This document outlines 5 red flags for startups that could indicate issues: 1) Founders always needing to be the smartest in the room, 2) other startups as the target audience, 3) not openly discussing the startup, 4) having rent or legal as major expenses, 5) founders not being customers themselves. Each flag is explained, with reasons they are problematic such as founders not listening to customers or lacking passion for solving problems. The takeaway is that while no single flag is a total disqualifier, they should give pause to potential founders, investors, or other involved parties.

1. AN INNOVATIVE AND DYNAMIC APPROACH TO VENTURE CAPITAL AND INCUBATION
The 5 Red Flags of Startups

2. 5 Red Flags = 5 Deadly Sins

3. The Red Flags
• Founder(s) Always Need to be the Smartest Person in the Room
• Target Audience/Customers 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
• Why it is an issue:
• 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

5. Startups Make Bad Customers
• Why it is an issue:
• 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!

6. The Startup Didn’t Move You
• 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
• 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?
• Why it is an issue:
• They aren’t passionate about the problem
• They don’t understand the problem
• Have zero credibility as an authority in the space

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