Long before I was an angel investor, I sat on the other side of the table as a startup founder.
I've personally founded four successful businesses. And let me tell you - it is seriously grueling work.
It was all worth it, though - and not just because I ended up making money.
More than anything, I'm glad I did it because each business started with an amazing idea. And what's better than watching an amazing idea come to life?
World-changing ideas are the bedrock upon which the startup world is built. Every successful business starts with one.
But what does a great idea really look like?
When you're an angel investor, you hear a lot of pitches from a lot of founders. And every single one of them tells you that their idea is revolutionary.
So how do you tell the difference between a founder with a billion-dollar idea... and one who's just blowing smoke?
I'll show you... [mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Picking an Idea That Will Grow into a Business
First of all, an idea solves a problem. If it's not solving a problem, then it's not going to do well in the long run.
So when you're trying to decide on all the ideas floating around out there, you need to look at the following four key factors to help you pick the one that can actually grow into a business...
Factor No. 1: Is the Idea Revolutionary?
Here's what I mean by that: Is this concept going to change people's lives? And if so, will it change their lives for the better?
For example, with so many people living in New York, parking is very expensive, and there's a ton of traffic. Companies like Uber Technologies Inc. (NYSE: UBER) have made people's lives - especially those living in big cities like New York - so much easier.
With a simple tap, they can request a car on their smartphone and no longer have to wait for a taxi. It's much more cost-efficient, as well.
In fact, take a look at the taxi industry in New York right now. It's almost nonexistent because Uber has almost wiped them all out.
Cutting-edge companies that change people's lives (for the better) are what you need to go for when you're analyzing startup ideas.
Factor No. 2: Is There Anyone Else Doing This?
There may not be anyone currently executing your idea or something similar in a business, but there are eventually going to be competitors. And if there isn't anyone doing that right now, how closely is it related to all the competitors out there?
How big is their addressable market size? Are they making a ton of money? Because if they're not, then this cutting-edge idea... may not cut it or do well in the long run. You want to go after big markets, and what you want to see is if anyone else is doing the same thing out there.
Even if they're not identical competitors, you want to look at the closest ones to make sure it's a big enough market.
Factor No. 3: If You Don't Like the Idea, You Shouldn't Jump on It
You should only go after an idea if you love it and truly think it can change people's lives. In addition, you should talk to other people and listen carefully to their feedback.
That's the only time you should jump on an idea.
And it's not just as simple as liking an idea and thinking you're good to go. If you do like it, think it's cutting-edge, know it's going to meet all other requirements, and other people love it and think it's going to be revolutionary, that's when you should get into it.
Don't forget that feedback is very important. Listen to what those around you are telling you about the idea.
Bottom line: If you don't like something, then there's no point getting into it.
Factor No. 4: Don't Invest Blindly
A great idea with a not-so-great team is useless - execution is everything.
You need to look closely at the team and their past work. You can do this by searching their LinkedIn account online to research exactly what they're doing in the background.
Have they climbed the ranks of the corporate world? Have they been in other companies that have done well? Do other people say good things about them? Again, feedback is critical.
When you Google them, can you at least find something on them? Because if you can't, then that means that they're probably not that good at marketing.
You need to make sure the team is amazing. That ensures you that the great idea you're going to invest in will have the support it needs to flourish and eventually grow into a successful business.
So when you're looking at potential ideas to invest in, it's not just about deciding whether you like the ideas or not. By going through and following these four simple steps, you'll find yourself picking better companies.
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