How I Evaluate an Early-Stage Startup: A Four-Part Framework
A working framework for sizing up an early-stage company: team, market, evidence, and deal structure, and the questions that sit under each.
I am a student of early-stage investing rather than a professional investor, so this is a working framework rather than a track record. I share it because writing a framework down forces it to be specific, and because I want it open to criticism from people who know more than I do.
When I look at an early-stage company, I try to answer four questions in order. Each one is only worth asking if the one before it has a convincing answer.
1. Is this the right team for this problem?
At the earliest stages there is often very little else to evaluate. I look for founders who understand the problem from direct experience, who can explain it simply, and who show they can learn quickly when they are wrong. Useful questions: Why this team? What have they already done without outside money or permission? How do they handle a hard question, and do they change their mind when given a good reason?
2. Is the market large enough, and why now?
A good company in a small market is still a small outcome. I want to see a credible path to a large market, ideally one where something recently changed, such as a new technology, regulation, or customer behaviour, that makes the opportunity possible now when it was not before. "Why now?" is often the most revealing question in the conversation.
3. What is the evidence?
Evidence beats projections. Depending on the stage, that might be customers who paid, users who came back, pilots that converted, or a prototype that works. I weigh retention and repeat behaviour above sign-up counts, because they show whether people actually value the product. The absence of evidence is not disqualifying at the very earliest stage, but the team should be able to say what evidence they will gather next and how.
4. Does the structure work for everyone?
Terms matter. The valuation, the instrument, the ownership split, and the rights attached to the investment all shape what happens in both success and failure. I want a structure that leaves the founders motivated, treats early investors fairly, and does not create problems for later rounds. Complicated or unusual terms are a reason to slow down and ask why.
What I am still learning
No framework removes uncertainty. Even strong teams in good markets fail, and investors are often wrong about which company will succeed. I treat the framework as a way to ask better questions and to be honest about what I do not know, not as a formula that predicts winners.