Investors in Silicon Valley and beyond have a singular focus: the overall health of a business. Much like doctors leverage a host of factors to measure our physical well being – blood pressure, cholesterol, glucose levels, pulse – investors have a host of factors that they evaluate in order to determine whether a company would be a worthwhile investment.
Recently on its blog, venture capital (VC) firm Andreessen Horowitz discussed the 32 startup metrics that help investors gauge the health of a business it invests in. The metrics focused mainly on the core financials of a business from P&L to churn to month-over-month growth.
All the data that you can find on the ledger sheet certainly should always be the the core foundational business metrics that investors use to predict success. However, the age of disruption should have investors checking on some other key company characteristics that may not be totally measurable.
You can’t quantitatively measure a company’s preparation for business conflict or regulatory disruption but you can ensure that it has a plan in place. Thanks to Uber, we all have a much greater appreciation for the business impact — from both a pure expense and a brand reputation standpoint – that disputes with regulators and entrenched monopolies can inflict. Over the past two years, Uber has spent nearly $1 million on lobbying in California alone.
Where are many VCs making their bets today? They are in financial tech (FinTech), healthcare tech and the sharing economy. And what do they all have in common? They are all highly-regulated industries that historically have been averse to change, yet alone the quick and seismic change that many upstarts are trying to inject into the system.
Changes brings angst from regulators, entrenched interests and from consumers. And angst brings conflict. A company’s ability to recognize these potential conflicts with a plan that covers everything from business processes to communications strategies should be as big a part of a company’s health evaluation as ARPU or recurring revenue.
Because without that plan and the ability to predict future landmines, a company’s health can go downhill at Internet speed.