Early Stage Startup Investment Screening Tool

A typical VC company received about 100s of pitch decks or investment proposals in a month. It is impossible to evaluate all these startups in detail. Thus, it is important to develop certain initial screening criteria to filter out the startups and evaluate only the filtered in depth.

Every VC firm has developed what they call "investment these" or their "sweet spot" as per their investment criteria. This sweet spot can be one or more of the characteristics they see in a startup, such, as an industry, sector, stage of business, geographic location, etc.

I too have developed a startup screening tool, which has helped me to screen startups for investment. As I am sector agnostic, but, I prefer to invest during the early stages of the startup lifecycle. My startup screening criteria comprise the following:

1. Startup Stage & Monetisation

   1. What is the stage of Startup?

   2. What is the revenue model?

   3. What is the ARPU? (over 12 months)

2. Team

   1. No. of Members in Founding Team.

   2. Is the product technical and needs coding? Evaluate against in-house skills

   3. Does the Founding Team has prior Entrepreneurial experience?

   4. Are the founders professionally qualified?

3. Industry/Sector

   1. Does the startup belong to the list of preferred sectors?

   2. Does the startup operate in the current hot sectors?

4. Opportunity

   1. What is the Total Addressable Market for the Startup?

   2. What is the competitive position of the offering?

   3. Is the startup trying to localise a successful product abroad?

5. Product

   1. Can the product be sold without a demo?

   2. Does the product require customisation for each customer?

   3. Does the startup offers a mobile application/mobility solution?

   4. Does the product have a proprietary IP? (which cannot be replicated easily)

   5. Does the product depend on any third-party service/solution?

   6. Does the startup have multiple use cases/revenue streams?

   7. Will I be a customer of this service?

I have screened 100s of startups using the above criteria for investment. I have also developed an objective tool to assign scores based on responses against each of the above criteria.

Finally, I arrived at a weighted average score out of 10. My minimum requirement for any startup to qualify for the next round is 6.5 or 65%.

Here is a screenshot of my tool:

You can reach me at Venture Canvas to get a free copy of my startup screening tool.