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| The Alameda
85 Questions: Entrepreneurs’ Checklist
We assist select early stage start-ups in achieving
success. This checklist is intended as a guide to entrepreneurs
to help them refine their strategies and plans in order to attract
investors, and ultimately achieve success. We do not expect start-up
companies to have all these questions addressed before contacting
us, and perhaps not all of them will even be relevant to each and
every company. However, the questions below represent many of the
important issues that are likely to drive success. As part of our
"Value Added" investment philosophy, we will work with
entrepreneurs to help them recruit winning team members and develop
the right strategies, plans and organizational effectiveness. |
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The
Team |
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| 1. |
Is the team
brilliant? |
| 2. |
Does the team
have energy and passion for their concept? |
| 3. |
Will the team
work hard? How do its members respond to frustration and setbacks? |
| 4. |
Is the team
expert in the relevant technology space? |
| 5. |
Does the team
demonstrate superior ethics? |
| 6. |
Can the team
communicate their concept and enthusiasm effectively? |
| 7. |
Can the team
present their business model clearly and articulately? |
| 8. |
Can this team
(and not just one person) sell key customers? |
| 9. |
Does the team
work together very well? Do they agree on their roles, both short
and long term? |
| 10. |
Does the team
understand their weaknesses? Are they willing to take advice when
needed? |
| 11. |
Is the team
willing to bring in professional management if and when required?
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| 12. |
Is the team
flexible enough to change direction if the market shifts? |
| 13. |
Does the team
have experience with similar markets, customers and suppliers? If
not, will they accept additional team members from the outside? |
| 14. |
Is the team
able to answer questions about market issues, the company, and the
deal? |
| 15. |
Does the team
have experience in start-ups and in similar technology businesses? |
| 16. |
Has the team
started a successful company before? |
| 17. |
Does the team
understand the risks and know how to manage them? |
| 18. |
Does the team
have realistic expectations? |
| 19. |
Does the team
cover all the functional areas needed for the stage they are at? |
| 20. |
What evidence
of experience with corporate governance issues does the team possess? |
| 21. |
Are there sufficient
and positive references on the founders, team, and board members? |
| 22. |
Has the team
met previous development milestones? If not, why? |
| 23. |
Are key members
of the team sufficiently motivated by stock and/or options? |
| 24. |
Does the team
value the interests of the investors in achieving a timely and profitable
exit? |
| 25. |
Is there a
board of directors? Does it include experienced and expert outside
participants? How active will they be in this company over time? |
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Concept
/ Product/Intellectual Property |
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| 26. |
Is the product
complete (i.e. "whole solution")? |
| 27. |
Is the product
unique and substantially different from competitors’ products? |
| 28. |
Is the product
sufficiently disruptive to create a new value paradigm? |
| 29. |
Does this new
product have the potential to lead its defensible business segment? |
| 30. |
Is the technology
ready for commercialization, or is there still basic research to be
done? |
| 31. |
How many months
are needed to achieve revenue on a production-ready product? |
| 32. |
How significant
are technology and product development risks? |
| 33. |
Are there logical
follow-on products or is this company a one-trick pony? |
| 34. |
Will this simply
be a technology treadmill, or are there other competitive advantages
that can be established? |
| 35. |
Is the intellectual
property patented or patentable? What are the risks to the IP? |
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Market,
Competition, and Customer Issues |
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| 36. |
Is the defensible
business segment large and growing rapidly? |
| 37. |
Do customers
really need the company’s offering, and not just like it? (i.e.
a pain-killer vs. a vitamin?) |
| 38. |
Is there a
clear customer ROI? |
| 39. |
Is there sufficient
customer perceived value to yield attractive gross margins? |
| 40. |
Have the target
customers been identified and are lead customers signed up? |
| 41. |
Are there one
or two beta customers committed? |
| 42. |
Has the company
correctly assessed the customers’ buying criteria? |
| 43. |
Is there any
customer validation for unit volumes and pricing? |
| 44. |
What pre and
post sales support and service will customers demand and can this
startup meet that demand? |
| 45. |
Are there customers
or potential customers who can validate the market window, competitive
factors and decision criteria? |
| 46. |
Are major sales
channels open to the company and Is the marketing plan compelling? |
| 47. |
Are there any
strategic partners signed up or are there some in discussions? |
| 48. |
Are there entrenched
competitors? Or can the company create a new price/performance paradigm
that is significantly better than competitors 3 years in the future? |
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Financial
and Operational Issues |
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| 49. |
What are the
projected revenues / profits / market share and are they realistic?
