HOW TO WRITE A
FEASIBILITY
SUMMARY
The 16th Annual Edward L. Kaplan, ’71
New Venture Challenge 2011-12
Steve Kaplan
Ellen Rudnick
WORKSHOP
AGENDA
PRESENTATION
• REVIEW NVC TIMELINE
• FEASIBILITY SUMMARY: KEY ELEMENTS
• OUTSIDE - IMPACTS
• DOS & DON’TS
• Q&A
AFTERWARDS
• FAST PITCH
• CASUAL NETWORKING
NEW VENTURE CHALLENGE
TIMELINE
TODAY
Mar 26
Developing a New
Venture
(Bus 34104)
begins
Feb 6
Phase 1 Feasibility
Summaries Due
April 27
Feb 23
Full Business
Plans Due
Phase 11 Teams
Announced
Finalists
Announced
Feb 28
May 24
Phase II Orientation
Harper Center
JANUARY
Phase I
FEBRUARY
May 21
MARCH
NVC Finals
Harper
Center
APRIL
Phase II
MAY
Finals
BETWEEN NOW & THE
DEADLINE
TODAY
Feb 6
Polsky Center Coffee Hour
WEDNESDAY, JAN 11 • 4:30-5:30PM
Phase 1 Feasibility
Summaries Due
Creating an MVP for the NVC (Avi Stopper)
TUESDAY, JAN 17 • 12:00-1:00PM
Polsky Center Coffee Hour
WEDNESDAY, JAN 18 • 4:30-5:30PM
EVC Feasibility Summary Working Session
TUESDAY, JAN 24 • 4:45-6:15PM
Polsky Center Coffee Hour
WEDNESDAY, JAN 25 • 4:30-5:30PM
Polsky Center Coffee Hour
WEDNESDAY, FEB 1 • 4:30-5:30PM
JANUARY
Phase I
FEB
FEASIBILITY SUMMARY
KEY ELEMENTS
• COMPANY MISSION
• MANAGEMENT TEAM
• MARKET INFORMATION
• FINANCIAL INFORMATION
• PROPRIETARY ASPECTS
• PROGRESS TO DATE
• REVENUE MODEL
• BUSINESS RISKS
• OPERATIONS MODEL
KEY ELEMENTS
MISSION
What are you selling?
What problem are you solving?
How big is the problem?
Why should an investor read any further?
KEY ELEMENTS
MISSION EXAMPLES
ex 1
The company has developed the SalivaSac™, a proprietary semipermeable membrane that enables the collection in saliva of
biochemical markers below 12 kilodaltons. The company will
focus on finding those applications which meet this criteria and
where there is an advantage to collecting a non invasive sample.
ex 2
The Company’s objective is to develop non invasive medical
diagnostic tests. The first application is for using a proprietary saliva
collection device to measure glucose levels in diabetics.
KEY ELEMENTS
MARKET INFO
How do you define your market?
Who is the customer?
What is the potential market size?
How much do costumers buy?
KEY ELEMENTS
MARKET SIZING
$2.8B
Art supply industry
Paint
Brushes
$558M (21%)
Surfaces
Frames
75% market
is price
sensitive
$147M (25%)
Prof artists
KEY ELEMENTS
COMPETITION
How will you win?
•
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 to
competition?
•
What barriers to entry will protect you?
o IP, Customer development process, etc.?
KEY ELEMENTS
TECHNOLOGY
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 or
product testing?
•
What are the technology risks?
KEY ELEMENTS
GO TO MARKET
What is your revenue model & go to market
strategy?
•
How will you make money?
•
Why will the customer buy your product/service?
•
How will you get to the customer?
•
What will the customer pay?
o Why are you sure the customer will pay this?
o Have you spoken to customers?
•
How many customers will you get?
KEY ELEMENTS
OPERATION MODELS
How will you deliver this product/service?
•
Outsourced vs. in-house resources?
Do the costs of providing this
product/service provide a sufficient
profit?
Are there execution risks?
KEY ELEMENTS
MANAGEMENT TEAM
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?
KEY ELEMENTS
MANAGEMENT TEAM
e.g.
Frank Smith, our CTO, has extensive experience in managing and
building data warehouses. He previously served as Vice President in
charge of Thompson Financial’s database management systems,
and worked as a consulting manager with IBM for organizations
building data warehouses. Frank received a B.S. in computer
science from MIT and an MBA from Chicago Booth with a
concentration in operations.
e.g.
We currently are looking for a Director of Sales. We have identified
several individuals in data/information companies also selling to the
Fortune 500 companies, consulting and investment firms that would
be interested once we have secured our financing.
KEY ELEMENTS
PROGRESS UP-TO-DATE
Milestones that have been achieved
Patents, trademarks that have been filed
Testing your business assumptions:
• Prototypes, MVPs, websites, focus groups,
beta customers, etc.
