How to evaluate a startup for investment purpose

  1. Background check of the founders: Evaluate the experience and educational background of the founders and the core team. Try to get references if you can. Do they have any experience in the problem they are aiming to solve? How much fieldwork they have put into the problem and how much research has been done in finding the solution? And foremost, are the people of character and integrity?
  2. Check financials: For early-stage startups, financials would not be available but for others, it is crucial to understand their financials. Even if there are no revenues yet, you may like to get a sense of where is expenditure being done? Does it resonate with their story?
  3. Other recent funding rounds and valuation: Check any recent funding rounds in the startup. Please use the funding documents filed with regulatory authorities to evaluate their recent funding rounds and the valuations claimed therein. The startup itself should be able to share those documents or you may get them from MCA or Tofler.
  4. Other investors and their other investees: You may want to meet the existing investors or check out other companies in which they are already invested. You can do this for free with the ‘company network’ feature at Tofler. This will give a sense of their investing style and you can evaluate whether it resonates with yours.