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HOW TO WRITE A
FEASIBILITYSUMMARY
The 16thAnnual Edward L. Kaplan, 71New Venture Challenge 2011-12
Steve KaplanEllen Rudnick
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REVIEW NVC TIMELINE
FEASIBILITY SUMMARY: KEY ELEMENTS
OUTSIDE - IMPACTS
DOS & DONTS
Q&A
FAST PITCH
CASUAL NETWORKING
AFTERWARDS
PRESENTATION
AGENDAWORKSHOP
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Phase 1 FeasibilitySummaries Due
Phase 11 TeamsAnnounced
Phase II OrientationHarper Center
Developing a NewVenture
(Bus 34104)begins
JANUARY FEBRUARY MARCH APRIL MAY
Full BusinessPlans Due
TODAY
FinalistsAnnounced
NVC FinalsHarperCenter
Phase I Phase II Finals
Feb 6
Feb 23
Feb 28
Mar 26
April 27
May 21
May 24
TIMELINENEW VENTURE CHALLENGE
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Phase 1 Feasibility
Summaries Due
JANUARY FEB
TODAY
Phase I
Feb 6
WEDNESDAY, JAN 11 4:30-5:30PMPolsky Center Coffee Hour
TUESDAY, JAN 17 12:00-1:00PMCreating an MVP for the NVC (Avi Stopper)
WEDNESDAY, JAN 18 4:30-5:30PMPolsky Center Coffee Hour
TUESDAY, JAN 24 4:45-6:15PMEVC Feasibility Summary Working Session
WEDNESDAY, JAN 25 4:30-5:30PMPolsky Center Coffee Hour
WEDNESDAY, FEB 1 4:30-5:30PMPolsky Center Coffee Hour
DEADLINEBETWEEN NOW & THE
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COMPANY MISSION MARKET INFORMATION
PROPRIETARY ASPECTS
REVENUE MODEL
OPERATIONS MODEL
FEASIBILITY SUMMARYKEY ELEMENTS
MANAGEMENT TEAM
FINANCIAL INFORMATION
PROGRESS TO DATE
BUSINESS RISKS
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What are you selling?
What problem are you solving?
How big is the problem?
Why should an investor read any further?
MISSIONKEY ELEMENTS
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MISSION EXAMPLESKEY ELEMENTS
The company has developed the SalivaSac, a proprietary semi-permeable membrane that enables the collection in saliva ofbiochemical markers below 12 kilodaltons. The company willfocus on finding those applications which meet this criteria andwhere there is an advantage to collecting a non invasive sample.
The Companys objective is to develop non invasive medical
diagnostic tests. The first application is for using a proprietary salivacollection device to measure glucose levels in diabetics.
ex 1
ex 2
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How do you define yourmarket?
Who is the customer?
What is the potential market size?
How much do costumers buy?
MARKET INFOKEY ELEMENTS
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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 tocompetition?
COMPETITIONKEY ELEMENTS
What barriers to entry will protect you?
o IP, Customer development process, etc.?
How will you win?
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Describe technology if there is a key differentiator /element of plan
Is it proprietary? Are there patents?
Are there key milestones in terms of development orproduct testing?
What are the technology risks?
TECHNOLOGYKEY ELEMENTS
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What is your revenue model & go to marketstrategy?
How will you make money?
Why will the customerbuy your product/service?
What will the customerpay?
GO TO MARKETKEY ELEMENTS
o Why are you sure the customer will pay this?
o Have you spoken to customers?
How many customers will you get?
How will you get to the customer?
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OPERATION MODELSKEY ELEMENTS
How will you deliver this product/service?
Do the costs of providing thisproduct/service provide a sufficientprofit?
Are there execution risks?
Outsourced vs. in-house resources?
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MANAGEMENT TEAMKEY ELEMENTS
Who makes up your team? Advisors? Partners?
Who are they?
Why are they relevant for this business?
How do you plan on filling these gaps?
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MANAGEMENT TEAMKEY ELEMENTS
e.g.Frank Smith, our CTO, has extensive experience in managing and
building data warehouses. He previously served as Vice President incharge of Thompson Financials database management systems,and worked as a consulting manager with IBM for organizations
building data warehouses. Frank received a B.S. in computerscience from MIT and an MBA from Chicago Booth with aconcentration in operations.
e.g.
We currently are looking for a Director of Sales. We have identifiedseveral individuals in data/information companies also selling to theFortune 500 companies, consulting and investment firms that wouldbe interested once we have secured our financing.
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PROGRESS UP-TO-DATEKEY ELEMENTS
Milestones that have been achieved
Patents, trademarks that have been filed
Testing your business assumptions:
Prototypes, MVPs, websites, focus groups,
beta customers, etc.
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BUSINESS RISKSKEY ELEMENTS
What are you worried about?
What do you plan to do about it?
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COMPARABLESKEY ELEMENTS
Are there comparables in the industry or otherindustries that validate your business model?
