business idea 3.png

How should technical co-founders evaluate business ideas?

This question originally appearedon CoFoundersLab : As a technical co founder how do you evaluate an idea

Answer from Micah Stevens, Director of Technology Development at EV Grid

 

I would evaluate other people's ideas like I do my own. In a journal, I like to list things I've learned, mistakes I've made and mistakes I’ve witnessed.

Here are a few high-level qualifications that I would definitely suggest you evaluate when you’re attempting to understand the value of a new business.

 

  1. A big litmus test is: what if they had the product in-hand today? Would they be able to immediately go out and make money? What customers are ready to buy? If not, what steps would it take to get customers. Customers don't just appear; you MUST have a plan to get them and keep them coming back.

  2. How much work has this potential partner put in? Do they have prototypes? Do they have plans written down? If not, it's hard to take any idea seriously. Any person can come up with five good ideas, and good ideas aren't worth anything. Nothing is real until you start to write it down, and nothing works unless the person is willing to put in the hours to make it work.

  3. A business plan — you need one. Sure, it’ll be a rough sketch of what you’ll eventually do, but making one forces you to go through the important steps of distilling your goals and the components of your business that you’ll need to nurture to succeed. If they haven't done this, or don't know how to, it will raise red flags to any partner you attempt to bring on.

  4. Marketing analysis: Another thing you definitely need. It doesn’t matter if you have the best idea ever conceived; if you can't market it, or don't have a plan for marketing it, you will fail. Good ideas are cheap — making them work is where the skill lies. A good marketing analysis will teach you VOLUMES about the product.

  5. Capital deployment — things ALWAYS cost more than you expect. Make sure the other party isn't under estimating the resources (not just money) necessary to take an idea to market.

    See full discussion on CoFoundersLab

  6. Costs: write them down and understand them. Review them and consider what things “might” cost, because you always will incur unexpected costs. Multiply by 150% or 200%, because you're probably underestimating the costs somewhere. Add it up. Do you have enough? Probably not. To some degree, you can offset costs with sweat equity, but that’s not always the case. Don't plan on sweat equity being a panacea for your business.
  7. Understand the resources that you and the potential partner can bring to bear. Money is important, but network is critical. Understand what your partner can and can’t provide — and consider how that will affect your business’ growth.

  8. Understand your needs. No amount of hard work will fill in large holes in planning. If you're filling a technical role and your potential partner is filling other roles, make sure they understand what is necessary and that they have a plan to fill the roles. Don't put off this conversation.

  9. Make sure your partner knows the customer. Founders often think they have this covered and they don't. Make sure your partner has experience in the market they're addressing. Make sure they've talked to potential customers and understand the needs they're filling.

  10. How emotionally invested is your partner? This sounds backwards, but I shy away from people who are very emotionally attached to their idea. This makes it harder for them to see the reality of their product. If you need to pivot the business, an emotional investment makes it hard to do so. Your partner needs to strike a balance: sure, they shouldn’t be too cynical, but they shouldn’t be so emotionally invested that they’re blind to reality.

  11. Just because someone is making money now doesn’t mean their product will make money down-the-road. In many cases, people cash in on opportunity and don't realize that opportunity is fleeting. They're successful today because of luck, and luck is a poor way to achieve long-term success. If your partner is building on a current offering, you need to make sure that your founding team is not blinded by today's success and can build on what the founding partner is giving you.


 

More from CoFoundersLab.com:

 

How should technical co-founders evaluate business ideas? originally appeared on CoFoundersLab — the place to connect, meet, and collaborate with like-minded entrepreneurs.

 

wpu4vengnhg-ben-o-bro.jpg

Sign up for CoFoundersLab updates

Join 250,000+ Entrepreneurs!

Leave a comment

Recommendations