Startnowhow - Opportunity Recognition and Evaluation
Transcript of Startnowhow - Opportunity Recognition and Evaluation
INTR
OD
UC
TION
StartNowHow
• Open seminar series for active and prospective entrepreneurs
• 10 sessions on monthly basis until summer 2015
• Covers relevant theoretical and practical aspects of entrepreneurship
• Based on lecture „entrepreneurship“ @Bogazici University
• Based on experiences of entrepreneurs, investors, mentors and consultants
• Each session with guest speaker (entrepreneurs, investors, mentors, etc.)
• Each session will end with test elevator pitch by seminar participant
• Seminar materials can be downloaded after the event
• Mondays 17.15h – 19.30h
• Next session: Mon, January 12th, 2015
• TOPIC: Planning, testing and developing a business model
• SPEAKER: Ömer Erkmen, Ideasoft / Mekanist, Angel Investor
• Certificate provided for participants joining at least 7/10 sessions
• Early registration for each session required (eventbrite), capacity 50 people!
• Priority for regular participants
Startnowhow – Seminar 3 08.12.2014 2
INTR
OD
UC
TION
StartNowHow - Seminar Topics (preliminary)
1. Mon, 20.10.: The entrepreneurial ecosystem in Turkey
2. Mon, 10.11.: Entrepreneurship as a profession
3. Mon, 8.12.: Opportunity recognition and evaluation
4. Mon, 12.1.: Planning, testing and developing a business model
5. Tbd: Market and competitor research
6. Tbd: Financial planning for startups
7. Tbd: Marketing planning and control – the role of key performance indicators
8. Tbd: Funding the startup – stage financing for ventures
9. Tbd: The investment process – pitching, negotiations and termsheet
10. Tbd: Success and failure as an entrepreneur
Startnowhow – Seminar 3 08.12.2014 3
OP
PO
RTU
NITY R
ECO
GN
ITION
Paths of Idea Generation
• The Alertness Path:
• Discovery by constant alertness, constant scanning of environment for opportunities
• Source of ideas: Environment
• Source of differentiation: Learning
• Process: Spontaneous
• Basis of discovery: Subconscious
• Fit with entrepreneur: Typically poor
• The Search Path:
• Discovery by systematic search for a problem solution
• Source of ideas: Information channel
• Source of differentiation: Knowledge
• Process: Deliberate
• Basis of discovery: Conscious
• Fit with entrepreneur: Typically strong
• Often, idea generation is a mix of both paths
• Ideas are often generated by a combination of play, improvisation, and observation
• (from: Bygrave / Zacharias, The Portable MBA in Entrepreneurship, pp.30-31)
08.12.2014 4 Startnowhow – Seminar 3
OP
PO
RTU
NITY R
ECO
GN
ITION
Creativity – The Fear Factor
08.12.2014 5 Startnowhow – Seminar 3
Source: Bygrave / Zacharakis, The Portable MBA in Entrepreneurship, p. 37
OP
PO
RTU
NITY R
ECO
GN
ITION
The Seven Sources for Innovative Opportunities
• The Unexpected
• Example: Unexpected success of IBM PC
• The Incongruous
• Examples: Invention of container ships / roll-on-roll-off ships, overnight package delivery
• Process Needs
• Examples: McDonalds, microwave ovens
• Industry and Market Structures
• Examples: Printing industry, ERP software, media industry
• Demographics
• Examples: Health care industry, universities in Turkey
• Changes in Perception
• Examples: Fashion industry, organic food
• New Knowledge
• Examples: Electricity, light bulb, internet, mobile phone, robotics, ...
• Source: Drucker, Innovation and Entrepreneurship, pp.27-117
08.12.2014 6 Startnowhow – Seminar 3
OP
PO
RTU
NITY E
VA
LUA
TION
Characteristics of Superior Business Opportunities
• Added value
• Venture creates or adds significant value to a customer or end user
• Venture solves a significant problem
• Venture adds value by solving a significant problem, removing a serious pain, or meeting a significant want or need
• Someone is willing to pay a premium for solving this problem
• Venture has robust market, margin, and money-making characteristics
• Large enough market (min. 50 Mio $)
• High growth expectation (min. 20% p.a.)
• High gross margins (min. 40%)
• Strong and early cash flow (recurring revenue, low assets, low working capital)
• High profit potential (min. 10% - 15% after tax income)
• Attractive, realizable return for investors (Internal Rate of Return IRR min. 25% - 30%)
• Venture fits to skillset
• Good fit with founder(s) and managment team skills for that time and marketplace
• Attractive risk-reward balance
• Source: Timmons / Spinelli, New Venture Creation, p.150
08.12.2014 7 Startnowhow – Seminar 3
OP
PO
RTU
NITY E
VA
LUA
TION
Sustainable Competitive Advantage
• Necessary: Resource bundle that is valuable, rare and inimitable
• Resources are all inputs to production process – land, raw materials, machinery, other fixed assets, patents, licenses, employee skills, management skills, knowledge, ...
• Resource bundle is valuable when it enables the firm to pursue opportunities, neutralize threats, and offer products and services that are valued by customer
• Resource bundle is rare when it is possessed by few, if any, (potential) competitors
• Resource bundle is inimitable when replication of this combination of resources would be difficult and / or costly for (potential) competitors.
