Why This VC Won't Fund Startups That Serve Startups Beware of launching a company that just serves another one.

As the startup gold rush grows, I've noticed a scary trend: Startups with questionable finances are being launched to service other startups with questionable finances. These take many forms, like exclusive property-management software for Airbnb hosts, or specialty car-leasing arrangements for Uber drivers. Sure, these new marketplaces are awash in cash, but many VCs consider this risky business. If you're tempted to join the crowd, here are three questions you must consider.

1. How dependent are you?

Some startups enable their host companies -- helping the bigger company grow, and therefore helping everyone. Other startups are simply dependent on the host company's status quo. You need to be the first kind. Consider the history of PayPal and eBay, for instance. Without the advent of PayPal, I'd argue, there's no way eBay would have become the juggernaut it is. PayPal enabled millions more people to use eBay, which is why they found such synergy. Contrast that with the once-hot trend of retail processing and shipping centers for eBay sellers, a market with no room to grow. Remember those startups? Neither do I.