KEY ELEMENTS
BUSINESS RISKS
What are you worried about?
What do you plan to do about it?
KEY ELEMENTS
COMPARABLES
Are there comparables in the industry or other
industries that validate your business model?
• Who are they and have they been successful?
• How are they valued and how did they get
funded?
• Have there been successful exits? Multiples?
• Have similar businesses failed? Why? (look for
“corpses”)
A FRAMEWORK FOR
EVALUATING A BUSINESS PLAN
STEVE KAPLAN
How Will Angels and VCs
Evaluate a Business Plan or
Opportunity?
When I look at an opportunity, I use
the following framework:
OUTSIDE- IMPACTS
OUTSIDE -IMPACTS
Opportunity, Uncertainty, Team,
Strategy, Investment, Deal, Exit.
OUTSIDE-IMPACTS
(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 substantial
growth/valuation?
(P) Why does the opportunity generate a positive present
value? 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
(O) Opportunity: Is this a positive present value
opportunity? (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 substantial
growth/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
(O) Opportunity: Is this a positive present value
opportunity? (Does it have IMPACTS?)
(P) Why does the opportunity generate a positive present
value? What is unique? What is differentiating?

The answer to this should be implicit in other parts of
OUTSIDE-IMPACTS. But, doesn’t 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
Is this a positive present value opportunity? (Does it have
IMPACTS?)
(A) Acceptance: Will customers in that market accept / buy
this 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
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
(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
(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 that
outcome is more likely to be favorable?
• Choice of initial customers? Choice of investors?
 How do the answers affect the opportunity?

OUTSIDE-IMPACTS
(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 are
necessities.
(S) Strategy
 Is strategy consistent with opportunity, uncertainty, team,
and exit?
OUTSIDE-IMPACTS
(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 ½,” “by 2/3”
• Push out forecasts
 What should you do?
• Plausible best-case scenario
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 the
OUTSIDE tests, leave it outside.
GrubHub.com
a website for finding and ordering from restaurants that deliver.
have to call every restaurant in city to get menu / ask if and where
they deliver. Info is hard to collect.
M - Not a huge market, but large enough.
Make money off on-line ordering.
AUseful for consumers.
Key issue is whether you can get them economically.
Restaurants follow once consumers are engaged.
PFirst-mover advantage / network effect for consumers.
Costly and time intensive to get menu / delivery info.
Consumers have no reason to switch because restaurants pay.
Bump
iPhone App to exchange contact info.
Uses unique identification of two phones from:
GPS
Synchronicity of Bump
AConsumers liked it / found it useful
Huge piece of luck when billionth iPhone App
PNetwork effect
But what is M? I? How do you make money?
DO’S AND
DON’TS
DO’S & DON’TS
AVOID CLICHÉS
•
“We have no competition.”
•
“We are the low cost provider.”
•
“We only need a 5% market share.”
•
“Our numbers are conservative.”
DO’S & DON’TS
AVOID ACRONYMS
•
Don’t assume everyone reading plan
has your knowledge base
•
When you use an acronym, explain it
TFT (the first time)
DO’S & DON’TS
NO AUTOPILOT
•
Make sure the car has a driver.
Someone should be the current CEO.
OK to say you will find a permanent /
better one later.
DO’S & DON’TS
BE CLEAR & BRIEF
Yes:
Middleware for wireless networks
No:
Develops and delivers an integrated suite of
packaged applications for web and wireless
deployment. Global enterprises use these
applications to become more competitive and
profitable by establishing and sustaining high-yield
interactions and transactions with customers,
suppliers, and employees.
DO’S & DON’TS
CAPTURE ATTENTION
•
Typical VC will not read past the first
page
•
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?
DO’S & DON’TS
EXAMPLES & EXPERIENCES
Provide tangible examples / experiences wherever
possible:
•Reference customers
o 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
IN CLOSING
NEXT STEPS
RESOURCES
CHICAGONVC.COM
• Link to key dates,
deadlines, and
events for the
2011-1\2 New
Venture Challenge
• Link to online
team building
site where
people can post
ideas and team
openings
• Link to
sample
business plans,
NVC class
workshops,
sample equity
agreement
• Check here for
• Link to official
the latest news on
current & former
NVC Companies
rules and
regulations,
sample
feasibility
summaries
RESOURCES
LINKD.IN/NVCIDEAS
Get feedback
on a new
business idea!
Find team
members for
your NVC
Entry!
Share your
resume &
expertise to let
other students
find you!
TONIGHT
FAST PITCH & NETWORKING
• Get food, come back
• 30 mins of pitches
o
Around the room, 45 sec per pitch
• Casual Networking
TONIGHT
FAST PITCH & NETWORKING
In 45 seconds, say:
•
•
•
•
Your Name:
Company name:
Short Description:
Needs:
John Smith
Banana Hats
We make hats for monkeys
Finance Guru, Developer