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How Do You Predict Startup Success?

September 23, 2010

There has been much discussion recently in the blogosphere and Twittersphere about startups. Are there too many tech startups? Are seed-stage valuations too high? Is this another tech bubble? What is the secret to startup success?

A lot of very early-stage startups are finding initial funding from angels and super angels who have filled a niche previously filled by VCs. Most of these angels have similar approaches and investment theses. The standard flavors typically involve: visionary founders/previously successful serial entrepreneurs; lean capital requirements; a technology, idea or product advantage; demo or commercially launched product (revenue a plus); and huge market potential.

From my perspective, all of these criteria are important, but there are two elements that are the most important when it comes to likelihood of success. Both are equally important and they must be connected. In my opinion, a fresh, superior technology plus the ability to connect that technology/product into a large untapped market are the most important factors in predicting startup success. If you have nailed these key elements, success is predictable regardless of initial valuations, founder pedigrees, etc.

Focus on the key elements described above and success will follow.

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