Am I a magnet for this kind of situations or it happens to you as well? Imagine, you are walking down a fair of the annual fair of your industry (e.g. aviation, energy, chemicals, tourism…anything) and you meet a guy in his 50s. He starts telling you that he spent his whole life in the industry and he developed a technology which will be disruptive and/or will exploit an unexplored niche.
That sounds very promising and you trust the experience he’s adding. On top of that he already created some traction and he knows that competition of large multinationals is late or not interested for the moment; moreover he sees in the competition the exit strategy to sell his venture to.
His numbers look very promising too: high CAGR, margins well above industry standards, double digit IRR.
In front of such a great business opportunity, risks are high too and they are especially driven by the fact that this inventor is working alone; he is a so called lone ranger. The risks of such a deal are all related to the loneliness of the key person and their physical existence: e.g. would the company still survive in case of accidental death or permanent/temporary incapacity of the founder? Or what if that person is a tiran and doesn’t accept other points of view during a Board meeting?
I suggest below some reflections you should definitely go through:
– How many team members work full-time at the project? And advisors? Show profiles.
– You want to dig into the numbers, questioning all hypothesis underneath each of them.
– Take your time and seek second technical opinions to validate the concept.
– How much (private) money are they willing to put at stake? Believe me, you won’t put a cent if they don’t have skin in the game!