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| 50. |
Is market seasonality
or cyclicality an issue? |
| 51. |
Are there governmental
or political factors that may delay or block sales (i.e. FCC spectrum
allocations, EPA waivers required, FDA approvals, etc.)? |
| 52. |
Has the cost
structure been established and does it compare with public companies
in similar business areas in terms of percent of sales for R&D,
G&A, and selling & marketing expenses? |
| 53. |
Can the business
achieve gross margins well above average? |
| 54. |
Is there a
clear path to achieving high growth rates? |
| 55. |
Does the company
have agreements with top tier legal, banking and accounting firms?
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| 56. |
Has the company
established arrangements with leading suppliers? |
| 57. |
Are the cost
estimates and cycle times realistic for production? |
| 58. |
What length
of time is required to achieve profits and then how long after that
before positive cash flow? |
| 59. |
Will the company
have sufficient cash after funding to make it to the next milestone
and financing round? |
| 60. |
Is the capitalization
table reasonable and does the team vest their stock over time? |
| 61. |
Are there any
ownership, special terms or other financial issues with prior rounds
of participants? |
| 62. |
Is there sufficient
equity remaining in the options pool for 2-3 years of added employees,
service providers and suppliers based on similar startups? |
| 63. |
What are the
terms and conditions of prior investors? Are they acceptable to new
investors? |
| 64. |
If prior investor's
rights must be modified, will they agree? |
| 65. |
Is the company
open to a range of exits (acquisition, mergers, or IPO)? |
| 66. |
Are there a
sufficient number of likely acquirers? |
| 67. |
Can the company
exit valuation be estimated based on public companies in similar industries? |
| 68. |
Is the exit
potential within a reasonable time frame (e.g. 3-5 years)? |
| 69. |
Is the pre-money
valuation for this round close to the value our internal models indicate
it should be? |
| 70. |
Can we reach
a reasonable consensus on valuation that works for investors, founders,
future employees, and other stakeholders in this company? |
| 71. |
What IRR is
projected for this round of investor using our models? |
| 72. |
Who else has
invested in this deal in any prior financing rounds and have they
added value in helping the company grow? |
| 73. |
Who is interested
in co-investing in this round if we lead? |
| 74. |
Is the syndication
sufficient for follow-on funding? |
| 75. |
What IRR (based
on realistic valuation step-up) is forecast for the next round of
investos and how does that impact this round of investors, founders
and other employees? |
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Risks
(if not previously covered) |
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| 76. |
Are the technical
risks identified and are there sufficient resources budgeted to overcome
them? |
| 77. |
Can all the
technical risks be overcome within 10 months of funded work with the
budget? |
| 78. |
Is the schedule
realistic with minimal risks and are there alternatives? |
| 79. |
Can marketing
risks be overcome by the company, or are there potential marketing
partners who are interested in sharing the risks? |
| 80. |
What is the
next round funding risk if there is at least one schedule slip? |
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Miscellaneous |
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| 81. |
Does the Executive
Summary differentiate this opportunity from others succinctly? |
| 82. |
Is the Business
Plan comprehensive and understandable to non-technical readers? |
| 83. |
Has the company
done the legal work necessary (board authorization, state filings,
etc.) to enable investments under generally accepted terms? |
| 84. |
Are the corporate documents
acceptable (stock option plan, stock purchase agreement, etc.)? |
| 85. |
What further due-diligence
is necessary for us to reach a unanimous affirmative decision? |