Who are they and have they been successful?
How are they valued and how did they getfunded?
Have there been successful exits? Multiples? Have similar businesses failed? Why? (look for
corpses)
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A FRAMEWORK FOR
EVALUATING A BUSINESS PLAN
STEVE KAPLAN
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How Will Angels and VCs
Evaluate a Business Plan orOpportunity?
When I look at an opportunity, I usethe following framework:
OUTSIDE- IMPACTS
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Opportunity, Uncertainty, Team,
Strategy, Investment, Deal, Exit.
OUTSIDE -IMPACTS
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(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 substantialgrowth/valuation?
(P) Why does the opportunity generate a positive presentvalue? 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
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(O) Opportunity: Is this a positive present valueopportunity? (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 substantialgrowth/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
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(O) Opportunity: Is this a positive present valueopportunity? (Does it have IMPACTS?)
(P) Why does the opportunity generate a positive presentvalue? What is unique? What is differentiating?
The answer to this should be implicit in other parts of
OUTSIDE-IMPACTS. But, doesnt 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
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Is this a positive present value opportunity? (Does it haveIMPACTS?)
(A) Acceptance: Will customers in that market accept / buythis 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
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Is this a positive present value opportunity? (Does it
have IMPACTS?)(C) CUSTOMERS, CUSTOMERS, CUSTOMERS
Get beta sites, beta customers, etc. VC pitches Kathryn Gould
OUTSIDE-IMPACTS
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(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
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(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 thatoutcome is more likely to be favorable? Choice of initial customers? Choice of investors?
How do the answers affect the opportunity?
OUTSIDE-IMPACTS
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(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 arenecessities.
(S) Strategy Is strategy consistent with opportunity, uncertainty, team,and exit?
OUTSIDE-IMPACTS
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(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 , by 2/3
Push out forecastsWhat should you do? Plausible best-case scenario
OUTSIDE-IMPACTS
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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 theOUTSIDE tests, leave it outside.
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GrubHub.coma website for finding and ordering from restaurants that deliver.
have to call every restaurant in city to get menu / ask if and wherethey 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.
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BumpiPhone App to exchange contact info.
Uses unique identification of two phones from:GPS
Synchronicity of Bump
A -
Consumers liked it / found it usefulHuge piece of luck when billionth iPhone App
P -
Network effect
But what is M? I? How do you make money?
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DOS AND
DONTS
DOS & DONTS
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AVOID CLICHSDO S & DON TS
We have no competition.
We are the low cost provider.
We only need a 5% market share.
Our numbers are conservative.
DOS & DONTS
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AVOID ACRONYMSDO S & DON TS
Dont assume everyone reading plan
has your knowledge base
When you use an acronym, explain it
TFT (the first time)
DOS & DONTS
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NO AUTOPILOTDO S & DON TS
Make sure the car has a driver.Someone should be the current CEO.
OK to say you will find a permanent /better one later.
DOS & DONTS
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BE CLEAR & BRIEFDO S & DON TS
Yes:Middleware for wireless networks
No:Develops and delivers an integrated suite ofpackaged applications for web and wirelessdeployment. Global enterprises use these
applications to become more competitive andprofitable by establishing and sustaining high-yieldinteractions and transactions with customers,suppliers, and employees.
DOS & DONTS
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CAPTURE ATTENTIONDO S & DON TS
Typical VC will not read past the firstpage
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?
DOS & DONTS
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EXAMPLES & EXPERIENCESDO S & DON TS
Provide tangible examples / experiences whereverpossible:
Reference customerso Actual customers best. Potential customers next best.
o TALK TO CUSTOMERS. Describe what you discovered.o There is nothing more important than a customer! Focus
on how you are going to get that first customer.
Credible partners, suppliers, advisors, etc. Identify comparable businesses or business models
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IN CLOSING
NEXT STEPS
RESOURCES
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CHICAGONVC.COMRESOURCES
Link to key dates,
deadlines, and
events for the
2011-1\2 New
Venture Challenge
Check here forthe latest news on
current & former
NVC Companies
Link to onlineteam building
site where
people can post
ideas and team
openings
Link tosample
business plans,
NVC classworkshops,
sample equity
agreement
Link to officialrules and
regulations,sample
feasibility
summaries
RESOURCES
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LINKD.IN/NVCIDEASRESOURCES
Get feedbackon a new
business idea!
Find teammembers for
your NVCEntry!
Share yourresume &
expertise to let
other studentsfind you!
TONIGHT
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FAST PITCH & NETWORKINGTONIGHT
30 mins of pitches
Casual Networking
Get food, come back
o Around the room, 45 sec per pitch
TONIGHT
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FAST PITCH & NETWORKINGO G
Your Name:
Company name:
Short Description:
Needs:
John Smith
Banana Hats
We make hats for monkeys
Finance Guru, Developer
In 45 seconds, say: