tech-company, investment, investors, accelerators, incubatorsI have read that some incubators are using models to predict the success of a startup in the pre-launch phase.
However, I currently haven’t found any academic approaches.
Any suggestions about state of the art approaches and papers about predicting the success of a startup in the pre-launch phase?
You can find some resources here. Albeit not academic they’re very helpful.
A good way of checking whether a business can be successful is to create a financial model. A very simple model would consist of:
and then project monthly (or other period) revenue, its growth, costs, etc. If profit is above $0 then business model is sound and may be successful.
But this is extremely simple model and of little use. More useful one would incorporate scenarios (eg. pessimistic, realistic, optimistic) to play with different variables (low revenue/high overheads, different demand, etc.). This would tell how sensitive a business model is to adverse conditions.
However, every model is based on assumptions, and as the saying goes - garbage in, garbage out. So the more thought you put into assumptions, costs, realistic revenue, etc., the better the model can be. And it is the thoughtful approach that makes a model good or bad.
I personally start from modelling cashflow projections and then build profit and loss and balance sheet (as a check) statements. I don't bother with any accounting practices and tricks at this stage. Cash is king!
I also extensively use Monte Carlo simulation to check different scenarios (from predicting demand to costs). And chart the model! You can spot trends (and mistakes) easier with visual graphs.
But as a warning, there is no one great tool that can do prediction accurate. At least I'm not aware of one. Also if the model showed an idea will be complete failure, I'd rather check the logic and assumptions first, before discarding it.
All content is licensed under CC BY-SA 3.0.