Forge Venture Rubric — A Startup Diagnostic Tool

Vish Sahasranamam
Forge Innovation & Ventures
11 min readMar 9, 2021

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The primary objective of the Forge Venture Rubric (FVR) is to validate the startup’s potential to emerge as a winning technology/product in the industrial digital transformation market and a high-growth industrial technology company.

The added benefit of this assessment is the identification of specific interventions that are critically needed to accelerate the startup towards technology, product, market, and growth outcomes. Evidence and Indicators we look for, and data/facts we analyse as basis for scoring the candidate startup against this rubric are indicated under each of the 24 attributes (numbered from A1 to A24)— 4 attributes for each of the 6 primary diagnostic parameters (numbered from P1 to P6), defined in the rubric.

On a scale of 100, the FVR Score represents a quantitative indicator of the inherent potential of a startup scaling technologies and solutions targeting industrial digital transformation.

FVR is the 100 point scale quantifying the attractiveness of the startup for Venture Capital and Corporate Ventures
Descriptors for Attributes A1 to A24.

P1 Market Opportunity [20]

Assessment of the Market Opportunity parameter is more to do with evaluating the GROWTH potential of the startup in terms of emerging as an industrial tech venture in the 5–7 years timeframe. The approach taken here is to evaluate the potential not at the startup level but at the aggregated market level, primarily from the perspective of a VC investor. The potential to grow is ultimately determined by how big the market opportunity is.

A1 Value Proposition [0–3–5]

Strong value proposition addressing an ignored need with quantified business/financial gains, backed with proven willingness-to-buy, plus FIR score = 100;

Evidence-1: Data points that clearly qualify/quantify the benefits and gains for the target customer, backed by sufficient proof to confirm the customer’s acceptance of the solution and the willingness-to-buy. Indicator-1: Is the startup able to demonstrate a track record of deeper engagement with the target customers during the technology/product development?

A2 TAM Size & Growth [0–2–4–7]

Potential to emerge as a substantially large domestic and global market with a market value in excess of $10 Bi per annum within the next 5 years;

Note: In the case of emerging tech/product categories, market size is estimated on the basis of economic value (monetary value of tangible benefits and measurable gains are achieved by solving problems, overcoming challenges etc.) versus overall sales value (revenues generated, since its still early days). For gaining a value (business impact) of Rs.X, industrial buyers will be willing to pay a price in the range of 10–20% of Rs.X. Evidence-1: Quantified economic value for a typical target customer extrapolated to the overall market, with factual data points demonstrating a strong customer’s willingness-to-buy.

A3 Market Readiness [0–2–4]

How mature is the market with enabling infrastructure/resources to scale up rapid adoption, distribution and GTM operations of industrial digital technologies?

A4 Attractiveness for Venturing [0–4]

Lower risks of regulation, entry barriers, external macroeconomic threats, sales-revenue cycle, adoption barriers for technology/innovation etc.

Note: Indicator-1: Presence of direct competitors in similar/same tech/product categories is the best indicator for evaluating market’s attractiveness; Indicator-2: Extensive/complex Tender process for procurement is indicative of longer sales cycles decreasing attractiveness; Indicator-3: Policy interventions by Govt., involvement of industry association in driving wider adoption of industrial digital capabilities are indicators of lower entry barriers; Indicator-4: Executive priorities/goals, Budget allocation and deployment of technical/managerial resources for digital transformation are all indicative of higher priority given to the acquisition of capabilities towards operational excellence and strategic growth.

P2 Technology Advantages [15]

Technology advantages a startup enjoys gives it an enduring edge over its competitors apart from giving it the ability to simultaneously impact multple product markets across different industrial sectors. In many ways the ultimate growth potential comes from a superior technology translated into a differentiated product and compelling customer value.

A5 Breakthrough Tech [0–3–5]

A fundamental scientific discovery/invention translated into a potentially disruptive technology capable of emerging as the Dominant Standard for industrial-grade applications across multiple sectors/use-cases;

Note: Technology is the translation of scientific concepts/principles evolved through research into usable form for applications to solve real-world problems. Indicator-1: Presence of key scientists/technologists in the sci-tech areas, as founders/employees in the startup or as closely engaged advisors. Indicator-2: Proof of widespread acceptance of the core tech invention/capability as the most advanced variant within the industry. Evidence-1: Publications in journals, proof of recognition/credentials for the science/tech and of the pioneer/leadership status.

A6 Generic Core-Product [0–3]

A strongly differentiated technology likely to emerge as the most widely adopted industrial-grade subsystem (core-product) that powers several end-product solutions across use-cases and categories;

Note: For startups winning in core-product categories leveraging their sci-tech capabilities is proven to be less risky than moving directly into end-product markets, where the threat of retaliation from existing players is immensely high. The execution on manufacturing/distribution/retail/branding fronts in end-product categories is a major challenges for startups under pressure to even match the quality-performance-margins benchmarks of established players. In contrast with core-product vision and strategies startups can position themselves as tech/innovation partners to incumbents, achieving accelerated market success and venture growth.

