market? (e.g. between you and your vendors/partners and costumers) Is this visible by the way contracts are structured?

What are your two biggest direct competitors and who are your two biggest indirect competitors? Do they already have similar products on the market? Are you seeing any similar products?
Which type of players are you seeing as your most serious challengers in the next years?

Sales (Clients & Partners)

How much revenue are you targeting per client? Will this revenue be one time or recurring?
Does your business model depend upon collaborating with certain business partners?
Do you currently have clients/partners signed? If yes which ones? Which kind of conditions did you agree upon?
How many potentially clients/partners did you already had talks with it? Is it difficult to identify and start conversations with potential new clients/partners?
What are your conversion ratios at different stages of your sales funnel?
What are major hurdles you are facing in your conversion process?
How many different clients/partners do you need in order for your business model to succeed?
How large is the pool of potential clients/partners you can work with? Which % of them do you need to sign in order to succeed?

Regulatory

Which regulatory challenges are you or the industry facing? How fast is the regulatory environment changing?
How can you solve those challenges or even provide a solution for them?
Are you able to fully comply with regulatory demands or do you need to take certain regulatory risks?

Investmentcase & Exit

Co-Investors

Have you been looking for investors? Who did you talk to before? With how many investors have you been talking?
How many VCs are active in your space? How large are they? (aum)
Do you currently have investors? If yes who are they?
Which conditions did you have in your last funding round? (size, structure)
How is your cap table structured? Is there going to be an employee stock option plan?
Do you vest founder shares? If yes over which period?

Legal Structuring & Governance

How are you planning to structure your current funding round?
How do you plan to structure the angel part of it?
Are there any specifics in the term sheet a potential angel investor should know about immediately?
At which point do you plan to establish a board?

Working together

What are you looking for in a business angel? What is important for you when working together? What are non gos and things you'd like to avoid?
How do you plan to keep your investors up to date?
How much access & transparency would a business angel have?

Exit

Are you targeting an exits or do you want to try staying independent?
What are your exit options? Who could be interested in buying you?
In which timeframe and at which valuation could an exit be realistic?
Which kind of terms did you agree with lead investors on? (Liquidations preferences, drag/tag along etc.)

Blindspots

Questions not asked

Are there any other important factors or areas i should know about?
Are there any other important questions i did not ask yet?
Are there documented questions from other investors i could access?
Which other more advanced questions/due diligence did you conduct with your lead investor/vcs?

Risks

What would you say are the biggest risks when investing in your company?
What would you say are the biggest weak points of you business model?
Where do you personally think you have the biggest blind spot and is there a team member who covers it for you?
Are there large singular risks that could happen (e.g. damages, legal challenges)? Do you have risk mitigation strategies for them?
Is there any risk i might not see as of now? Could you help me to see it?

Opportunity

If you are looking into the future what are you personally most excited about?
Why should i want to invest in you and your company?
Is there any potential i might not see as of now? Could you help me to see it?