How to Evaluate Early-Stage Startups: The Pattern Breakers Framework

My colleague Micah gifted me Pattern Breakers by Mike Maples, Jr and Peter Ziebelman, and it’s one of the clearest frameworks I’ve seen for evaluating early-stage businesses.

Pre-seed and seed investing is about the people, but I like to say that the “take-home assignment” is the business and there are structured ways to pressure-test it before traction exists.

The framework: identify the inflection the company is riding and the non-consensus insight that lets them exploit it.

Two clean examples from the book:

Uber/Lyft – The iPhone put high-fidelity GPS in everyone’s pocket. The insight: people would get into strangers’ cars.

Airbnb – Facebook Connect surfaced identity, photos, and interests. Combined with rising comfort with online reviews, the insight was that people would sleep in strangers’ homes.

The framework is somewhat retrospective (Micah and I debated this over lunch), but it’s useful during the current AI inflection. Everyone sees it. You might have a big insight, but then a flood of derivative ones pop up before you can say “Series A.”

The book is a great reminder that the goal is to build something new and non-obvious.