The three Ts of investment
By Stacey Riordan,
When it comes to evaluating potential investment opportunities, it all comes down to what serial entrepreneur Selwyn Pellett calls the three Ts.
Is the team a tight unit with the appropriate skill sets? Are they calculated thinkers and motivated doers? Are there any hangers on, are they missing any expertise or experience?
If you are thinking of investing in yourself and starting your own business, do you have all the capabilities needed to succeed? If someone was evaluating you, would they think you had a strong team or do you need to add more skills to the lineup?
To my mind, the team is the most important aspect – unless you have some crazy unique piece of IP, the team is really all you are investing in.
Is the time right for the idea? It could be too early, it could be too late, is the market ready for the idea?
If this was done in five years' time or if it was done five years ago, would you still expect a similar response? If yes then time is not crucial, and the idea could happen whenever … potentially without making much of a splash.
For an entrepreneur starting a business, another important dimension of time is working out whether this particular idea is actually going to be worth your time in the long run. Can you get enough out of it to justify spending two, five or 10 years of your life on it?
To be able to evaluate the time dimension effectively, it is essential to have an in-depth knowledge of world events, trends and the economy, so you can pick up on potential opportunities and outcomes that may arise from changes in these.
For example, after 9/11 security in travel, large organisations and governments around the world dramatically increased. If you had a piece of technology ready that improved surveillance back then, then you would have been ready at exactly the right time. A year earlier and no-one would have been interested. A year later and your competitors would have the majority of the market share.
You need to assess what you have in relation to potential competitors and substitutes, and what you have to offer potential partners and end users.
What IP do you have? If you don’t have IP then you need to think about how you can defend your product. Perhaps your greatest advantage comes from one of the other Ts – a strong, capable and experienced team for example.
Another aspect to consider is the rate at which technology changes. Are you looking for investment in building something that the big players could easily build, and that in a couple of years will be commonplace and very low cost or even free?
Finally, remember you can never judge a book by its cover. A lead that doesn't leap off the page may well fire you up after an in-person meeting.
Stacey Riordan spurned the corporate ladder in favour of learning the ins and outs of business from a successful New Zealand entrepreneur. She blogs at staceyriordan.com.