Thursday, July 1, 2010

Start-ups and reassurance for the client

As a client that uses a number of new technology businesses that could be defined in the 'start-up' vein one of the things that I constantly look for is reassurance that there is sustainable substance behind the beauty parade and that the business will keep pace with industry and client demands.

There are a number of variables that I look for all of which I portion a weighting to, this then helps me form an overall level of reassurance for the business. Here are a couple of the variables that I look at:

Industry speed: In technology there is a big risk that businesses won't keep up with changes in technology standards or client demands, the faster the industry moves the bigger the risk. For this variable you have to know the industry back-to-front or, like me, read as much research and keep up-to-date with industry blogs.
Competition: Especially in tech companies the barriers to entry are very low so it is important to view the landscape for competitors and get an understanding for the sustainable competitive advantages of each. Forrester and Gartner research really helps for this variable.
Funding: This is a tricky one as you'd think News Corp buying MySpace for $580m would give you reassurance that it's a safe bet, alas... But still, looking at the funding sources for start-ups does give some level of reassurance. Look at the funding sources to see if they align with your business, eg Microsoft or Cisco capital investments in start-ups might align with your long-term infrastructure aims
Customers: Another tricky one, especially in tech start-ups. Look at how MoveNetworks lost Fox as a customer and saw the decline of a $70m business. Still, portioning some of your reassurance to existing customer relationships is worthwhile.

Now I know whole libraries have been written on this subject and from a Venture Capital or M&A perspective my analysis would probably not even get me a janitor's job in their marble-lined offices, but from a customer point of view it is these basic steps that has helped me sort out the hundreds of vendors out there.

What other variables should I add to my vendor scorecard? It'd be great to beef up my scorecard with more analysis.

Image credit: archangel12

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