1. Introduction to theCritical Factor Assessment (CFA)and theCritical Factor Assessment Snapshot(CFA Snapshot) CIC 2013

2. The CFA Diagnostic assessment tool designed tohelp entrepreneurs / advisors identify risks Deployed over 20,000 times, andretrospectively evaluated for validity Identifies specific risks that must beaddressed before proceeding Covers 42 risk factors that have beenshown to link to business failureCIC 2013 3. The CFA Snapshot Uses a factor analysis to link those 42critical factors to eight underlying (oraggregated) Factors Focuses on identifying risks of failing Requires the entrepreneur to show thatthey have understood each risk andmanaged (or mitigated it) to the point thatit does not increase the risk of failureCIC 2013 4. CFA / CFA Snapshot designed to help entrepreneur Identify and focus on critical business risks Develop mitigation strategies for high risks Decide to continue, or not Save money, and timeIf tool helps entrepreneur decide if they arewasting their time it can help governmentsdecide when to invest.CIC 2013 5. Differences between CFA and CFA Snapshot CFA usually done by linking business plan to 42critical factors Snapshot requires entrepreneur identify /assess/mitigate eight groups of risk factors CFA provides direct guidance to entrepreneurhow they might mitigate risks Snapshot highlights if they have providedevidence that risk not criticalCIC 2013 6. Role of CFA Snapshot Assessor Understand each of eight risk factor groups Examine entrepreneur response to look forevidence of risk levels Risks need to be identified and addressed byentrepreneur (not by assessor) The absence of sufficient information for a factoris seen as a high risk Ratings for each factor are A,B,CCIC 2013 7. Use traffic light analogy for each risk factorA. Limited or little risk (green light)B. Acceptable or limited risk (amber light)C. High risk or fatal flaw (red light)An opportunity that receives a red light on anyone of the eight factor groups MUST addressthis risk before continuing to move forward.CIC 2013 8. Green LightProceedCIC 2013 9. Amber LightAdvance withcaution CIC 2013 10. Red LightStop until riskcan be reducedto acceptablelevelCIC 2013 11. Overview of Eight Critical Snapshot Factors Technology Features and Benefits Technology Market Readiness Technology Barrier to Entry Market - Adoption Market Channel to Market Market - Size Management - Entrepreneur experience Business Model - Financial viability CIC 2013 12. Overview of 42 Critical FactorsTechnical ConsiderationsBusiness ConsiderationsTechnical Feasibility Business ManagementPracticality of Functionality ExperienceComplexity of Outstanding Market ComplexityDevelopment Product Extension PotentialTechnology Position inAvailability of ResourcesLifecycle Cost of ProductionApplication of Technology toCost of SalesCurrent MarketCost of ServiceSafety of TechnologyThreat of Existing CompetitionEnvironmental ImpactThreat of Copycat CompetitionVisibilityLicensing (Sale) OpportunityCommercialization CostsProfitability per Unit CIC 2013 13. 42 Critical Factors (Contd)Sales Considerations Risk ConsiderationsPotential Market SizeRegulationIntegration Ease DevelopmentTrend of DemandDependenceDuration of Demand ProtectionDegree of Need/Problem Sales Cycle LengthUrgency of NeedCompetitionIndustry Attitude and Legacy AdoptionPerformanceSustainabilityQualityCostDistribution OptionsAccess to DistributionCIC 2013 14. Technology:Features and BenefitsWhat evidence can you provide that the features and benefits thatyour solution offers, in comparison with using either existingsolutions or the option of not changing from current practice,provide a compelling enough reason for the customer to switch toyour product or service? A. Customers already involved in testing/evaluating product, andconfirm that the proposed features are sufficient to make themchange from current practice. B. Evidence provided that features offered significant advantageover current solutions, but no direct commitment from potentialcustomers to the proposed product or service. C. Proposed product or service features and benefits competitivewith current offerings, or those being developed by competitors..CIC 2013 15. Technology: Market ReadinessWhat evidence can you provide that there is limited technologyrisk (including functionality, performance andmanufacturability/supply chain risk) in deploying your solution inthe marketplace, and that you are almost ready to deliver tocustomer?A. Evidence is available that show product or service functions to specification, meets customer performance expectations, and major manufacturing/supply chain issues have been addressed.B. Evidence of product functioning is available, where