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Feasibility Summary
The 18th Annual Edward L. Kaplan, ’71 New Venture Challenge
2013-14
Ellen Rudnick Steve Kaplan
Robert Gertner
Agenda
Review NVC
Timeline
Feasibility Summary:
Key Elements OUTSIDE-IMPACTS
Dos & Don’ts Q&A
Presentation
Review NVC
Timeline
Feasibility Summary:
Key Elements OUTSIDE-IMPACTS
Dos & Don’ts Q&A
Presentation
Agenda
Full Business Plan Due
NVC & SNVC Timeline
JAN FEBRUARY MARCH APRIL MAY JUNE
S/NVC Feasibility Summaries Due
Feb 10
S/NVC Phase Two Teams Announced
Feb 27
Phase Two NVC Orientation
Mar 4
Phase 2 SNVC Orientation
Mar 5
Developing a New Venture
Course Mar 31
SNVC Finalists Announced
May 21
NVC Finalists Announced
May 23
New Social Venture Course
Mar 31
SNVC Finals May 27
NVC Finals May 29
May 2
Entrepreneurship.uchicago.edu
Upcoming Events
Review NVC
Timeline
Feasibility Summary:
Key Elements OUTSIDE-IMPACTS
Dos & Don’ts Q&A
Presentation
Agenda
Feasibility Summary Key Elements
The Company’s objective is to develop non invasive medical diagnostic tests. The first application is for using a proprietary saliva collection device to measure glucose levels in diabetics.
Example 2 The company has developed the SalivaSac™, a proprietary semi-permeable membrane that enables the collection in saliva of biochemical markers below 12 kilodaltons. The company will focus on finding those applications which meet this criteria and where there is an advantage to collecting a non invasive sample.
Example 1
What Are You Building and For Whom?
Am I solving a customer’s need or problem?
Value Proposition Customer Segments Competition Intellectu
Customer Segments Competition Intellectual Property Customer
Market Size Estimate
Who are your customers?
Who are the different groups of people or organizations you aim to reach and serve?
How do you define your market?
What is the potential market size?
29 years old
City dweller
Single
$60-80K Income
Customer Profile
Competition Intellectual Property Customer Engagement Reve
How will you win?
Who are current players in the market?
Who could be your competition in the future?
What are your competitive (dis)advantages?
How are you positioned with respect to competition?
What barriers to entry will protect you?
IP, Customer development process, etc.?
Intellectual Property Customer Engagement Revenue Model
Are there key differentiators/elements of your business worth protecting?
Is it proprietary? Are there patents?
Are there key milestones in terms of development or product testing?
What are the technology risks?
Customer Engagement Revenue Model Operations Managem
How do you communicate and get the solution to your customers?
How does the product get from my company to the customer (physical, web, mobile)?
How do you get, keep, and grow customers?
Acquisition through retention
Revenue Model Operations Management Team Progress to Da
≤ ≤ Costs to
make, sell and service
Price Perceived Value
How do you make money from each customer segment?
What will the customer pay? How do you know?
Operations Management Team Progress to Date Business Risks
What are the most important actions you take to operate and deliver your value proposition?
Production, problem solving, platform/network?
What assets are required by the business to deliver your value proposition?
Physical, intellectual property, team, financial?
What are the costs incurred creating and delivering value, maintaining relationships and generating revenue?
Fixed and variable costs, economies of scale, etc.
Management Team Progress to Date Business Risks Business Analo
Who makes up your management team? Advisors? Partners?
Who are they?
Why are they relevant for the business?
How do you plan on filling gaps?
Who are the vendors, strategic alliances, joint ventures involved in executing your business?
We currently are looking for a Director of Sales. We have identified several individuals in data/information companies also selling to the Fortune 500 companies, consulting and investment firms that would be interested once we have secured our financing.
Example 2
Frank Smith, our CTO, has extensive experience in managing and building data warehouses. He previously served as Vice President in charge of Thompson Financial’s database management systems, and worked as a consulting manager with IBM for organizations building data warehouses. Frank received a B.S. in computer science from MIT and an MBA from Chicago Booth with a concentration in operations.
Example 1
Progress to Date Business Risks Business Analogues *Social NVC*
What have you done so far? How have you tested your assumptions?
Milestones achieved
Patents, trademarks, etc.
Prototypes, Minimal Viable Products (MVPs), sales,
customer research or testimonials, letters of intent, etc.
