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.
- ¨– (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?
- ¨ Provide solid support for your analysis.
- ¨» Are there additional opportunities?
- ¨– (P) Why does the opportunity generate a positive present value? What is unique?
- ¨» 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?
- 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? Sales force? Ads?
- How much will it cost?
- How will you keep customers? Sales force?
- How much will it cost?
- Why won’t the value be competed away?
- What will existing competitors do?
- What will other new entrants do? How will you respond?
- Why is this a good time to enter?
- Why hasn’t the opportunity been taken already?
- How quickly can this be implemented?
- Good opportunities have positive IMPACTS.
- If the opportunity does not have IMPACTS, then it
- ¨should not be pursued.
- What are major uncertainties?
- Possible uncertainties:
- Market size.
- Customer acceptance.
- Customer approach.
- 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?
- 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 arenecessities.
- Is strategy consistent with opportunity, uncertainty, team, and exit?
(I) Investment requirements / cash flows.
- Is the amount of money required reasonable?
- Do the cash flows / forecasts make sense?
- 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?
- Is the deal exitable? How?
¨If an investment does not pass the OUTSIDE tests, leave it