Startup Commons a global nonprofit association dedicated to making startup funding more understandable

Focus item one: Identifying and categorizing startups

by: Valto

Image via Wikipedia

In this post we will focus on the first item, in our three point action list

Throughout the history, we as people have created different ways to communicate  complicated matters, in format that is simple and fast to identify. We have these everywhere, we have letters, numbers, signs etc. we use these in traffic, biology, education, etc. basically we use these everywhere.

Many of these identifiers are also language neutral so those can be recognized quickly, like traffic lights. Yet when we talk about start-up's, we only have one unified way to describe them - Start-up (in different languages). That same term is used to describe companies of all sizes of their growth path.

With Startup Commons, the first item on our task list, is to build common language to identify these different type of start-up's, depending on agreed variables. To be able to do this, we need to first define and agree on these variables and then build categories based on these sets.

Why do we do this - how does it help?

It's very simple - to be able to dramatically cut down the time to identify what type of start-up (and stage) is in question. This identifying alone can potentially save millions of hours in wasted time, in early communications, when people are just trying to identify a start-up, either by start-up entrepreneurs them selves (what is their current position/stage) or by potential partner/investor looking for the right start-up to fit in to their strategy/portfolio - Think about buying clothing without any size (ot other) labeling, in a black & white catalog - now how long would it take to find the one you are looking for...

Naturally there are plenty of other benefits to this and what can be developed on top this, but the above sample alone is enough to justify the need for this.

To move forward, we together as a global startup community, need to agree what are the needed variables to be able to cover the most important and obvious areas, to quickly understand what type of start-up is in question. Ie. to agree on the level of detail, we want to achieve with these categories.

The definition of a Start-up by wikipedia is:

"A startup company or start-up is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets. The term became popular internationally during the dot-com bubble when a great number of dot-com companies were founded. A high tech startup company is a startup company specialized in a high tech industry."

If we put the above to clothing terms - we have now been able to recognize the "shirt" and one specially identified type of shirt, like T-shirt. At Startup Commons, we think we can do much better than this, without going all the way to "tailor-made" level.

What next?

We have already started this process by opening the dialog with industry people on the topic of what these identifiers should be. One such can be found in LinkedIn Q&A section, where we have already some interesting answers:

So, if you would be considering to join or investing in a startup, what would be your questions to get a quick feel of "what type of startup is in question" when you meet with the entrepreneur?

If you could only choose five, what would those 5 areas in the startup be, that you would focus on. And percentually how important each of them would be to you?

1. Idea potential (low-high)?
2. Business plan (poor - very detailed)?
3. Numbers (clear budget plan/forecasts - rough estimates)?
4. Number of founders (1-5)?
5. Average age of founder(s) (young - older)?
6. Average experience and education (book smart - street smart)?
7. Ownership % split by founders (even - noneven)?
8. Clear "leader" (yes - no)?
9. Ambition (high - low)?
10. $$$ need (low - high)?
11. Cash flow (is - is not)?
12. advisory board members (0-5)?
13. Product stage (idea-proto-demo-live)?
.........
14. Something elese?

(If you can write down your own headlines with most necessary items and order of how important that is)

Once we have continued this dialog for a while and collected enough ideas, feedback etc. we can start to build our first model for this and then publish it for additional ideas and feedback. We welcome anyone interested to see this developed to join in the conversation.

What are the questions you use to quickly identify the start-up you meet?

PS. There are plenty of other roles to join and help us move SC forward, so if you are interested on helping, just let us know. Even on proof reading and writing

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