Business Risks Business Analogues *Social NVC*
What are you worried about?
What do you plan to do about it?
Business Analogues *Social NVC* Customers vs. Beneficiaries
Who are they, and have they been successful?
How are they valued, and how did they get funded?
Have there been successful exits? Multiples?
Have similar businesses failed? Why? (Look for “corpses”)
Are there analogues in the industry or other industries that validate your business model?
*Social NVC* Customers vs. Beneficiaries Financial Strategy
For SNVC candidates, there are additional nuances to consider…
Are your customers different from your beneficiaries?
What is your financial strategy?
How will your venture create social impact?
SNVC: Customers vs. Beneficiaries Financial Strategy Social Imp
Beneficiaries and customers may or may not be the same
Provide inexpensive green-technology stoves in rural Ghana
Same
NHHH – Indian hospital that subsidizes poor through surplus from those that can afford their services
Similar
Arzu Rugs – Beneficiaries are Afghan women and their daughter; Customers are U.S. rug consumers
Different
SNVC: Financial Strategy Social Impact
Financing strategy may be more complex than a traditional venture
Describe your plan for financing in the early stages and in the long run
Sources may include combinations of:
Think about what makes your venture attractive to different financing sources
• Philanthropists • Foundations • Fees-for-service • Other earned income • Friends & family • Government grants/contracts • Social investors
• Personal resources • Financial investors (debt or
equity)
SNVC: Social Impact
An explanation of how your venture will have benefit society is an important part of the application.
What is your theory of social impact?
- How does your venture impact society? - Are you trying to solve for a market breakdown? - If you have a mission statement, this is where it belongs - For many ideas, this will be covered in the value
proposition of the core business model - For ideas that look more like traditional for-profit
ventures, a separate explanation may be useful
- Some idea about how you will measure social impact is a useful part of the feasibility study, but not essential.
Review NVC
Timeline
Feasibility Summary:
Key Elements OUTSIDE-IMPACTS
Dos & Don’ts Q&A
Presentation
Agenda
Evaluating a business plan Steve Kaplan’s framework for
How will angels and VCs evaluate a business plan or opportunity? “ ”
When I look at an opportunity, I use the following framework:
OUTSIDE- IMPACTS
Opportunity, Uncertainty, Team, Strategy, Investment, Deal, Exit
OUTSIDE- IMPACTS
(O) Opportunity: Is this a positive present value opportunity? (Does it have IMPACTS?)
(I) What is the idea/industry? (M) Is the target market large enough to support substantial growth/valuation? (P) Why does the opportunity generate a positive present value? What is unique? (A) Acceptance: Will customers in that market accept/buy this new product/service? (C) Why won't the value be competed away? (T) Why is this a good time to enter? (S) Speed? How quickly can this be implemented?
OUTSIDE- IMPACTS
(O) Opportunity: Is this a positive present value opportunity? (Does it have IMPACTS?)
(I) What is the idea/industry? Explain the idea/opportunity clearly and succinctly What problem does it solve? What is the pain point
(M) Is the target market large enough to support substantial growth/valuation? How large is the overall market? How large is the market segment you are targeting?
• Who are the key customers? • How many are there? • What will they spend? • Provide solid support for your analysis.
Are there additional opportunities?
OUTSIDE- IMPACTS
(O) Opportunity: Is this a positive present value opportunity? (Does it have IMPACTS?)
(P) Why does the opportunity generate a positive present value? What is unique? What is differentiating? The answer to this should be implicit in other parts of
OUTSIDE-IMPACTS. But, doesn’t hurt to be explicit. • Why will you make money? • How will you make money? • What is your “edge?”
• First-mover advantage? • Network effect • Switching costs • Execution
• Technology? • Advantage? • Defensible?
OUTSIDE- IMPACTS
Is this a positive present value opportunity? (Does it have IMPACTS?)
(A) Acceptance: Will customers in that market accept/buy this new product/service? Who is the customer in the target segment? Put yourself in shoes of a
customer. • How does the customer spend the day
Why will they buy your product/service? • What do they buy now? • Why do they buy what they do now? • Why will they switch from their current product?
How will you get to the customers? • Direct Salesforce? Resellers? Distributors?
• How much of each? How quickly? • Advertising • How much will it cost? • Common to underestimate time/cost
How will you keep customers? How much will it cost?
OUTSIDE- IMPACTS
Is this a positive present value opportunity? (Does it have IMPACTS?)
