July 12, 2021 Innovation Team

How To Know If a Startup Is Worth Backing

If you’ve spent much of any time at all looking into startups to back, you probably have an idea of just how many there are out there. Startups can be a dime a dozen, but that hardly means they’re all worth backing. If you’re going to invest in something, you want it to be something that’s going to succeed and earn you money. For that reason, it’s important to have some indication that a startup will be worth backing.

They Have Experience

Generally speaking, business owners start their first startup without having much experience in owning a business. Everyone has to start somewhere, after all. While some will be successful, according to Findstack, about nine out of ten fails. Not exactly favorable odds. With experience comes greater chances of success though. If the owner of the business you’re considering has already started other successful businesses, there’s a good chance they have a feel for what needs to be done in order for them to succeed with this one too.

They Know Their Competition

Every business has competition, and it’s often fierce. Knowing who you’re up against is an absolute must as a business owner. According to Podium, neglecting to look at the competition is cited as a reason for failure by 19 percent of startups that fail. Think about it. The startup must have something that makes them stand out. Knowing your competition is the best way to figure out what to do to make your business stand out. Business owners of startups you back should demonstrate that they have this knowledge and the wisdom to use it properly.

They Know the Market

Even the best startup ideas can fail if market circumstances aren’t favorable, and there’s a lot that goes into that. A business owner worth backing has analyzed the demand for their business and determined that it’s an avenue worth pursuing. They should be aware of the market saturation, how many businesses in their niche are succeeding, how many are failing, and have an idea as to the why behind each. Do yourself a favor and determine these things for yourself as well to aid you in your decision.

Deciding which startups are worth investing in is hardly an exact science. That said, business owners who have experience, know their competition, and are familiar with the market are more likely to have a startup that is at least worth considering. This is no guarantee of success, however. Make sure you evaluate any startup individually so you can best determine which ones are worth backing.

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