• Core resource: Entrepreneurial knowledge
• In mind of entrepreneur, or in collective mind of employees / management team
• Source: Market knowledge
• Source: Technology knowledge
• Source: Hisrich / Peters / Shepherd, Entrepreneurship, pp.67-70
08.12.2014 8 Startnowhow – Seminar 3
OP
PO
RTU
NITY E
VA
LUA
TION
Opportunity Screening Process Funnel
08.12.2014 9 Startnowhow – Seminar 3
Source: Harper, Extraordinary Entrepreneurship,, p.127
OP
PO
RTU
NITY E
VA
LUA
TION
Classification Guidelines for the VOS Indicator
08.12.2014 10 Startnowhow – Seminar 3
Source: Leach / Melicher, Entrepreneurial Finance, p.55
OU
TLOO
K StartNowHow - Outlook
• Today‘s materials will be made available to participants for downloading
• Next Seminar: „Planning, testing and developing a business model“
• Guest Speaker: Ömer Erkmen, Ideasoft / Mekanist, Angel Investor and Mentor
• Monday, 12.1.2015, 17.15 – 19.30h
• Don‘t forget to register early (eventbrite) - capacity 50 people!
• Priority for participants / registrants from today‘s session
• General rule: Allocation of seats according to participation
• Regular participation = certificate (70% participation)
• Be prepared to pitch!
Startnowhow – Seminar 3 08.12.2014 11
• Status
• Idea Stage, Product / Service not yet / not fully developed
• No / limited market test, no users, no customers yet
• Limited business know-how, limited knowledge about market, monetization
• Legal unit not yet created, organization not defined
• Too developed for continuing in incubation center, too underdeveloped for angel investment
• Special Needs – “Continued incubation”
• Development and testing of minimum viable product, support for product / service development
• Support for market analysis, market testing, initial market access
• Mentorship (not only monthly but weekly or more frequent support), continuous management consulting needed
• Limited financial support (normally up to 50,000 TL)
• Setup of legal unit and establishment of backoffice services should only happen if startup progresses to next round (seed round)
• If promising, preparation of investor pitch, access to investors for seed round PR
E-SE
ED P
RO
GR
AM
Characteristics of Early Stage Startups
12 Startnowhow – Seminar 3 08.12.2014
STAR
TNO
WH
OW
PR
E-SEED
TR
AC
K
PR
E-SE
ED P
RO
GR
AM
BIC Angel Support
13 Startnowhow – Seminar 3 08.12.2014
STAR
TNO
WH
OW
PR
E-SEED
TR
AC
K
PR
E-SE
ED P
RO
GR
AM
BIC Angel Support
08.12.2014 14
Source: Timmons, J.A./Spinelli, S., New Venture Creation, p.433
Startnowhow – Seminar 3
STAR
TNO
WH
OW
PR
E-SEED
TRA
CK
PR
E-SE
ED P
RO
GR
AM
Investor Role in STARTNOW Pre-Seed Track
• Passive
• 1-2 times a year.
• You invest with others and receive information on the company like all other shareholders. A shareholder meeting is usually held once a year.
• Active
• Average 0.5-2 days a month alone or as a group.
• Usually as a Board Member or Advisor. When you make the investment you have to decide whether or not you want to be on the Board and negotiate it as a term.
• Very Active
• 1 day a week alone or as a group.
• Usually playing an operational role. Need to discuss upfront if you will be compensated for it and if yes, how much and split of cash and equity.
• Adopted from: GoBeyond, Early Stage Investing, Business Angel Training, September 2012
15 Startnowhow – Seminar 3 08.12.2014
STAR
TNO
WH
OW
PR
E-SEED
TR
AC
K
PR
E-SE
ED P
RO
GR
AM
STARTNOW Pre-Seed Track
• Pre-Seed Track: The Investment Process
• Initially personal and “Convertible loan” by pre-seed investors to founders
• Investment driven by strong lead investor, “personalized deals”
• No formal pitching to group but individual sessions with potential leads
• Very active but informal role of lead investor, BIC and other mentors before incorporation
• Target: Development and testing of minimum viable product
• Target: Development of scalable and profitable business model
• If promising, incorporation of business or integration into existing company at the end of the program
• In case of incorporation, setup of AS with 50,000 TL share capital
• Conversion of initial investor loan into share capital at pre-agreed valuation
16 Startnowhow – Seminar 3 08.12.2014
STAR
TNO
WH
OW
PR
E-SEED
TR
AC
K
PR
E-SE
ED P
RO
GR
AM
STARTNOW Pre-Seed Track
• Pre-Seed Track: The Deal
• Duration of program: 3 + 3 months
• First 3 months: Build your minimum viable product
• Second 3 months: Gain initial traction
• Evaluation and investor approval for second phase necessary
• Investment of 50,000 TL (cash & services) against equity
• First phase: 10,000 TL cash + 10,000 TL services
• Second phase: 10,000 TL cash + 20,000 TL services
• Investment by lead investor (or lead investor group) and BIC
• 25,000 TL provided by lead investor or lead investor group
• 25,000 TL provided by BIC Angel Investments
• Custom-made deals, start and end possible at every time
• Individual program and individual mentorship for each startup
• Key: Active lead investor knowledgeable and connected in startup’s market
• “Fast track” to BIC seed program (2nd round meetings) if both phases are completed successfully, access to other other investors if meaningful
• Approval by both lead investor and BIC necessary for progression to seed
17 Startnowhow – Seminar 3 08.12.2014
STAR
TNO
WH
OW
PR
E-SEED
TR
AC
K
BIC ANGEL INVESTMENTS Dr. Joachim Behrendt
Phone: +90 212 328 1939 Fax: +90 212 328 1933
www.bicangels.com http:/twitter.com/joachimbehrendt http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a
Email: [email protected]