(C) CUSTOMERS, CUSTOMERS, CUSTOMERS Get beta sites, beta customers, etc. VC pitches
OUTSIDE- IMPACTS
(C) Why won't the value be competed away? What will existing competitors do? What will other new entrants do? How will you respond?
(T) Why is this a good time to enter? Why hasn't the opportunity been taken already?
(S) Speed? How quickly can this be implemented?
Good opportunities have positive IMPACTS. If the opportunity does not have IMPACTS, then it should not be pursued.
OUTSIDE- IMPACTS
(U) Uncertainties: What are major uncertainties? Possible uncertainties:
• Market size • Customer acceptance • Customer approach • Competition • Management team • Potential real options
Which uncertainties can be managed so that outcome is more likely to be favorable? • Choice of initial customers? Choice of investors?
How do the answers affect the opportunity?
OUTSIDE- IMPACTS
(T) Team Can management team implement opportunity?
• How does previous experience relate to opportunity? • How “hungry” is the management team?
If management pieces are missing: • What pieces are missing? • What type of person will you look for to fill them? • How will you find that person?
For VCs, a good team and a good opportunity are necessities.
(S) Strategy Is strategy consistent with opportunity, uncertainty, team, and
exit?
OUTSIDE- IMPACTS
(I) Investment Requirements Forecasts and cash flow requirements Forecasts:
• What do investors look for? • Possibility of 10x return • Credible forecasts
• Growth, margins, exit value • Analogs
What do investors do? • Cut forecasts “in 1/2,” “by 2/3” • Push out forecasts
What should you do? • Plausible best-case scenario
OUTSIDE- IMPACTS
(D) Deal Does deal structure provide appropriate incentives?
• Is the deal priced attractively? • Do key individuals have incentives to do deal? • Do key individuals have incentives to make deal work?
Does deal structure provide / ensure appropriate governance?
Does deal structure help manage the uncertainties?
(E) Exit Can investors exit the deal? How?
• Is the deal priced attractively?
If an investment does not pass the OUTSIDE tests, leave it outside.
OUTSIDE- IMPACTS
A website for finding and ordering from restaurants that deliver. have to call every restaurant in city to get menu / ask if and where they deliver. Info is hard to collect. M – Not a huge market, but large enough.
Make money off on-line ordering. A -
Useful for consumers. Key issue is whether you can get them economically.
Restaurants follow once consumers are engaged. P -
First-mover advantage / network effect for consumers. Costly and time intensive to get menu / delivery info. Consumers have no reason to switch because restaurants pay.
GrubHub Example
iPhone App to exchange contact info. Uses unique identification of two phones from:
GPS Synchronicity of Bump
A - Consumers liked it / found it useful Huge piece of luck when billionth iPhone App
P - Network effect
But what is M? I? How do you make money?
Bump Example
Review NVC
Timeline
Feasibility Summary:
Key Elements OUTSIDE-IMPACTS
Dos & Don’ts Q&A
Presentation
Agenda
Dos and Don’ts Feasibility Summary
Avoid Clichés • “We have no competition.”
• “We are the low cost provider.”
• “We only need a 5% market share.”
• “Our numbers are conservative.”
• Don’t assume everyone reading plan has your knowledge base
• When you use an acronym, explain it the first time (TFT)
Avoid Acronyms
No Autopilot Make sure the car has a driver. Someone should be the current CEO. OK to say you will find a permanent/better one later.
Capture Attention • Typical VC will not read past the first
page
• Should answer the following questions in the first page
- What is the opportunity? - Why does anyone care? - How will it be achieved? - What is your unique differentiator?
YES: Middleware for wireless networks
NO: Develops and delivers an integrated suite of packaged applications for web and wireless deployment. Global enterprises use these applications to become more competitive and profitable by establishing and sustaining high-yield interactions and transactions with customers, suppliers, and employees.
Be Clear and Concise
Review NVC
Timeline
Feasibility Summary:
Key Elements OUTSIDE-IMPACTS
Dos & Don’ts Q&A
Presentation
Agenda
Q&A
NVC Sponsors
Edward L. Kaplan, ’71, founder and chairman emeritus, Zebra Technologies
Bronze Sponsor
Elizabeth Jean Pitt, ’02
SNVC Title Sponsor
John Edwardson, ’72, retired chairman and chief executive of CDW
NVC Sponsors
The End
PENDING
