{"id":4575,"date":"2011-07-17T20:21:34","date_gmt":"2011-07-18T03:21:34","guid":{"rendered":"http:\/\/robertfagan.com\/?p=4575"},"modified":"2025-03-18T23:31:38","modified_gmt":"2025-03-19T06:31:38","slug":"investinginorjoiningastart-upaskthesetenquestions","status":"publish","type":"post","link":"https:\/\/theaposition.com\/robertfagan\/coaching\/business-coaching\/4575\/investinginorjoiningastart-upaskthesetenquestions","title":{"rendered":"Investing In or Joining a Start-Up? Ask These Ten Questions"},"content":{"rendered":"

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\"\"<\/a>I\u2019ve made all the mistakes myself investing in or working for start-ups. Fortunately, I\u2019ve preserved time and capital by the \u2018opportunities\u2019 I\u2019ve walked away from. Whether you join as an employee or investor, it is essential you perform your due diligence. Here are ten questions that if you don\u2019t get absolutely great answers to each and every one, play smart and choose another situation for your time and money.<\/p>\n

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1.\u00a0\u00a0 What is the company\u2019s unique competitive advantage? Life is short in the start-up world, and even more so without a superior product, service, delivery system, etc. What can this company do that others can\u2019t?\u00a0 Can it become \u2018special\u2019 soon?<\/p>\n

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2.\u00a0\u00a0 How does the company figure its burn rate or net cash outflow?\u00a0 If they don\u2019t share that or it doesn\u2019t have a cushion for contingencies, that\u2019s a bad sign. It’s better to know when the doors will close if income doesn’t materialize.<\/p>\n

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\"\"<\/a>3.\u00a0\u00a0 Has the company shipped any product, have any paying customers, or collected any revenue? If not, when? Why?\u00a0 Carefully listen to the answers.<\/p>\n

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4.\u00a0\u00a0 How much money does the company actually have in the bank? I am talking about good, ole cash, not credit or promises. All the strategy and talent means nothing if the company runs out of cash.<\/p>\n

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5.\u00a0\u00a0 Who are the investors? It\u2019s quite all right to have the Founders bootstrap the company if the company is producing revenue. Otherwise, do the investors offer continuing commitment and do they bring any strategic advantage to the table or are they simply financial investors? And what is management’s ‘exit strategy.’<\/p>\n

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6.\u00a0\u00a0 What is the value of the company following the last round of investment? If the company isn\u2019t beginning to take off in terms of revenue, \u201chits,\u201d patents, etc., raising more money will become increasingly difficult as expectations were already set too high, and it may die.<\/p>\n

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\"\"<\/a>7.\u00a0\u00a0 Who is on the board of directors? Beware the close-knit friends and family boards.\u00a0 You need someone who has some relevant operating experience and isn\u2019t afraid to exercise their experience.<\/p>\n

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8.\u00a0\u00a0 Has the company properly analyzed their competitors for what they can and can\u2019t do? Optimism is good, but delusion, lack of due diligence or dishonesty is not.<\/p>\n

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9.\u00a0\u00a0 What new technology or legislation could upset the company? Use your imagination because you can bet that someone else is. Is there a key person without whom the company could not function?\u00a0 In other words, what might surprise the company, and how are they prepared to respond?<\/p>\n

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10.\u00a0\u00a0 Can you trust the people in the company? Trust your gut on this one. If the integrity and values don\u2019t mix with yours, run don\u2019t walk and hold onto your money with both hands.<\/p>\n

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Realizing that the vast majority of start-ups fail, don’t fret if you have to walk away from any special opportunity. There’s another one right around the corner, and savvy investors and job seekers don’t waste either their time or money.<\/p>\n

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    I\u2019ve made all the mistakes myself investing in or working for start-ups. Fortunately, I\u2019ve preserved time and capital… Read more »<\/a><\/p>\n","protected":false},"author":41,"featured_media":4577,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2248],"tags":[85180,86521,86630,85183,5145],"class_list":["post-4575","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-coaching","tag-investing","tag-working","tag-cashflow","tag-boardofdirectors","tag-technology"],"jetpack_featured_media_url":"https:\/\/theaposition.com\/robertfagan\/wp-content\/uploads\/sites\/33\/2011\/07\/startup.png","_links":{"self":[{"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/posts\/4575","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/users\/41"}],"replies":[{"embeddable":true,"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/comments?post=4575"}],"version-history":[{"count":16,"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/posts\/4575\/revisions"}],"predecessor-version":[{"id":18834,"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/posts\/4575\/revisions\/18834"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/media\/4577"}],"wp:attachment":[{"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/media?parent=4575"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/categories?post=4575"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/theaposition.com\/robertfagan\/wp-json\/wp\/v2\/tags?post=4575"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}