What I look for in a Startup

John J. Schaub 

Feb 9 , 2023 

When I started blogging last year I intended it more as a creative outlet and a way to build a network in a new city. One of the unanticipated benefits I have found however is that having a site like this allows me to answer some of the frequent questions I get in a fulsome manner and then simply point any future people asking that question to the post rather than giving some half baked off the cuff answer or digging through my emails for the last time someone asked that question. This post is very much in that vein as I often get asked about either joining startups as an advisor, investor or early staffer. These conversations follow a very standardized pattern as I work through my personal checklist so I thought I would share the fast screen questions I apply both as a way to filter conversations and potentially offer some useful info to founders. To be clear I have a far more in-depth checklist I use this list is simply the 60 second screen I apply to decide if I should dive deeper. 

Can I understand it? Over the years I have been pitched an assortment of companies that I frankly cannot understand. Given I have some serious experience in the Fintech space if I cannot understand how a Fintech works I am arrogant enough to assume the issue lies with the company and I politely pass.  If by some chance your levered token exchange reinvents the global economic system missing out on it is a cross I will have to bear. The can I understand it test unfortunately also rules out some very legit businesses where I just have zero expertise even though I feel the space is potentially amazing, the prime example of this is Medtech. 

Can this Product or Service make money? I wish this filter was not needed but for some reason it absolutely is. No one is going to invest time or money in your company if your business model is giving puppies to orphans and making up the losses on volume. As noble and worthwhile as your goals might be if you do not have a plausible route to making a self sustaining amount of money what you have is a non-profit. To be clear I am not against the idea of not for profits and have consistently volunteered in that space for two decades but if you are pitching me a non profit board role or asking for a donation do not try to dress it up as an investment or advisory role, they are very different things.

Can I add value? There have been a few times when I have been asked to be an advisor to a start up and it seemed that they really just wanted to put my face on the website as a credibility builder. This is flattering but the reality is I do not have nearly the profile required to add value in that way so I will need to stick to the startups that I have expertise in. For the record if I ever happen to get to the level where I can add value to a company just by putting my face on it rest assured I will do so with a flagrancy that will make Ryan Reynolds look subtle.

Is there something in it for me? No I am not interested in pro-bono advisory roles and I do not know of a single credible person that is. I am very happy to grab a coffee and discuss your idea and how we might work together but if you pitch me on doing a six week fulltime contract pro-bono as a founder recently did you can expect the reply to be direct. As a general rule professional advice for startups is priced at market rate in a 50% cash and 50% equity model.  If the startup is particularly cash strapped pure equity or pay for performance arrangements are also common but no one credible will work for free and as an aside a founder that is too willing to hand out equity is a massive red flag. My only free advice - you should not take advice from anyone who values their own advice at zero.

Should this Product or Service exist? Not every company needs to be curing cancer but if you are causing cancer I am not interested in being involved and I really wish you would reconsider how you are spending your time. In Fintech there are a whole swath of products which are essentially trying to trap young and vulnerable people in debt. Many of these companies go to great lengths to hide this fact with convoluted value propositions but regardless I have no interest in being part of any of them.  

Is the founding team credible? If your pitch involves the phrase 'we are looking for a CTO' I am likely not interested unless you are bringing some serious business credibility to the table. Serious credibility means a decade plus of track record and leverageable connections in industry. The reality is there are certain skills that are just harder to find and if your team does not have them you are at a serious and potentially insurmountable disadvantage despite whatever surplus of skill you may have elsewhere. The counter point here is if you are a strong dev please be humble enough to realise that there are other skills that are needed as well. 

Is it in the news? A lot of early stage founders think that by working on whatever is getting covered in the media this week they are sure to attract investment. They are unfortunately probably correct but my personal filter explicitly excludes things I am currently hearing about on CNN. In my opinion a startup company takes somewhere between five to ten years to really build so you need to be aiming well ahead of where the world is today to have a real chance of being in an established position when the world is ready. To quote Wayne Gretzky 'don't go where the puck is go where the puck is going to be'

Do you have a data room? It takes maybe half a day to bring together the basics of a dataroom and it goes miles to separate you from the pack. On the topic of datarooms you need to set it up in such a way that you can share the link to everyone and restrict some of the items only to investors or those who have signed an NDA. This is trivial to do in Google drive and not having it setup makes you look incompetent. A final rant on NDAs - no I will not sign one until we are vastly further down the road toward working together. 

Hopefully this provides so useful insight and if after reading that you would like to reach out please do not hesitate to do so.