A7 Opportunity for IP Licensing [0–3]

Novel technology with strong IP potential, capable of being monetised through IP (technology) licensing deals;

Note: Designing the underlying inventions, knowhow, proprietary science/designs/process etc. in a manner that allows for commercial licensing is a relatively easy to scale model and strengthens the commercial potential of the startup. The potential to generate and protect the IP in the form of patents, trade secrets etc. makes the startup have a distinct advantage.

A8 Disruptive Potential [0–4]

Highly likely to impact the fundamental business model around industrial digital transformation, in the same way ICT/Mobile tech and Cloud Computing tech impacted digital transformation in consumer and enterprise markets;

Note: Disruption in industrial digital transformation shall arise from scaling up the implementation of relatively simple, very affordable, easy to adopt/integrate solutions, on similar lines to how PCs, internet, mobility, and cloud computing scaled up the infra, platforms, applications, and services that delivered digital transformation in the enterprise and consumer markets. Examples of disruptive tech most likely to enable this scaling up are: Power Line Communications, Edge Computing, Connected Manufacturing Platforms, Generic Machine Intelligence Hw/Sw Systems etc.

P3 Team & Capabilities [15]

Ultimately the top success factors are talent and capabilities the startup has to execute the vision and in an accelerated manner translate potential to on-the-ground results. The most attractive startups are those that are able to attract top talent and manage execution at multiple KRAs/functions to scale the company seamlessly.

A9 Tech/Domain Expertise [0–3]

Founders are involved full-time, with capable technical and operations team capable of commercialising the innovation, guided by eminent advisors.

Note: How much of a competitive edge does this startup have purely from access to talent, expertise, and specifically prior entrepreneurship experience? Indicator-1: On the core technology front or the domain, does the startup have among its founders/core-team/advisors highly reputed experts in those areas? Indicator-2: Ultimately execution on the commercial front is what truly matters, so how capable is the startup on the scaling up company and commercial operations? How much importance is given to budget/execution and the progress achieved on the recruitment front.

A10 Founder-Market Fit [0–5]

Visionary entrepreneur with the leadership and company building skills, with the ambition to emerge as the category leader, backed by strong execution skills vital for achieving success in the chosen target market;

Note: This is least related to domain expertise usually linked to past experience in the target sector. Winning in a big way for founders comes from having a stronger fit with the target market demonstrated or manifested in these following ways: Indicator-1: A profound/compelling vision for the ultimate customer value/experience/impact arising from deep customer/user empathy. Indicator-2: Growth mindset with very high ambition to emerge as the category/market leader, becoming the gold-standard and influencing massive change. Indicator-3: Ability to lead execution in scaling up internal teams and external partners to win in the target market. Indicator-4: Being opportunistic and agile to customer-validation & market-feedback and not being too inflexible and inwardly focused on tech, product.

A11 Partner Network & Capabilities [0–2–4]

Established partners to offer resources and capabilities for production, commercial launch and distribution;

Note: While the strategy around expanding and scaling up the partner network is covered under Growth Readiness, the focus here is on the ability to execute on building and scaling partnerships. Indicator-1: Do the founders/core-team members have the proven expertise to build partnerships that can give them a competitive edge, lower costs and mitigate risks of scaling?

A12 Business & Financial Planning [0–3]

Comprehensive Business Plan covering all financial planning aspects required for scaling up company, commercial operations, and meets requirements for Seed/Venture funding;

Note: The focus here is not so much the document but the quantitative depth and analytical rigour in the business/financial planning process, and the skills within the founders/core-team members. Only when startups are engaged actively in fund raising, and mentored by angel investors actively, do they tend to make solid progress on this front. Intent alone is not sufficient but real progress on developing a sound business plan covering financial and operational aspects is key. Indicator-1: Completeness/correctness of business plans. Indicator-2: Actively engaged in fund raising, and showing proof of specific investors engaged with, progress on angel investments. Are angel investors actively undertaking review of financial/operating plans?

P4 Product Readiness [20]

Accelerated conversion from early customised solutions (implemented as multiple trial/pilot projects for individual customers) into standardised solutions with a near 100% common factor for the target market is a key milestone to achieve for industrial startups. This milestone indicates all round readiness for generating repeatable revenues and scaling up commercial operations.

A13 Problem-Solution Fit & Product-User Fit [0–4]

Product solves the problem most effectively, has been tested for usability, integration/deployment constraints and validated against adoption barriers (FIR = 100).

