You’re already closer to becoming a confident startup investor than you think. You don’t need insider connections or millions to start building generational wealth. With disciplined thinking, the right questions, and a little courage, even a modest allocation can become the seed of something far bigger. Read on with confidence: these tips were designed to empower you to make smarter decisions, invest responsibly, and own a piece of the future. Remember: you can own equity from as little as $100, and the cycle is open until November 3, 2025. Send us a DM to get started.
Research the Market
Understand the market the startup targets before you look at the team or the product.
- What to look for:
- Total Addressable Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) — assess whether the market is large enough to support a meaningful exit or category leader.
- Growth rate and trends: Is the market expanding? Are there secular drivers (e.g., AI adoption, regulatory tailwinds, demographic change) that will sustain demand?
- Customer pain points and willingness to pay: does the solution meaningfully reduce cost, increase revenue, or save time for customers?
- Questions to ask founders or check in materials:
- Who is the target customer and why will they switch from incumbents?
- What are the leading indicators of demand (search volume, waiting lists, pilot programs)?
- Red flags:
- Market depends on speculative consumer trends with low stickiness.
- Overly optimistic TAM without supporting data or defensible assumptions.
Evaluate the Team
People are the single biggest factor in startup success. Evaluate capability, cohesion, and credibility.
- What to look for:
- Founders’ domain expertise and track record (previous exits, relevant industry experience, technical depth).
- Complementary team roles (technical founder, product leader, growth/ops founder).
- Evidence of execution: shipped products, customer references, revenue or pilot results.
- Practical checks:
- LinkedIn background checks, past company performance, and references from prior colleagues or investors.
- Founder alignment: equity splits, vesting schedules, and clarity on long-term vision.
- Red flags:
- Frequent founder turnover, unclear role definitions, or founders with only marketing experience and no product/technical background for tech startups.
Review the Business Model
A viable business model drives repeatable revenue and sustainable unit economics.
- What to inspect:
- Revenue streams: subscription (SaaS), transactional, marketplace fees, licensing—are they predictable and scalable?
- Unit economics: Customer Acquisition Cost (CAC) vs. Customer Lifetime Value (LTV), payback period, gross margin.
- Pricing strategy and monetization roadmap: demonstrated willingness to pay and planned expansion of revenue lines.
- Practical checks:
- Example calculations showing LTV/CAC, margin assumptions, and sensitivity to churn or price changes.
- Red flags:
- No clear path to positive unit economics, or revenue entirely dependent on one large customer without diversification.
Analyze the Financials
Numbers tell the story of runway and sustainability—understand them deeply.
- Key metrics to request and review:
- Burn rate (monthly cash burn) and runway (months until cash exhaustion at current burn).
- Monthly Recurring Revenue (MRR) and ARR growth rates for SaaS or recurring models.
- Cash conversion metrics, gross margin, and monthly net burn trend (are they improving?).
- How to judge reasonableness:
- Compare burn to traction. High burn without commensurate growth is risky.
- Ask for scenarios: what happens if next funding is delayed by 6–12 months?
- Red flags:
- Runway under 6–9 months with no credible fundraising plan.
- Opaque or inconsistent financial statements and projections.
Understand the Competition
A startup’s defensibility determines how long it can keep the market to itself.
- Competitive map essentials:
- Direct competitors, indirect alternatives, and potential large incumbents who could enter.
- The startup’s sustainable competitive advantage (technology/IP, distribution channels, regulatory barriers, data moat).
- What to evaluate:
- How easy is it for competitors to copy the product or replicate the approach?
- Are there switching costs for customers, or network effects that strengthen the business over time?
- Red flags:
- Vague differentiation that depends solely on being “faster” or cheaper with no tech or distribution moats.
Look for Traction
Traction validates product-market fit and reduces execution risk.
- Signals of real traction:
- Paying customers, recurring revenue, growth in active users, retention rates, and engagement metrics.
- Strategic partnerships, pilot agreements with enterprise customers, or letters of intent.
- Positive unit economics at scale or evidence that CAC is stabilizing or improving.
- Traction metrics to prioritize:
- MRR/ARR growth rate, month-over-month user growth, churn rate, and conversion funnels.
- Red flags:
- Lots of hype but few paying customers; reliance on vanity metrics (app downloads without retention).
Due diligence practical checklist (use these to compare deals)
- Market: TAM/SAM/SOM, growth rate, customer pain validation.
- Team: founder backgrounds, cohesion, references.
- Product: MVP status, roadmap, defensibility.
- Business model: revenue streams, LTV/CAC, margins.
- Financials: burn, runway, unit economics, clear projections.
- Traction: paying customers, retention, growth metrics.
- Legal/IP: ownership clarity, regulatory exposure, outstanding litigation.
- Cap table and terms: founder dilution history, investor rights, liquidation preferences, and post-money valuation implications.
Use the uploaded PDF visuals and QR code as a quick checklist when reviewing each pitch deck.
How to think about $100 allocations and portfolio strategy
- Treat $100 per allocation as a learning-first, exposure-building move rather than a single big bet. Over time, build exposure across multiple startups and sectors to diversify idiosyncratic risk.
- Suggested mindset:
- Start with small allocations to 6–12 startups over multiple cycles, track which sectors and stages match your risk appetite, then scale selectively.
- Reinvest learning: review what worked and why—were winners in particular sectors or led by repeat founders?
- Practical money management:
- Maintain an emergency buffer and retirement allocations outside of these early-stage investments. Early-stage investing is high-risk and illiquid; never allocate essential savings.
Monitoring, reporting, and your role as an investor
- Post-investment engagement:
- Expect periodic investor updates, milestone reports, and KPIs from portfolio companies. Review these updates for progress on product, customers, and runway.
- Participate in investor Q&As if offered; ask focused questions about milestone delivery and fundraising plans.
- What to watch for:
- Positive indicators: improving CAC, falling churn, expanded partnerships, and tangible revenue growth.
- Warning signs: repeated extension of timelines without progress, unexpected founder departures, or sudden cash emergencies without clear mitigation.
Legal structure and cap table considerations
- Understand the instrument you’re buying (equity, SAFE, convertible note) and its implications:
- SAFE/convertible notes convert at a later round—check caps and discounts.
- Equity gives immediate ownership but may have different rights (common vs. preferred).
- Cap table hygiene:
- Review dilution history and potential future dilution scenarios.
- Liquidation preferences and investor rights affect your path to returns—ask for plain-language explanations if terms are complex.
- Red flags:
- Opaque or shifting terms, aggressive founder-friendly or investor-unfriendly provisions, or missing legal documentation.
Exit pathways and time horizon
- Early-stage investments are illiquid and can take 5–10+ years to realize an exit via acquisition or IPO.
- Consider likely exit scenarios: acquisition by strategic players, follow-on rounds that increase valuation, or platform acquisitions.
- Align expectations: treat these as long-horizon positions and avoid needing liquidity in the short term.
Behavioral tips and decision-making hygiene
- Avoid FOMO: high-growth stories are attractive, but disciplined evaluation wins over hype-driven decisions.
- Use checklists and scorecards: assign objective scores for team, market, traction, and financial health to compare opportunities.
- Learn from losses: most portfolios will have failures—focus on the winners and iterate your selection process.
Next steps and how Startup Drivers supports you
- We provide consolidated pitch decks, due-diligence summaries, and ongoing investor communications to reduce your research burden.
- Our partnership with Tekedia Capital USA sources, vets, and curates deals so you access institutional-quality opportunities with $100 minimums.
- To get started: request pitch decks, review the due-diligence summaries, pick allocations, and we’ll handle the rest.
Call: +234 809 987 4275
Email: hello@startupdrivers.com
Send us a DM now and let’s get you started. The Tekedia H2 2025 Investment Cycle runs until November 3, 2025.
