Identify the need: Does the start-up, whether B2C or B2B, solve a pain point or a need that has not been met before? Does it have the potential to make customers’ lives easier? For example, a customer doesn’t have to battle traffic to buy something, if he is offered seamless home delivery.
Tech backbone: Does the start-up have a high technology component that cannot be easily replicated? Can the product or service be accessed through different mediums? Most brick and mortar businesses are easy to replicate, and hence, the start-up must have a technological edge.
Assess potential: The most important aspect is to figure out whether the opportunity represents a huge market and if the business is scalable. Many start-ups pursue opportunities that aren’t scalable. A potential idea should be scalable across geographies, demographics and income distribution.
Eye on costs: Is the start-up mindful of and closely tracks its customer-acquisition cost? Many don’t and fold up because of that. Always question whether the growth is coming at a huge cost and whether it is sustainable.
What’s at stake: The founder needs to have skin in the game. He cannot sail in two boats: hold a job and start something on the side. There has to be passion, commitment and a willingness to stake one’s life on the venture.