What is the real value of your Startup, the Business andtheProduct?
On the question – How do I know that what I'm building/doing has any real value? Note: this is also how I evaluate the investment potential of any startup/business.I break down what the business/startup is into 5 core values:
Business, Market, Tech, Product and Founder Value
1. Business Value
Are you making money? If you do, you have Business Value. You're given points from 1 to 10, depending on the level of money you're making. For example, Google has a value of 10/10 (if you're profitable, you get above 5), but Asana (when it had first announced what it was working on in 2009) was at 0/10.
2. User Value
How many users/customers do you have? You also get 1-10 points, depending upon the amount of your clients. For instance, Twitter has a 10/10 user value. Think of a service that has 10 users when its potential market of users is in the millions, like a really crappy iPhone App or Game that's 0 out of 10. The point is the more millions of users you have in your space, the higher is your market brand and its value.
3. Tech Value
Did you build something that even NASA can't technically replicate? Intel gets a 10/10 for its technology, which it continues to develop on an ongoing basis, and you won’t see any other chip manufacturer that would attempt to directly compete with them or AMD (at least for now). However, if you build a static website, you only get 0/10.
4. Product Value
You may not have any users/customers, or may not make any money initially. But, if you have got a team of superstar product designers and you build something amazingly cool, you've got product value. Think about Apple back in the days when PCs ruled the world. They still had some serious Product Value and it still carries forward today in every other product they bring to the market. All Blizzard games also have Product Value. Another way of looking at this is if you made a movie 'Inception' but it hasn't released - you know it has serious product value cause everyone that you do show it to says "that just blew my mind!"
5. Founder Value
You may not have any Product/users/customers, or may not make any money initially. But, if you have got a team of superstar founders with a track record of success in the given space, you've got Founder value. Remember how Color raised 41M on just an app? Well they also had an absolutely stellar founding team with an awesome record of building and selling companies, so they had a 10/10 (or close enough) on Founder Value. And as I told my buddy, it's all about the Founding Team, not the 'idea'.
If you don't have founder value - that is none of your founders are experts in their given fields with track records of successes. You should consider getting advisors that supplement your missing expertise and track record. VCs may not fund you but they will certainly fund a startup backed up by reputable/proven advisors - get Zuckerberg to be an official advisor and you know getting VC money won't be an issue :)
Your advisors are your champions and getting the right individuals to show that they vouch for you by signing up as advisors on your board will certainly raise your founder level past 5/10
Business Value (make money), Market Value (number of users), Tech Value (your technology is highly researched, patented and/or impossible to replicate), Product Value (you've built an amazingly cool product) and Founder Value (your founding team or advisors carry all the right specialists with impressive track records).
Now here's how most investors would tie it together, they ask -
Are you and your team (Founders/Advisors), Rockstar founders or have the backing of Rockstar advisors?
If so, have you built an Experience (Product) that has tremendous value, an experience like no other?
If so, is it something that individuals will actually pay for and generate revenue (Business)?
If so, is your potential customer base (Market) large enough to create a significant revenue base, and thus high valuation?
And is your IP (technology) patentable / defendable or cannot be replicated easily?
Hopefully this helps you value what you're doing.