How can you effectively evaluate multiple startups at once?

In my experience, as CEO of one of the most relevant EU startup hubs and board member of VC and investment companies, I am convinced that having a clear set of criteria will help you evaluate startups in a systematic and efficient manner. Your investment thesis, target market, preferred stage, and expected return will guide your assessment. It's important to create a checklist of specific criteria that align with your goals and values. For example, consider evaluating the problem-solution fit, product-market fit, team, traction, scalability, competitive advantage, and financials of each startup. These criteria will provide a structured way to compare and contrast the startups you are evaluating.

Scorecard/Rate the following: Team: experience, expertise, track record, ability to navigate challenges, raise capital. Uniqueness and value proposition of each startup's product or service. Financial: revenue streams, cost structures, and potential risks. Expected return, risk tolerance, industry preferences, and time horizon. Customer Traction and Validation: PMF achieved ? Intellectual Property References: customers or other investors who may have experience with the startups

Assessing multiple startups actually provides comparative data crucial for VCs. To really solve a large problem, you need to assess a wide range of solutions to be sure that the one you chose is truly the best one at the time. Specifically, having diverse solutions for a single problem helps evaluate strengths, weaknesses, and market potential, aiding in pinpointing the most promising investment. This approach offers a comprehensive view, making it easier to identify the standout solution worthy of backing among various contenders.

Defining the criteria and your investment thesis is key to go faster in developing a portfolio. Understanding the trends and the hidden value in the investment opportunities is key for maximize that value. To distinguish between founders followers and real pioneers, as well as good practice and consistency not just because there seems to be the most marketable option in the sector is key for be part of real game changers companies, and unicorns.

I think it is important to really know what you want and understand why you want that. Having a clear set of expectations (or we might call criteria) then follow with a tracking and screening procedure. You can also consider having your criteria listed down by prioritization. Some criteria you may want to consider: sector, stage, problems, technology, team, market, etc. Besides, having startups' expectations (fundraising amount, type of investors they are looking for, their growth pace, etc.) listed down will also help a lot in evaluating.

Using screens is essential to apply the standard you want to set, so make sure you actually understand how to apply the screens!

Most VC rely on inbound flows (startups they are introduced through their network or applying directly). However, a growing trend is "outbound scouting", sometimes on the long term, through which investors actually follow companies as from their inception and monitor their progress. Engaging in outbound scouting requires the use of proper scouting tools that find relevant candidates not on firmographics and financials, but on actual activities of startups. These tools heavily rely on AI (NLP, now LLM) to identify, validate and engage with the best companies out there - even those from unchartered territories.

In an article I wrote for SiGMA magazine recently I have advocated for placing an emphasis, in evaluating startups, on the founders' managerial skills as much as on the novelty of the idea itself. Leadership and management abilities within the founding team can be as critical as technical expertise in most cases as effective management and leadership are critical to transforming an idea into a marketable product.

Prioritizing is always and essential task in life, isn’t it? And when it comes to startups it is fondamental to utilize your predefined criteria to screen and prioritize the startups that align with your investment goals. You can use various resources such as online platforms, databases, or networks to discover potential deals. Additionally, seek referrals, recommendations, or introductions from trusted sources to ensure you have a high-quality pool of startups to evaluate. Once you have a list of potential startups, rank them based on their fit and level of interest. Consider using a simple scoring system, a matrix, or a funnel approach to organize and manage your pipeline.

Effectively evaluating multiple startups at once involves a well-structured screening and prioritization process. From my experience, start by quickly screening each startup against basic qualifying criteria such as industry, stage of development, and financial health. This initial filter helps in narrowing down the pool to those that meet your basic investment thresholds. Next, prioritize the filtered startups based on more detailed criteria, such as innovation level, market potential, team strength, and scalability. This two-step process of screening and prioritizing allows for efficient handling of a high volume of startups, ensuring that time and resources are focused on the most promising opportunities.

