After putting together some thoughts on questions entrepreneurs should have for angels, I got a number of questions and comments from angels about some counter questions they should ask entrepreneurs in an effort to better analyze the model and company.
When looking to invest a startup there are a number of things to consider. I have broken them into FOUR BROAD categories pertaining to a startup’s customer value proposition, technology and operations plan, go-to-market approach, and profit formula.
Here is Part II: Technology and Operations Plan
Having defined their customer value proposition - Part I, entrepreneurs next should consider the following choices for technology and operations management:
What activities are required to develop and produce the venture’s core offerings?
Which of these activities should the venture perform in-house? Put another way, to what extent should the business be vertically integrated? Who will perform outsourced activities, and under what terms?
What are the cost drivers for key activities (e.g., unit volume, capacity utilization, number of customers)? Can the venture exploit scale economies in operations by substituting fixed for variable costs? By leveraging learning-by-doing opportunities?
Will the venture create any valuable intellectual property? If so, how will this IP be kept proprietary?
How strong are first mover advantages (FMAs) related to technology and operations management, for example, scale economies in production or preemptive access to scarce production inputs? How do FMAs compare to late mover advantages, such as opportunities to reverse engineer pioneers’ products or leapfrog leaders by leveraging new technology?
Given capacity and hiring constraints, will rapid scalability be possible?
