Having scored hundreds of startup opportunities as an angel investor, VC, and mentor, I thought I would share my scorecard template. It’s how I determine the merits of a new business opportunity. I score startups on five dimensions:
- Product – how good/unique is the product or service?
- Market – are they targeting the right market segment?
- Team – does the team have relevant experience in the space?
- Strategy – how do they plan to go-to-market, capture share, and generate revenue?
- Economics – does the business model make sense and provide good ROI to investors?
Each dimension is comprised of 10 criteria, for a total of 50 data points. Each data point is rated between 1 and 10, with 1 being poor and 10 being very strong. After the scores are totaled in each dimension, the template will total and chart the score so you can visually see where the startup is strong and where the founders need to do some work to make it a better opportunity. In my experience, most startups rank between 5 and 7.
Here’s a scorecard I recently did for a startup looking for help in raising capital.
You can see that the startup scorecard template allows you to weigh the dimensions. In the above example, I weighed the team 30% of the score (because it’s hard to fix a team), and I weighed the strategy only 10% of the score (because I can help them fix those issues). Most startups, by the way, are usually weak on strategy. Thus the need for good mentors.
The nice thing about the template is that the scores are totaled and charted automatically as you enter a number between 1 and 10 for each criteria. You can even change charts to view the data in different ways, like this:
The best startup opportunities are those that rank above a 7 and the five dimensions are fairly well aligned, meaning they all rank 8 or 9. I’ve never seen a startup that ranks a perfect 10 in all five dimensions. If you find one, please let me know where to send the check. 🙂
The startup scorecard template also allows you to edit the dimensions and the criteria to suit your purposes. The criteria I use is for scalable startups planning to serve a multi-national market and would be capable of attracting venture capital. If you are scoring a startup that is a lifestyle business serving a local market, your criteria would be different.
Without further ado, here’s where you can download the Startup Scorecard Template:
Who Will Find the Startup Scorecard Useful?
If you are an aspiring entrepreneur with a startup idea, it’s useful to know how smart investors, partners, and other potential stakeholders are going to evaluate your opportunity. It’s also helpful to have a reality check to gauge whether or not you should move forward, and how you might adapt your idea to make it more likely of being funded and commercialized. You don’t want to waste valuable time pursuing an idea that will be dead on arrival. This scorecard is your reality check. Use it to test the strength of your idea and how you should be developing it and executing on it.
For Angel Investors
If you are new to angel investing, it’s useful to know how experienced investors evaluate startups, so you can create your own system of evaluation. There is no one-all-be-all system of determining the merits of a startup. There are a lot of variables to consider, so it’s important to have a baseline. Don’t just rely on your gut. Startups can be seductive. They must have more than big ideas and entrepreneurial passion. They must be capable of maturing into viable, profit-making businesses. This scorecard can help you determine which startups have a good shot at becoming one of those businesses and provide you with a good return on your investment.
If you are a mentor assigned to assist and advise founders, this scorecard can help you advise them. We are all prisoners of our own experiences, so it is natural to push founders towards decisions and practices that worked for us in our careers, but which may not be well suited for them. All mentors have blind spots. We may be very strong on product development or finance, but weak on team-building and strategy. The Startup Scorecard can help you fill in the gaps and help you to guide founders to think more objectively about the key drivers of their businesses.
Enjoy! I hope you find the Startup Scorecard Template to be a useful tool.