AGENDA:  Most important things to look for in a start up

TAM: Make sure the market is sufficiently large than once they win they can get rewarded
- Medium sized markets that should be winner take all can work
- TAM needs to be realistic of direct market size

Product market fit: Being in a good market with a product than can satisfy that market
- Solves a problem
- Builds a solution a customer wants to buy
- Either saves the customer something (time/money/pain) or gives them something (revenue/enjoyment)

Unit economics: Profit for delivering all-in cost must be attractive (% or $ amount)
- Revenue minus direct costs
- Raw input costs (materials, variable labour), direct cost of delivering and servicing the sale
- Attractive as a % of sales so it can contribute to fixed overhead
- Look for high incremental contribution margin

LTV CAC: Life-time value (revenue contribution) vs cost to acquire customer must be healthy
- LTV = Purchase value x number of purchases x customer lifespan
- CAC = All-in costs of sales + marketing over number of new customer additions
- Strong reputation leads to referrals leads to lower CAC. Want customers evangelizing product/service
- Rule of thumb higher than 3

Churn: Fits into LTV, low churn leads to higher LTV and helps keep future CAC down
- Selling to replenish revenue every year is hard
- Can run through entire customer base over time
- Low churn builds strong net dollar retention

Business: Must have sufficient barriers to entry to ward off copy-cats once established
- High switching costs (lock-in)
- Addictive
- Steep learning curve once adopted (form of switching cost)
- Two sided liquidity
- Patents, IP, Branding
- No hyper-scaler who can roll over you quickly
- Scale could be a barrier to entry but works against most start-ups, not for them
- Once developed, answer question: Could a well funded competitor starting up today easily duplicate this business or is it cheaper to buy the start up?

Founders: Must be religious about their product. Believe they will change the world against all odds.
- Just money in the bank is not enough to build a successful company. Just good tech not enough
to build a successful company
- Founders must be motivated to build something, not (all) about money. They would be doing
this for free because they believe in it. Not looking for quick score
- Founders must be persuasive. They will be asking others to sacrifice to make their dream come
to life. They will need to convince investors this company can work and deserves funding.
- Must understand who the customer is and what problem they are helping to solve.
- Founders aren’t expected to know all the preceding points in this document but have an understanding of most of this, and be able to offer a vision.