The VC firm, 20VC uses the below 7 points to identify whether the potential startup (for investment) has or does not have a sustainable value creation in their business.
1. Scale Economics: Does the unit-cost decline as the size of the business increases?
2. Network Economics: Does the value experienced by the customers change/increase as the number of users of the product/service grows?
3. Counter Positioning: Can an incumbent startup initiate a new, superior business model/value proposition to take away the market? What is the startup’s differential value proposition (moat), and how can it be sustained over the long term?
4. Switching Costs: What potential value loss would customers anticipate, if they switch to a different supplier?
5. Branding: How does the historical value of the startup (seller) lead to the perception of higher value for an objectively similar offering?
6. Cornered Resources: What advantage does a startup (business) gain from having preferential access to a valuable asset that can enhance value independently?
7. Process Power: How do the embedded startup (organization), activities, and processes enable lower costs, and/or superior products, which can only be matched through long-term commitment?