Assessing Your Venture
What the Business Is For? Create Value Capture Deliver
Offering Delivery Product Process Service Channel Content Fulfilment
Factors for Creating Value Quality Price Location Selection Service Speed/turnaround
What Is Your USP? Unique Selling Proposition—what attracts customers away from the competition and toward a business? Compare what your business offers to what competitors offer. Are you at a cost advantage or disadvantage?
Elements of a New Venture People The team Capabilities Attitude Reputation Deal Business Resources Rewards and risks + Financial Incentives Physical Ownership Plan Intellectual Harvest Opportunity Customers Strategy Business Model
People & Opportunity People Entrepreneurs Others Opportunity Profile of business What it will sell and to whom Whether it can grow and how fast What is the economics Who and what stand in the way of success
Context and Risk & Rewards Context The big picture Factors that inevitably change but cannot be controlled by the entrepreneurs Risk and Rewards Assessment of everything that can go right and wrong A discussion of how the team will respond
Core Strategy of the Venture Core Strategy The first component of a business is the core strategy, which describes how a firm competes relative to its competitors Primary Elements of Core Strategy Mission statement Product/market scope Basis for differentiation
Primary Elements of Core Strategy A firm’s mission, or mission statement, Mission describes why it exists and what its Statement business model is supposed to accomplish A company’s product/market scope Product/Market defines the products and markets on Scope which it will concentrate It is important that a new venture differentiate itself from its competitors in some way that is important to its Basis of customers Differentiation If a new firm’s products or services aren’t different from those of its competitors, why should anyone try them?
Defining an Organization Core Values Mission Vision Culture Organizational Core Beliefs Beliefs entrepreneurs use to guide organizations. Example: My restaurant will support local organic farmers. Core beliefs affect: materials used in production prices charged how customers are treated
Mission Statement Vision A concise statement of Overall view of desired company Target customers future state Products & services Built upon core Markets served values & beliefs Use of technology Compelling across Importance of public the organization issues & employees Employees need to Focus on survival, profitability, & be empowered to growth fulfill it
Culture Largely shaped by leadership Core values in action Includes Risk tolerance & innovation Orientation with respect to people, teams, & outcomes Attention to detail Communication norms
Strategic Resources A firm is not able to implement a strategy without defining its specific resources For a new venture, its strategic resources may initially be limited to the competencies of its founders, the opportunity they have identified, and the unique way they plan to serve their market The two most important strategic resources are: A firm’s core competencies Strategic assets
Primary Elements of Strategic Resources A core competency is a resource or capability that serves as a source of a firm’s competitive Core advantage. Examples include Dell’s competence Competencies in supply chain management or Google’s search algorithm Strategic assets are anything rare and valuable that a firm owns. They include plant and Strategic equipment, location, brands, patents, customer Assets data, a highly qualified staff, and distinctive partnerships New ventures ultimately try to combine their core competencies and strategic assets to create a sustainable competitive advantage This factor is one that investors pay close attention to when evaluating a business A sustainable competitive advantage is achieved by implementing a value-creating strategy that is unique and not easy to imitate
Concerns of Stakeholders
Concerns of Stakeholders Amounts and schedules for Family and returns Stability of firm Friends Funds use Growth rate Silent Partners/ Market Business team Angel Investors Amounts and schedules for returns Team Composition Venture Market growth Strategy for competitive Capitalists advantage Expected returns
Concerns of Stakeholders Fit between the firms Joint venture Competitive advantage partners Benefits Intellectual property protection R&D Bankers Cash flow and cash cycle Asset/ collateral base Long-term prospects
Concerns of Stakeholders Compliance with regulations Government and laws agencies and Monitoring compliance institutions Potential Service/ product quality Benefits Customers Competitive advantage Responsiveness to customers Stability of firm Key Growth (applies to increased employees opportunities within the firm) Long-term prospects
Stage-wise Requirements of Funds Stage Milestone = expected outcome Seed Formulation of initial team & completion of business plan Product development Series A completed Product test and customer Series B acceptance proven Series C Launch product into market
What Investors Look For How does the team think? How detail oriented is the team? How big is this market? Is there sustainable competitive advantage? What’s the growth plan? What does the technology roadmap look like, short term or long term play
What Investors Look For Mindset Staying power Ability to handle risk Verbal ability Detail orientation Compatible personality Past Experience Market knowledge Track record Leadership
10 Must Answer Questions How large is your addressable market? How fast is the market growing? Who’s make up your management team? What’s your “secret sauce?” What are the barriers to entry/competitive advantage? What do your 5 year financials look like? What’s your path to profitability? Why is this a company versus a product/service? Who’s your competition and how do you beat them? Why can’t Apple do this? (or name any big, established company…)
Evaluating a New Venture
Due Diligence Market assessment is initial focus Customer market validation next Team references and resumes critical Secondary: Financials and assumptions Corporate structure and legal docs Patent applications
Key Determinants of New Venture Success Strength of Business Idea Industry-related issues Target market and customer- related issues Founder-related issues Financial issues
Strength of Business Idea Low Potential Moderate High Potential (-1) Potential (1) (0) Extent to which idea Weak Moderate Strong #Takes advantage of environmental trend #Solves a problem #Addresses unfilled gap Timeliness of entry to market Not timely Moderately Very timely timely Extent to which the idea adds Low Medium High value for its buyer Extent to which customer is Very satisfied Moderately Ambivalent or satisfied by existing products satisfied dissatisfied Degree to which the idea Substantial Moderate Small to no changes requires customers to change changes changes required their basic practices required required
Industry-Related Issues Low Moderate High Potential Potential Potential (1) (-1) (0) Number of competitors Many Few None Stage of industry life Maturity Growth Emergence cycle phase phase phase Growth rate of industry Little or no Moderate Strong growth growth growth Importance of Ambivalent Would like to Must have industry’s products have and/or services to customers Industry operating Low Moderate High margins
Target Market and Customer Issues Low Moderate High Potential Potential Potential (1) (-1) (0) Identification of target Difficult to Hazy Identified market for proposed identify new venture Ability to create Unable to May not be Can create barriers to entry for create able to potential competitors create Purchasing power of Low Moderate High customers Ease of making Low Moderate High customers aware of the new product or service Growth potential of Low Moderate High target market
Founder-Related Issues Low Moderate High Potential Potential Potential (1) (-1) (0) Founder’s experience in the No Moderate Experienced industry experience experience Founder’s skills as they relate No skills Moderate Skilled to the proposed new venture’s skills product or service Extent to which the new Weak Moderate Strong venture meets founder’s personal goals and aspirations Extent of the founder’s None Moderate Extensive professional and social network in the relevant industry Likelihood that a team can be Unlikely Moderately Very likely put together to launch and likely grow the new venture
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