Note: Is there a strong indication of Willingness-to-Pay backed up by demonstration and acceptance of proof-of-value. FIR less than 100 automatically should be scored 0. Indicator-1: Proof of successful completion of deployment/integration/usage trials and realisation of proposed business/financial value and impact; Indicator-2: Multiple customer projects have a higher degree of common factor and a standardised solution is highly likely to emerge;

A14 Product-Trials/Certification Fit [0–3–5]

Completed sufficient number of end-user/field trials, validated for regulatory compliance, industrial-grade certification standards;

Note: The focus is on achieving sufficient progress on the certification front, wherein the production-ready design at industrial-grade standards has been validated for manufacturing feasibility/viability.

A15 Product-Factory Fit [0–2–4]

Production ready design suitable for mass manufacturing, optimised for unit-price/profit, and contracts negotiated with supply-chain and factory partners for a market launch within 3–6 months;

A16 Product-Market Fit [0–3–5–7]

MVP has emerged as the standardised solution (near 100% common factor), backed by evidence of repeatability in revenue generation and has emerged as the leader in key customer segments;

Note: In simple terms PMF is about being able to market and sell the product off a catalogue — as in being able to execute standardised product marketing and sales operations, which is the minimum precondition for scaling up the startup’s GTM and distribution models.

P5 Product Advantages [20]

A17 Product Vision & Roadmap [0–5]

Ambitious vision for longer-term product evolution towards dominating current and adjacent categories, backed by evidence for validated need and predictable demand;

Note: Vision here refers only to the product and is applicable only from the point where the startup is closer to achieving a 100% standardised solution across its base of early-adopter customers. At any stage prior to this, the ideas about the evolution and roadmap of the product are purely assumptions lacking rigorous validation, which is more hallucination than vision. Vision or Roadmap in this context doesn’t at all relate to technical or functional aspects of the product but more strategic matters dealing with how the product will emerge as a winner in the current category and create/penetrate other adjacent categories too.

A18 Distinctive Value-Cost Advantage [0–4]

Substantially high technical/operating value leading to business/financial impact with low TCO over product lifecycle, plus competitive edge in pricing and revenue model over competitors;

A19 Category Leadership [0–3]

Strong product differentiation in design/capability/performance translating to tangible gains and measurable benefits, overcoming adoption/usage barriers, highly likely to emerge as category leader;

Note: While Category Creation matters unless Category Leadership is achieved then there is very limited long-term upside. Indicator-1: Higher conversion from pilots to commercial orders plus faster sales cycles in comparison with direct competitors; Indicator-2: Evidence of direct monetary gains created by the product backed by rigorous facts/estimations; Indicator-3: Evidence of strong demand generated by customer referrals;

A20 Original/Indigenous Solution [0–3]

Higher extent of locally sourced technology, design, know-how and production resources with lower dependency on imports, foreign partners & collaborators;

P6 Growth Readiness [20]

Achieving non-linear growth and scaling up an industrial tech venture requires strong execution on multiple strategic growth levers. Each of these levers independently and collectively should have the potential to deliver nX growth in revenues at a X growth in costs. Any attempt to fund startup growth before these fundamental growth factors have been validated usually leads to outsized startup failures.

A21 Expanded Value-Network [0–3–5]

The value-network to create additional customer value, generate demand, drive adoption, scale up distribution and sales can be leveraged to serve multiple applications across sectors;

Note: Non-linear scaling up depends primarily on the startup’s ability to expand its network of partners and leverage their financial and commercial assets in distribution, demand generation, value-creation etc. Ultimately a startup’s potential (validated too and demonstrable) to emerge as winner in multiple markets makes it attractive for venture funding. Scaling not only in the primary target market but rapidly expanding into adjacent markets by exploiting readily available partner resources and assets is the most desired growth strategy.

A22 Sustainable Competitive Advantages [0–4]

Advantages over competitors that are hard to match, duplicate or beat in creating, delivering and capturing value arising from capabilities, resources, and partners in technology, product, and commercial operations;

A23 Cost & Ease of Distribution [0–3]

Existing channels can be utilised for distribution, sales, user activation, customer acquisition, & lifecycle support, at relatively lower costs compared to existing solutions;

Note: High-growth comes only from the startup’s ability to grow revenues at a rate far higher than the cost of generating/servicing demand — basically create an order of magnitude difference in the growth of revenues vs costs. Traditionally market expansion comes at a huge investment/cost but where a startup contender can change the rules of the game is by leveraging technology and partnerships in the execution of market expansion strategies.

A24 Unit Economics & CLV [0–3]

MVP priced for attractive margins over direct costs, combined with predictable recurring revenue and higher lifetime value arising out of up/cross-sell possibilities.

Note: As Industrial (B2B) markets involve much higher customer acquisition and servicing costs, achieving non-linear revenue growth requires generating multiple revenue streams by deeply mining customers at much lower costs.

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