All startups have a handful of things that are instant red flags. These warning signs are universal and not dependent on the vertical, geography, or technology. Learning to identify these red flags so you can avoid them no matter what part of the startup ecosystem you are filling. This is part of the Wasabi Ventures Academy Startup Foundations cohort. If you are interested in joining a future cohort, visit http://academy.wasabiventures.com

1. Analyst Training:
The 5 Red Flags of Startups
An Innovative And Dynamic Approach To Venture Capital And Incubation

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5 Red Flags = 5 Deadly Sins

3. The Red Flags
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1 2 3 4 5
Founder(s) Always
Need to be the
Smartest Person in
the Room
Target
Audience/Customer is
Other Startups
You Don’t Talk
about the Startup
Startup has “Rent” or
“Legal” as a Measurable
Expense
Founder(s) are not
also Customers

4. Smart People Need To Be Humble
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• Usually have a hard time listening to customers
• Don’t tend to be good managers
• Think the whole world is like them
• Think that being smart is all that matters
• Always think that they have to have the answers to all questions
WHY IT IS AN ISSUE:

5. Startups Make Bad Customers
• They never have a lot of money
• They tend to think they can build anything themselves
• There aren’t that many of them
• They tend to disappear!
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WHY IT IS AN ISSUE:

6. The Startup Didn’t Move You
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WHY IT IS AN ISSUE:
• If you don’t get a great feeling, it isn’t worth caring about
• The people involved weren’t inspirational
• You don’t have a personal vested interest

7. Lawyers, Accountants, Real Estate = NO ROI
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WHY IT IS AN ISSUE:
• Shows that a startup is focused on the wrong things
• Can’t usually be zero, but needs to be close to zero
• Early Stage it needs to cost less than lunch per month
• None of these make a company more valuable, they are just
necessary evils

8. Would The Founder Pay For This?
• They aren’t passionate about the problem
• They don’t understand the problem
• Have zero credibility as an authority in the space
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WHY IT IS AN ISSUE:

9. Key Take Away
None of these items are 100% disqualifiers,
but any of them should give you pause as a
co-founder, investor, or interested party
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If you are interested or know some interested
in the Wasabi Ventures Academy, email
wvacademy@wasabiventures.com