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Ranking startups, TPPPT scale

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For Hackers and Founders Angel Office Hours, we used the TPPPT (pronounced tippet) scale. It seemed to work really well. Most of the high scoring startups (4+) got a thumbs up from Naval. Lower scoring startups mostly got panned.

  • Team: Do you have a technical cofounder?
  • Pitch: Do you have one and is it short?
  • Product/Prototype: Do you have one?
  • social Proof: Do you have any?
  • Traction: Can you show growth metrics?

The characteristics summarized by TPPPT are only correlated with successful startups. It is designed to be an indicator or heuristic, not a guarantee.

Curious what others think about this. Are there any other ranking/rating systems for early stage startups?

A detailed breakdown of the TPPPT scale can be found here: http://amattn.com/2011/11/25/tpppt_scale.html

I first encountered TPPPT in Naval's 5 qualities of exceptional startups.

I think that this system leads to false positives and false negatives, and overall selects for a more homogenous type of company because:

  • Technical co-founders can go astray due to arrogance or ignorance; they also regularly quit or are fired.

  • Pitch is ever-changing due to a culture of pivots.

  • Having a product/prototype is easy, but having a good one is not.

  • There are so many people in the game that social proof does not mean what it used to.

  • Traction can plateau, reverse, or just stop without warning.

False positive: Pizza and Pipes. Technical co-founder (me); Pitch: great ingredients, great pizza; Product: pizza and beer; Social proof: more than a thousand customers a month; Traction: revenues growing month-over-month since we started. Would this be a good candidate for Angel office hours? No.

False negative: 2008-era Airbnb. Technical co-founder was a known spammer, and the other two co-founders are designers; Pitch: even Fred Wilson doubted it; Social proof: all investors thought it was too small; Product and Traction: had to be abandoned to sell breakfast cereal. Fast forward to 2011 and it's a billion dollar company.

Despite potential for false positives and false negatives, I think this system is better than most when it comes to evaluating an early stage consumer Internet or enterprise software-as-a-service company in 2011. Those are all valuable qualities, and having them gives a company higher chance of success, imho.

Adam, is your main point that the TPPPT system does not take any account of the size of the idea? In fact it might tend to favor the small ideas over the big hairy ones.

That's my main point, yes.

Pizza and Pipes, which is a small idea, ranks highly.

Airbnb, which is a big idea that took a while to prove its market, ranked poorly in 2008 when they needed help most.

Specific feedback for the TPPPT article:

Team -- I love the phrase "relentlessly resourceful", but it's hard to get a feel for team working dynamics on a first meeting.

Pitch -- Be weary of the Hollywood Style "Die Hard on a Bus" pitches. Be mindful of whether the pitch is addressing a great market. Team-Market Fit is more important than product-market fit.

Product -- Make sure the product is not optimizing anything prematurely.

Social Proof -- What we're really looking for here is that a team isn't bringing a product to market in isolation. Who else is helping?

Traction -- Is the hardest to call. Is there any such thing as "enough traction"? Favstar.fm does millions of monthly pageviews -- is it enough? Depends on who you ask. When push comes to shove, it becomes hard to quantify how much traction is needed to matter.

Traction is definitely FAR FAR FAAAARRRR more subjective than inexperienced VCs would have you believe. Every momentum investor says that they want to get in your deal right before you start to hockey-stick... but as Adam points out, there's a lot of interpretation involved in even the seemingly "objective" act of looking at a graph. And honestly, do most engineer founders really want a momentum investor in their early-stage deals? :)

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