The 10 Key Criteria for Evaluating a Startup

What is my startup worth? What do I need to consider and check in order to determine a reliable value, whether because I want to sell my company or because I want to invest in a startup? We’ll tell you the 10 most important criteria that you should definitely consider:
- Market potential: How big is the pie?
A solid understanding of the target market is essential to assess the value of a startup. How big is the market, and how much can the startup penetrate this market? Also, consider long-term growth opportunities and potential limitations. - Team quality: The people behind the success
The founding team is the engine of the startup. Does the team have the necessary experience to overcome challenges? What about motivation and commitment? A strong team can significantly increase the value of a company. - Business model: Stability and scalability as a basis
Is the business model future-proof? Are profits being made? Is the model scalable and can it react to possible market changes? If you have to answer all questions with “NO”, the business model harbors risks that should be analyzed more closely. - Competitive analysis: Where does the startup stand in the market comparison?
A unique selling point is essential for success. What sets the startup apart from its competitors and what makes it competitive in the long term? Who are the current competitors and how do you deal with potential threats from new market participants? - Product/Technology: Innovation or average?
The product or technology should not only be functional, but also forward-looking. Does the solution offered create real added value and how easy or difficult is it to copy by others. - Financial situation: Let the hard numbers speak
Carefully check the financial figures: What do sales, profit, debt and liquidity look like? How realistic are the financial forecasts? The transparency of the financial data is also particularly important. - Customer base: Who buys – and stays?
A stable and growing customer base is a clear indication of the success of a startup. Analyze customer loyalty, sales, growth and diversity of the individual customer groups. - Legal and regulatory aspects: Better safe than sorry
Legal pitfalls can drastically reduce the value of a startup. Check contracts, patents, trademark rights and possible regulatory hurdles. - Exit strategy: Is there a clear plan?
A clear exit strategy is crucial for investors and potential buyers. Are there plans for an IPO, a takeover or other options? A realistic exit plan increases the investment value. - Risk assessment: Where could problems arise?
Identify the biggest risks, whether from external factors such as the market or internal factors such as the team. A clear strategy for risk minimization should be in place and it makes a startup more stable and attractive.
In addition to these key criteria, each of which could become a killer criterion, the following, more unconventional aspects should also be considered and rethought during the evaluation. They are often overlooked, but are also important.
- Cultural fit: How well do the values harmonize?
It can also be crucial for investors that the corporate culture of the startup harmonizes with their own values. This can facilitate cooperation and avoid conflicts. - Availability of mentors/networks: The value of connections
Startups with access to strong networks and experienced mentors often have a competitive advantage. Check which contacts the startup already uses or can use in the future. - Customer feedback: Learn and grow
Insight into customer feedback and the startup’s ability to respond to it and improve. - Willingness to change: Adaptation is everything
The ability to react flexibly to market changes is a key success factor. Is the founding team prepared to flexibly adapt its strategy if necessary? - Sustainability and social responsibility: Creating values
In an age in which sustainability is becoming increasingly important, considering environmental impacts and social responsibility can not only influence the reputation and long-term viability of a startup, but also increase its value in the medium to long term.
You can find further information on investors’ return expectations and a calculation example under Evaluating startups.