Writing in today's Information Week Startup City blog, Andrew Conry-Murray, offers some advice on how to evaluate a start-up firm before doing business with them.
- Startups have yet to build a sustainable revenue stream, which means customers are essentially placing bets on the company's future existence. To make sure you aren't making a sucker bet, look closely at the funding structure. Who has invested in the company, and what is the exit strategy? Do the investors have a record of long-term growth, or are they looking for a quick return via acquisition? If it's the latter, investors may push the startup to change its strategy or business model midstream to capitalize on "hot" trends.
- A startup's pedigree also should be taken into account when assessing risks. How experienced is the founder and the executive team? Who is sitting on the board?
- As you would when considering an established vendor, conduct technical due diligence. Just because a product has launched doesn't mean it's ready for a production environment. Also be prepared for bumps in implementation and support.
If your organization is faced with a complex problem, a startup may be your best bet for a true partner in creating an innovative solution tailor fit to your company. Just make sure you've researched them thoroughly before getting too deeply involved with their product.