Risk analysis tom kosnik_cleantech_open_academy_2012

Risk Analysis: “De-Risking” your New VentureTom Kosnik, Fenwick and West Consulting Professor

Stanford Technology Ventures ProgramStanford School of Engineering

2 Cleantech Open Confidential Information – All Rights Reserved

Risk Management Agenda

Gear Up: A System to Create New Markets or Disrupt Existing Markets

Five Sources of Risk that May Threaten any New Venture

How to Identify the Risks

Risk Mitigation: How to Prevent the Risks

Contingency Planning: What’s your Plan B if the S&!# Hits the Fan?

How to Prioritize the Risks

How to Build and Validate your Risk Management Dashboard

Exercise


GEAR UP: Your Best Idea Ever LENA RAMFELT

JONAS KJELLBERGTOM KOSNIK

BASED ON THE BETA VERSION OF THE BOOK

RISK MANAGEMENT

: “DE-RISKING”

YOUR NEW VENTURE

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YOUR RISK MANAGEMENT DASHBOARD

The Risk How to avoid it?

What to do if it happens?

Probability? Severity?

YOUR OBJECTIVE IS FOR YOUR TEAM TO FILL IN THIS MATRIX. THEN VALIDATE YOUR “BEST GUESSES” WITH CUSTOMERS AND CHANNEL PARTNERS.


Five Sources of Risk that May Threaten Any New Venture

•Technology/Product Risk: •Market Risk:•Team Risk:•Financial Risk:•Legal/IP Risk:


Technology/Product Risk

• Is it a “pain killer?” Are customers actively seeking a pill for this pain?

• Has it been validated by a credible third party? Or field tested?

• What are the existing or new alternative technologies that address the same pain?

• Can it be manufactured in volume at a competitive cost?

• Is completion of development questionable? Will it slip? (of course it will)


Market Risk:

• Have you credibly identified the right first market/customer segment (“bowling pin”)

• Are there market structure issues that will prevent or seriously slow your market penetration?

• Does that segment together with subsequent customer segments amount to an attractive market size?

• Have you realistically assessed the costs of getting to the market and acquiring customers?

EarlyMarket

Chasm

Tornado

Main Street

Bowling AlleySources: Moore (1991, 2002), Crossing the Chasm, Moore (1995, 2002), Inside the Tornado.


Team Risk:

• What “talent gaps” in the founding team must be filled to reach critical milestones in the next 18 months?

• How do you intend to cost effectively fill them (hiring may not be the answer).

• Are the founders coachable? Will they listen to those more seasoned than they?


Financial Risk:

• Have you based your cost model on cost estimates from suppliers in your value chain?

• Have you validated your estimates for customer acquisition costs by talking with potential customers and channel partners?

• Have you made credible estimates of the funds required to complete development and other milestones?

• Are your assumptions about your sources of capital realistic, given your projected growth?


Legal/IP Risk:

• Can we create, defend and leverage intellectual capital?

• Have you searched for prior art? How reliably?

• Are there laws or government policies that threaten sales?

RISKS – TECHNOLOGY/PRODUCTDefine the RISK:

How to avoid it? What to do if it happens?

Probability? Low 1 2 3 4 5 6 7 8 9 10 HighSeverity? Low 1 2 3 4 5 6 7 8 9 10 High

RISKS – MARKETDefine the RISK:



RISKS – TEAMDefine the RISK:



RISKS – FINANCIALDefine the RISK:



RISKS – LEGAL/INTELLECTUAL PROPERTY

Define the RISK:




How to Prioritize the Risks

• Gather your new venture team and any mentors/advisors• Review the five sources of Risk• Ask if there is a “Sixth Source” of Risk for your venture• Using the forms, have each person write down the major risks in each source of

risk.• Have each person identify how to prevent the risk, and what to do if the S@#!T

hits the fan.• Using a 10 point scale, rate the likelihood each risk will occur• Using a 10 point Scale, rate the severity of each risk’s impact• Have your entire team compare the results of their individual risk brainstorms.

Identify the highest priority risks.• Fill out Risk Management Dashboard for highest priority risks.

YOUR RISK MANAGEMENT DASHBOARD

The Risk How to avoid it?

What to do if it happens?

Probability? Severity?

LIST YOUR RISKS IN PRIORITY ORDER BASED ON YOUR TEAM BRAINSTORM. VALIDATE YOUR “BEST GUESSES” WITH CUSTOMERS & CHANNEL PARTNERS!

Exercise• Founders huddle with any mentors/advisors• Ask if there is a “Sixth Source” of Risk for your venture• Using the forms write down the major risks from each source. • Identify how to prevent the risk, and what to do if the S@#!T

hits the fan.• Using a 10 point scale, rate the likelihood each risk will occur• Using a 10 point Scale, rate the severity of each risk’s impact• Limit the time for individual brainstorm to 10 minutes. Spend

much more time later…• Compare the results of your individual risk brainstorms.

Identify the highest priority risks.• Fill out Risk Management Dashboard for highest priority risks.• Prepare to validate with customers/partners and iterate!!!

THANK YOU !!!

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Tom KosnikFenwick and West Consulting Professor, Stanford Technology Ventures Program

iPhone: +1-650-450-3330Skype: thomas.j.kosnik

PLEASE DON’T SEND ME EMAIL!

Risk analysis tom kosnik_cleantech_open_academy_2012

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