1. Has Validated Customers. This is one of the core rules of consummate entrepreneur and fellow Forbes Contributor Alan Hall. Do you know in advance that you have customers who are willing to pay the price you are asking for the product or service you have? Too many good startups fail to sufficiently validate their customer assumptions—or, in the case of internet firms, scale too quickly before validating the initial marketplace and streamlining their costs. A successful startup scales its growth on the basis of proven, steady and paying customers (especially where residual/subscription income is involved). Steady acquisition is also a very good sign, as opposed to high and low fits and starts.
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2. Shows a Strategic Perspective. This is the direct opposite of a company that is operating in panic mode, or exhibiting survival thinking. A startup actively planning and moving towards national and global expansion; that has a solid one- and five-year agenda and is making steady and measurable strides to meet the critical milestones is poised to succeed.
3. Is Cash Conservative. There’s never been a better time to start a business in many respects, but there’s perhaps never been a more challenging time to obtain early stage credit or funding. Today’s successful startups are a stark contrast to the high-flying internet firms who bragged about their rabid “burn rates” in 2000-2002. Lean operations are the name of the game, and the ability to stretch and conserve early stage funds, even if greater funds are available, is a significant sign that points to future success. One of my favorite agency clients, Dan Dyer (CEO of NASCAR Car Wash) notes that none of his high-flying executive contemporaries have ever proven to him yet the genuine economic need for a private jet. “Do you know what I call a company jet?” he said recently. “Transportation to bankruptcy.” Good one, Dan. A funny statement, but he’s pretty much right.
4. Operates with Transparency.