New Ventures: Opportunity Evaluation
The student team will conduct an evaluation of a technology or business idea. At the end of the course, the team will make a recommendation concerning whether the business idea has commercial potential and merits further investment of resources.
The NV: Opportunity Evaluation is a course structure for executing the first step in creating a new venture.
In order for a group of students to enroll in a particular instance of this course of work, the following conditions must be satisfied:
The course is organized to allow teams to follow a structured process in doing their analysis and making a recommendation. Five major questions guide the work of the student teams.
Is there a basis for sustainable competitive advantage? Competitive advantage is generally taken to consist in a set of assets that are valuable, rare, inimitable and non-substitutable (VRIN). Competitive advantage is sustainable if it does not dissipate over a relevant time horizon. In technology based companies, competitive advantage is usually grounded in protected intellectual property. If there is indeed a market opportunity and a feasible solution, then a venture can be created that will capitalize on that opportunity. This venture should create an attractive return for investors. This is the case that the student team will have to make.
Can a team be assembled that can execute a commercialization plan? Professional investors often say that the most important criterion in evaluating an investment opportunity is the team. That is, they invest in people rather than business ideas. Alternatively, investors will say that good ideas are plentiful but good people are rare. The student team will analyze the skills, experiences, relationships, etc. that would be needed successfully to capitalize on their business idea. The team will also perform an analysis of the availability of the relevant talent and propose a strategy and timeline for assembling the right team.
Is the risk / reward profile sufficiently attractive to merit investment of capital?
As the final step in their analysis, the student team will create a small set of scenarios of the projected financial performance of the venture. They will articulate the assumptions that drive these various financial models and will make a case for the likelihood of the various outcomes.
The team will create the following deliverables:
The instructor will grade the team based on the set of deliverables. 75% of the grade will be based on the written report and 25% on the final presentation.
1. Organize: divide responsibilities / create a plan / track your progress.
2. Get started early - pace yourselves – stick to your plan.
3. Get started early on the primary market research – this will always take longer than you think. You need to identify people to talk to, make contact, set up conversation, etc., and it does not always work out.4. Decide what is critical to making a go/no go decision and focus on that. (How the process outline is to be tailored to this particular opportunity: what is the scope of the analysis and what are the areas of particular focus?)
5. Decide how you will make decisions in advance – don’t wait for an issue to arise.
6. Be open and flexible – your specific idea may not be the ultimate idea.