performance meets specification. Detailed implementation plan to address manufacturing/supply chain issues has been developed.C. Product or service concept has been completed, but further research or testing is required to confirm functionality/performance. Lack of evidence of supply chain in place.CIC 2013 16. Technology: Barrier To EntryIs there evidence of the presence of a suitable barrier to entry(i.e. patent, first mover advantage, brand, strategic customer)?A. Evidence that product or service has received a patent, or embeds unreplicable proprietary technology. Alternatively, evidence that business offers a unique feature (i.e. brand, first mover advantage, or business model), which creates a significant entry barrier for competitors.B. Patent has been applied for, or evidence of strong intellectual property, a brand, a lead customer or a business model that makes it challenging, but not impossible, for others to replicate.C. The product or service or the business model does not readily offer a mechanism to reduce the likelihood that competitors will be able to easily replicate functionality and value proposition. CIC 2013 17. Market AdoptionIs there a first customer in the target market who has demonstrateda willingness to change their behavior in order to purchase yourproduct or service when it becomes available? A. Evidence provided that potential customers willing to changecurrent practices and adopt /purchase the product/service assoon as it becomes available, despite competitor pressures. B. Primary market research has confirmed a real and specificmarket for the product or service, indicating a willingness tobecome a first customer. C. Limited independent market validation of the product or service,either from potential first customers or their supply chain.CIC 2013 18. Market - Distribution/ Channel to MarketIs there a realistic and qualified distribution channel identifiedand in place?A. An identified distributor or channel partners has committed to participate in the supply chain as soon as the product or service is market ready.B. A number of potential distributor or channel partners have been identified, but there is no evidence of a formal agreement.C. There is little evidence of understanding the challenges of developing a distribution partner or channel strategy, despite acknowledging the need for one.CIC 2013 19. Market - SizeIs the overall market size, and anticipated market share,realistic, and sufficient to generate envisaged revenues andhence profit levels? A. Evidence is provided that market potential for product orservice is large, (i.e. > $20 million), and nature ofmarketplace such that company can achieve significantmarket share (i.e. > 20%) B. Evidence is provided of substantive market potential (i.e.> $5 million), with a high likelihood of achieving highmarket share (i.e. > 10%) C. No evidence of size or market, or likelihood of achievinghigh market share. CIC 2013 20. Management and Entrepreneurial ExperienceDo founders or member of the ventures management or advisoryteam have relevant (business, technical) experience that can bedirectly applied to the challenges facing the venture? A. Members of the venture team have deep and significantrelevant experience in the technology, market/industry or theestablishment of an early stage venture B. Members of the venture team have limited experience in oneaspect of the technology, market/industry or the establishmentof an early stage venture C. Members of the venture team have limited relevant experiencein the technology, market/industry or the establishment of anearly stage venture CIC 2013 21. Business Model Financial ExpectationsDo the cash flow projections presented provide evidence that thecompany can achieve persuasive cash-flow neutrality, eitherbased on investment, loans or income from operations? A. Evidence is presented that combination of external funding andcash flow from operations can support the growth of business,where sources of external funding are identified and realistic. B. Evidence is presented that combination of initial funding canfund the venture until it can achieve positive cash flow fromoperations. C. Financial projections are not provided in sufficient detail, orshow a cash whole before positive cash flow from operationscan be achievedCIC 2013 22. Guiding Innovation to be Market DrivenStatistics and experience demonstrate that companies commercializing a product or service with a market-driven process fare significantly better than those who dont.Typical benefits include:faster time to marketreduced development costsgreater user acceptanceinvestor confidence and buy-in, and ultimatelygreater sales potentialThanks for listening CIC 2013