How To Vet Technology StartupsHow To Vet Technology Startups

The release of information's Startup 50 raises the old question: Should IT departments do business with startups at all? The unequivocal answer is yes, and here's my advice on how to pick the right ones.The issue, of course, is that doing business with startups entails risk, even more so than working with established vendors. Startups have a shorter track record, fewer customers, and they're generally not as financially stable. They may be acquired, have a change of product strategy, or go out of business.

The flip side of the argument, which argues in favor of working with emerging companies, is that they're more innovative and responsive and their technologies tend to be cheaper or otherwise help lower costs. How do we know this? In an information Analytics survey last year, IT pros told us so.

With this week's publication of the information Startup 50, we're re-releasing a report I wrote about six months ago titled "Vetting Startups." It's a guide to the world of up-and-coming tech companies-what to look for in evaluating them and what kinds of questions to ask.

Here are seven steps to evaluating tech startups, excerpted from the report: