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What to look for and ask the founders when evaluating an investment opportunity in an app?

Technology and Apps in Health & Well being are not my area of expertise, but I have been approached with the opportunity to invest in one such App, and I would like to tap into this network's expertise in those areas.

My Question: When evaluating the opportunity, which should be the top 5-10 questions/areas to evaluate and/or ask the founders?

The App is a marketplace focused on enhancing human health, resilience and quality of life.
They are doing this by connecting holistic and healthcare professionals with users in a slick and smart interface.

They are conducting their Beta testing with users and are now starting to sign up the Professional beta users, like Independent care givers, health and well being centers, etc. They are conducting transactions during the Beta phase.

Once the market is fluid in their country, they want to expand to the rest of Latin America, Europe, and the US.

Their team is composed of the following:
o CEO
o Lead Designer UX/UI
o Business developer
o Marketing Officer
o Community Manager
o Attorney
o Accounting
o Backend developer


Thanks for any and all input.

6 Replies

David Evans
0
0
David Evans Advisor
Fractional CTO and Investor
Biggest areas of concern:
1) Is the company in US? Or is the investment international?
2) What is the user acquisition cost? In a two sided market, you have to attract twice the users and usually require scale on one side before you can attract users on the other
3) If you have no personal expertise or serious personal attachment to the problem they're solving (i.e. you'd be an early adopter), think twice about the investment.
4) What is the revenue model?
Natasha Homer-Earley
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Natasha Homer-Earley Entrepreneur
Founder Gujiwo.com
I was advising a google backed Mobile Healthcare venture afew months ago. The questions I would ask are
1. What's their USP - as there are a number of players across that space already in USA & Europe. I'd gem up your knowledge of the overall mobile health landscape. CBinsights did a useful overview here :https://www.cbinsights.com/blog/iot-healthcare-market-map-company-list/?utm_source=CB+Insights+Newsletter&utm_campaign=d82aa3e59e-Top_Research_Briefs_04_09_2016&utm_medium=email&utm_term=0_9dc0513989-d82aa3e59e-87571845
2. How do they intend to connect healthcare professionals - in different markets major systems are already in place under agreement from the institutions employing these professionals. So how do they legitimately get these healthcare professionals adopting a different system to that provided by their employer ?
3. Not clear from your intro whether this is a pure B2B offering or B2C or B2B2C ?
4. Does the founding team have IP expertise in this area ? I would be looking for previous experience & proven results in health care, marketplaces, SaaS & mobile launches, building mobile traffic etc.
5. Find out more about the founders personal journeys. There was a very useful article in Inc.com about the 7 attributes of outstanding founders. You can find it here :http://www.inc.com/bill-carmody/the-7-attributes-of-exceptional-founders.html
6. What is the burn rate & when are they forecast to be cash positive ? and you want that info to assess how much more funding they are going to need at each stage & whether on the basis on the competition, they are likely to get that funding. Otherwise your funding a Startup that won't get beyond Seed round.
7. Are they clear on what works in their markets ? For example what age groups are they going for & do those age groups prefer Apps or Mobile Internet sites instead ? Usually older age groups prefer mobile internet, not Apps.
8. How do they intend to carry payment across Latin America for transactions ? It's known for being a market with very fragmented payment solutions & some of it's markets have very low card penetration rates.

So I am suggesting you dig abit more into the practicalities of how they intend to capture their own market & how they intend to compete in other markets like Europe, with more established players there.

It might be they can't compete and it's just a Latin America they can realistically capture - if that's the case then they need to be very clear with you on what exactly their exit strategy is for the business.

Graeme Lewis
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Graeme Lewis Entrepreneur
Busy with something...
I took on investors for the sake of money alone, once, and will never do that again.

Money is worth nothing if it does not add functions you do not already own. I mean by this, it must bring solid and workable relationships to the venture.

I'd avoid first timers unless they let me retain control. Life is too short to teach first timers what you have already learned.
Robert Lasky
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Robert Lasky Advisor
Digital Executive, Consultant and Cross-Industry Channel Expert
Hi Isabel,

The first, and most important, thing to understand is that what they are building isn't a product. Your success as an investor is dependent on their ability to build two audience bases, one is the product that the other, the customer, sees enough value in to pay for.

1. Why are they the team to do this? What qualifications, relationships, etc. do they have? Do they know how to acquire people on both sides of this marketplace? At the end of the day, your success as an investor will come down to their ability to execute, not identify a great opportunity.

2. If the team checks out, who can you speak with that has some subject matter knowledge in the space to validate the opportunity is viable for the market and demographic?

3. How do they plan to make money? Per the above, who pays them, how, and for what? This will have implications on their marketing costs and again, from your description, it sounds as if they may need both "product" and "customer" marketing plans (e.g. if providers are paying, they need to acquire consumers / patients as product, if consumers are paying, they need to acquire a solid base of providers in the markets they plan to serve early on as product). If they are a consumer subscription service in this particular space, be skeptical.

4. What are their primary risks to success that may be out of their control and what is their plan for navigating them (e.g. if they are in healthcare, bring a great solution to market and have some good early traction, what prevents the leading company in their specific space, pharma, healthcare provider, etc. from offering a comparable service and squeezing them out?)? What competition is already in the space and how are they poised to succeed (this should go beyond a feature comparison)?

5. How will they force their marketplace to grow? This starts with a marketing strategy and plan, with ROI estimates. But if / when that doesn't play out as expected, how will they grow their customer base?

6. Where are they at with regard to a MVP / beta (if they don't, at a minimum, have that ready to demo and close to putting into market to test, I'd walk away)? How much money do they need, and what milestones do they plan to achieve with this funding? Understanding this will be speculative, you also want to get their current thoughts on when will they need additional funding, how much and for what?

7. What data will they be watching on a daily basis to clearly determine whether they are succeeding or failing.

Good luck!

Robert

Sam Sepiol
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Sam Sepiol Entrepreneur
Founder at Bleetz
I would echo elements from each of the responses above, but no one addressed security. In the U.S., HIPAA is the governing law over personally identifiable information (PII) in the healthcare world. It will of course differ for that group in their locale, but they had better be able to spell (the local analog of) HIPAA, and have someone on the team with responsibility, and time, and accountability for it.

Additionally, they need to understand that being HIPAA-compliant, or whatever, doesn't mean they, or their data, are secure. It means they have metthe (very minimal) minimum bar for their industry in their country. They need to understand what their data touches (user interface, back-end database, web app cache, mobile app cache, etc.) and how it moves between each touch point.
Edmond Gozo
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Edmond Gozo Advisor
design thinker, creative problem solver, tinkerer
One area that I often find overlooked in technology apps, regardless of sector, is that the technology is just part of a human and institutional ecosystem.

For health & well-being in general, I've worked with a few in the space, and they underestimated (or did not factor in) the attitudes toward health and healthcare -- people are sensitive about things related to their health; oftentimes they are under-informed, so it makes connecting the caregiver and the patient less than straightforward; and many look at the selection of a caregiver a very personal affair. The interactions (not just in the app, but in the overall way these parties are expected to connect) need to consider this, and other similar human nuances.

To your question then -- does the product/service consider the human context? Has it been designed with these considerations in mind? Have they considered the ecosystem -- people, caregivers, other health-related services or institutions, regulations, etc.? And does the team building the product/service think like this?

Ultimately, you also need to decide whether you are investing because you believe primarily in the product/service, or in the team? In the latter scenario, a good team can recover and/or persevere, if the product isn't quite turning out the way they imagined it.
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