Sunday, November 11, 2007

Infoweek: 9 Questions To Ask A Tech Startup

"IT departments shouldn't ignore startup companies, but they must exercise rigorous due diligence before jumping in with both feet. Here are some key questions to ask market newcomers:

What's your background?
This applies to the founders and key executives, as well as the company itself (some are recast after initial failure). Look for people with deep technical expertise and past startup successes.

When was your company formed?
Anything less than two years is cause for caution; beyond that, there should be signs of maturity in terms of management team, funding, and product development.

How are you funded?
There's no wrong answer to this question, but it helps to know if a company is bootstrapped or if it has received outside funding and, if so, how much. A company with $500,000 in angel funding isn't as far along as one that has secured $20 million through two venture capital rounds.

Can I talk to an early customer?
Fellow IT pros will almost always tell you things, good and bad, about a startup's technology and customer support that you won't hear from the company itself.

Who are your competitors?
Some startups don't like to answer this question, but the smart ones will be open and honest. Companies that acknowledge the alternatives can tell you why their approach is best.

What's the road map?
One of the benefits of working with a startup is that you should get ready access to the company's top techies--the CTO, for example, or director of engineering. As an early adopter, you're in a position to influence what comes next.

How do you make money?
It's great that new business models let some startups share their products for little or nothing, but it's worth knowing just how the company plans to grow into a viable long-term player. If you don't get a clear answer, it's a sign that the business model isn't fully baked.

Do you expect to be acquired?
Any startup with a business plan has an exit strategy. That's OK. It just helps to know, so you're not surprised if Oracle (NSDQ: ORCL) comes swooping in.

Can we meet?
You can learn a lot about a company in a face-to-face visit. Even early-stage companies should exude business savvy and give you a sense that they understand what your IT department is up against. If Fido is panting at the founder's feet, give him a biscuit--not an enterprise license."

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