When evaluating any investment there are many things to look for, but I can divide them into the following categories:
1. Investors are more likely to invest in people rather than just ideas.
The dream team: look at the entire management or leadership team. I need to see a team that has a proven track record of delivering goals on time and that can handle all of the responsibilities that come with a startup.
2. Business Plan.
Although the model might change in startups during the making, make sure that startup has a clear and completed business plan. What’s the problem that’s been solved? What’s the business model? What’s the market like? Who are the competitors? What advantages are there over the competition? How will the investor make money?
If the valuation is outrageous, then this is a sign an entrepreneur has overvalued his or her startup.
4. Know the risk involved.
An entrepreneur should be passionate, optimistic, and hopeful for the future, however, an entrepreneur should also be realistic. They should understand that there’s a major risk involved for both you and them.
Invest in entrepreneurs who are thrifty, resilient, determined, and passionate. In other words, the entrepreneur should be able to not only lead the team, set goals, and manage a budget, but also rise to the occasion when times get tough.