Marston Venture Management:
What happened?
John W. Mullins
London Business School
© John Mullins 2009
1
ProCom
• Bootstrapped the business with money
from 3Fs to prove the model
• Raised $4 million from GE Capital when
e-learning was all the rage
• Have treaded water since, no exit, but
still around: the “living dead”
© John Mullins 2009
2
Oxiden
• Raised £5 million from 3i
• Took two years to get product to market
• Then, a very lengthy sales cycle
followed
• There was another solution…
• Died after 4 years
© John Mullins 2009
3
Darian Holdings
• Raised small amount of angel money
• An opportunity arose to buy a
competitor at a very attractive price
• Having considerable success: ranked
among UK TechTrack 100 for 2005,
2006, 2007, 2008
© John Mullins 2009
4
Glencoren
• Turned down by several investors, but
did eventually raise a small amount for
proof of concept
• Raised the next round in 2006
• A very long lead time play – changing
surgeons’ behavior takes a long time
© John Mullins 2009
5
Research Question
How do entrepreneurs (and
investors, too) best assess market
opportunities?
© John Mullins 2009
6
The Conventional Wisdom
• Three crucial factors for entrepreneurial
success
– Management…
– Management…
– Management!
© John Mullins 2009
7
In the Words of Warren Buffett…
“When a business with a
reputation for poor
fundamentals meets a
management team with a
reputation for brilliance…
it’s the reputation of the
former that remains intact.”
© John Mullins 2009
8
Point of Confusion #1:
The Market / Industry Distinction
• What’s a market?
• What’s an industry?
• These are frequently confused!
© John Mullins 2009
9
The Seven Domains of
Attractive Opportunities
Market Domains
Market Attractiveness
© John Mullins 2009
Industry Domains
Industry Attractiveness
10
Point of Confusion #2:
The Macro / Micro Distinction
• Large and growing markets are
important, but…
• Structurally attractive industries (in a
five forces sense) are also important,
but…
© John Mullins 2009
11
The Seven Domains of
Attractive Opportunities
Market Domains
Macro
Level
Market Attractiveness
Industry Domains
Industry Attractiveness
Micro
Level
Target Segment Benefits
and Attractiveness
© John Mullins 2009
Sustainable Advantage
12
Point of Confusion #3:
What’s Crucial about
Entrepreneurs and Their
Teams…
• It’s not found on their CVs
• Not simply about “chemistry” or
“character” or “entrepreneurial drive”
© John Mullins 2009
13
The Seven Domains of
Attractive Opportunities
Market Domains
Macro
Level
Industry Domains
Market Attractiveness
Industry Attractiveness
Mission,
Aspirations,
Propensity
for Risk
Ability to
Execute
on CSFs
Team
Domains
Micro
Level
Connectedness up
and down Value Chain
Target Segment Benefits
and Attractiveness
© John Mullins 2009
Sustainable Advantage
14
In Summary, for the Seven
Domains…
• Scores are not additive: summing the
scores across the seven domains is
meaningless
• Strong scores at the micro level can
mitigate poor macro-level scores
© John Mullins 2009
15
Why Examine
the Seven Domains?
• Identify key weaknesses
– Questions to be answered
• Suggest avenues for reshaping the
opportunity if not mitigated by other
domains
• Identify key strengths
– Crucial in telling the story to investors and
investment committees
© John Mullins 2009
16
Remember
Warren Buffett’s Words
“When a business with a reputation
for poor fundamentals meets a
management team with a
reputation for brilliance, it’s the
reputation of the former that
remains intact.”
© John Mullins 2009
17
For the rest of the story…
The New Business Road Test
© John Mullins 2009
18