Once you have narrowed down your list you may want to conduct more thorough research and analysis on each target. This step helps validate the claims and potential of the startups you are considering. I often prefer to use information from multiple sources pitch decks in particular, websites, social media (third parties only), reviews, articles, reports, or industry data. Additionally, consider using tools like surveys, interviews, surveys, or simulations to test the assumptions and hypotheses of the startups. This research and analysis process will provide a deeper understanding of each startup's viability and potential for success. Especially through comparison of the different results you get.

In my book, research and analysis sum up to a proper due diligence process. Due diligence is a thorough investigation and analysis conducted before committing to an investment opportunity. It aims to review details, risks, and legal exposures (such as IP ownership issues and challenges or litigation involvement). Venture capital firms often conduct these assessments in-house, while angel investors rely on their expertise or hire personnel as needed. Robust due diligence is crucial to minimize risks tied to hype cycles. Assessing technological foundations, market fit, scalability, and regulatory compliance in startup enterprises is key and is mostly the very factor that distinguishes a bad investment from a sound investment.

The Validation stage of diligence is one of the most important steps. Assuming a deal makes it to this point of the process they should be willing to pull back the curtain and give you access to their data room, financial projections / modeling, cap table, lead investors etc. all of which are pieces of the puzzle that will give you a cohesive picture of what to expect for the future of the company. Don't rush this part of the process. Slow is smooth and smooth is fast when it comes to diligence. Better to do it right the first time rather than having to go back and double check because you were too hasty in your initial diligence and validation.

Create a best case and worst case scenario on a given/selected target customer. 1. Linear part: add different segments after having multiplied with ARR ( recurring revenue). 2. Non-linear part: take into account time to hit critical-mass in each segment of customer that can unlock new revenue stream. Benmark: run benchmark of each category of startup at same stage ( e.g pre product-market-fit) to come with with prevailing Highs and lows in market. This serves as en envelop for evaluation. 3. Founder and culture check. Interview customers and employee before making final call. The culture of startup should align with mission and values and should be reflected in each of its transactions.

For a startup with well-thought investment strategy and a precise grasp of fund allocation - should be a deal breaker to agree to an investment amount lower than requested. Even by just 5-10%. It's crucial for startups to secure the funding they genuinely need to execute their vision successfully, so it might be helpful to include such a question for a late negotiation stages.

“Evaluating multiple startup’s / deals simultaneously is what we are paid for “ The trick is to keep all related data on the table and stick to one deal after another. Emotions play a role and we digress on the deal on the table because of the last deal we evaluated. Example if the management team in last evaluation was bad, the current deals team looks good comparatively. I personally like to make notes ; hand written and then I refer each page prior to signing off.

Venture capital transcends the linear 'deal factory' model suggested by AI for this article. Our process is deeply iterative and relationship-focused, hinging on the diverse expertise of our team in finance, tech, and operations. Our team's collective experience allows us to 'play positions' effectively to unravel the complexities of every deal. We recognize that startups evolve over funding rounds, often revisiting and reassessing them multiple times throughout their journey. Building and maintaining relationships with entrepreneurs is key, as initial rejections may evolve into future opportunities. This dynamic, long-term engagement approach is critical in the ever-changing landscape of startup investments.

I'd add External Advice: Consider getting external advice from industry experts, technical consultants, or financial advisors to provide an independent assessment. Many times, we are biased by our previous experiences and subjective preferences.

Be organized and use tools to help juggle several deals at once, with many context switches between them in a typical day. A CRM system that is continuously updated can help with quick and clean context switches. However, sometimes it's a surprise call on the mobile while driving, so it's important to remember the main parameters/issues/discussions, at least for the current deals in progress. Regardless of the circumstances and tools chosen, the founder/CEO I'm talking with deserves a clear recall of their specific company, status, and deal details each and every time we talk. In the odd occasion I don't remember something, I apologetically admit it and ask for the details again.

At 77 Partners, we run a 12-week program, enabling us to provide upfront value to founders at no cost or obligation, and to assess ten high-quality startups simultaneously. By the end of the program, the process of deciding which ventures to fund is simple.