Startup Scouting Through Market Maps

How To Evaluate Deals As a Startup Scout

I remember when I first got into the startup scouting business, I sent any deal that I was excited by out to my VC network. If I liked a deal, they would too, right? Wrong. Almost every time, they passed. This happened for months, deal after deal. Now that a few years have passed, I realize why this happened; My excitement about a deal was inversely correlated to my knowledge about a market. Meaning, the less I knew about a market, the more excited I was about a deal.

Since my early days in venture where I couldn’t get a deal across the line, I have met thousands of founders to help me inform my mental market map on the world. A market map is a representation of all the players in a single market and how they all relate to eachother. When you discover a new market, your map is empty and you fill it up with research, analysis, and immersion. Once you do, your bar for excellence goes up.

All of a sudden, that one amazing fitness app using AI to generate workouts didn’t seem so impressive when I came across 7 others with a same feature set. Or that one social app with crazy FOMO that we all thought was going to be next Facebook didn’t stand a chance beyond the headlines. The only way to know these things is to meet a lot of founders, explore curiosities, and fill in your market map.

Thesis driven scouts have very strong market maps. These scouts know certain markets so well, that they know how to spot an exceptional opportunity because they’ve seen it all already. I don’t believe generalists have this luxury. Complete market maps allow you to know every company in a market, what makes them all similar and unique, and what types of companies could complement or disrupt the market vs just being redundant.

If you’re looking to get into the startup scouting business, I would challenge you to look at thousands of companies, all across the board, and fill in your market map. And maybe pick 2-3 markets to dive really deep on. Where is the map full? Where is it empty? These are the questions to be asking yourself when you come across a deal. Don’t get excited about it in a silo. Take the deal and display it on your market map, next to dozens of other competitors. Does is still look strong compared to everything else on the map? Ok, now you have something.

The more deals you see, the more you understand what the market has (and is lacking), and the higher your bar for excellence goes when sending deals to VCs. Welcome to the scouting business 🏴‍☠️