HOW TO WRITE A

FEASIBILITY SUMMARY

The 16th Annual Edward L. Kaplan, ’71 New Venture Challenge 2011-12

Steve KaplanEllen Rudnick

• REVIEW NVC TIMELINE

• FEASIBILITY SUMMARY: KEY ELEMENTS

• OUTSIDE - IMPACTS

• DOS & DON’TS

• Q&A

• FAST PITCH

• CASUAL NETWORKING

AFTERWARDS

PRESENTATION

AGENDAWORKSHOP

Phase 1 Feasibility Phase 1 Feasibility Summaries DueSummaries Due

Phase 11 Phase 11 TeamsTeams

AnnouncedAnnounced

Phase II Orientation Phase II Orientation Harper CenterHarper Center

Developing a New Developing a New VentureVenture

(Bus 34104)(Bus 34104)beginsbegins

JANUARYJANUARY FEBRUARYFEBRUARY MARCHMARCH APRILAPRIL MAYMAY

Full Business Full Business Plans DuePlans Due

TODAYTODAY

Finalists Finalists AnnouncedAnnounced

NVC FinalsNVC FinalsHarper Harper CenterCenter

Phase IPhase I Phase IIPhase II FinalsFinals

Feb 6Feb 6

Feb 23Feb 23

Feb 28Feb 28

Mar 26Mar 26

April 27April 27

May 21May 21

May 24May 24

TIMELINENEW VENTURE CHALLENGE

Phase 1 Feasibility Phase 1 Feasibility Summaries DueSummaries Due

JANUARYJANUARY FEBFEB

TODAYTODAY

Phase IPhase I

Feb 6Feb 6

WEDNESDAY, JAN 11 • 4:30-5:30PM Polsky Center Coffee Hour

TUESDAY, JAN 17 • 12:00-1:00PM Creating an MVP for the NVC (Avi Stopper)

WEDNESDAY, JAN 18 • 4:30-5:30PM Polsky Center Coffee Hour

TUESDAY, JAN 24 • 4:45-6:15PM

EVC Feasibility Summary Working Session

WEDNESDAY, JAN 25 • 4:30-5:30PM Polsky Center Coffee Hour

WEDNESDAY, FEB 1 • 4:30-5:30PM Polsky Center Coffee Hour

DEADLINEBETWEEN NOW & THE

• COMPANY MISSION

• MARKET

INFORMATION

• PROPRIETARY

ASPECTS

• REVENUE MODEL

• OPERATIONS MODEL

FEASIBILITY SUMMARYKEY ELEMENTS

• MANAGEMENT TEAM

• FINANCIAL INFORMATION

• PROGRESS TO DATE

• BUSINESS RISKS

What are you selling?

What problem are you solving?

How big is the problem?

Why should an investor read any further?

MISSIONKEY ELEMENTS

MISSION EXAMPLES KEY ELEMENTS

The company has developed the SalivaSac™, a proprietary

semi-permeable 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.

The company has developed the SalivaSac™, a proprietary semi-permeable 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.

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.

ex 1

ex 2

How do you define your market?

Who is the customer?

What is the potential market size?

How much do costumers buy?

MARKET INFOKEY ELEMENTS

MARKET SIZINGKEY ELEMENTS

$2.8B $2.8B Art supply industryArt supply industry

$558M $558M (21%)(21%)

SurfacesSurfaces

$147M $147M (25%)(25%)

Prof artistsProf artists

PaintPaint

BrushesBrushesFramesFrames

75% 75% market is market is

price price sensitivesensitive

• 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?

COMPETITIONKEY ELEMENTS

• What barriers to entry will protect you?

o IP, Customer development process, etc.?

How will you win?

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?

TECHNOLOGYKEY ELEMENTS

What is your revenue model & go to market strategy?

• How will you make money?

• Why will the customer buy your product/service?

• What will the customer pay?

GO TO MARKETKEY ELEMENTS

o Why are you sure the customer will pay this?

o Have you spoken to customers?

• How many customers will you get?

• How will you get to the customer?

OPERATION MODELSKEY ELEMENTS

How will you deliver this product/service?

Do the costs of providing this product/service provide a sufficient profit?

Are there execution risks?

• Outsourced vs. in-house resources?

MANAGEMENT TEAMKEY ELEMENTS

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?

MANAGEMENT TEAMKEY ELEMENTS

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.

PROGRESS UP-TO-DATE

KEY ELEMENTS

Milestones that have been achieved

Patents, trademarks that have been filed

Testing your business assumptions:

• Prototypes, MVPs, websites, focus groups, beta customers, etc.

BUSINESS RISKSKEY ELEMENTS

What are you worried about?

What do you plan to do about it?

COMPARABLES KEY ELEMENTS

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

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

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

OUTSIDE-IMPACTS

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.coma 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.A -

Useful for consumers. Key issue is whether you can get them economically.

Restaurants follow once consumers are engaged.P -

First-mover advantage / network effect for consumers.Costly and time intensive to get menu / delivery info.Consumers have no reason to switch because restaurants pay.

BumpiPhone App to exchange contact info.

Uses unique identification of two phones from:GPSSynchronicity of Bump

A -Consumers liked it / found it usefulHuge piece of luck when billionth iPhone App

P - Network effect

But what is M? I? How do you make money?

DO’S AND DON’TS

AVOID CLICHÉSDO’S & DON’TS

• “We have no competition.”

• “We are the low cost provider.”

• “We only need a 5% market share.”

• “Our numbers are conservative.”

AVOID ACRONYMSDO’S & DON’TS

• Don’t assume everyone reading

plan has your knowledge base

• When you use an acronym, explain

it TFT (the first time)

NO AUTOPILOTDO’S & DON’TS

• Make sure the car has a driver. Someone should be the current CEO. OK to say you will find a permanent / better one later.

BE CLEAR & BRIEFDO’S & DON’TS

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.

CAPTURE ATTENTIONDO’S & DON’TS

• 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?

EXAMPLES & EXPERIENCES

DO’S & DON’TS

Provide tangible examples / experiences wherever possible:

•Reference customerso 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 CLOSINGNEXT STEPS

CHICAGONVC.COMRESOURCES

• Link to key dates, deadlines, and events for the 2011-1\2 New Venture Challenge

• Check here for the latest news on current & former NVC Companies

• 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

• Link to official rules and regulations, sample feasibility summaries

LINKD.IN/NVCIDEASRESOURCES

Get feedback on a new business

idea!

Find team members for

your NVC Entry!

Share your resume &

expertise to let other

students find you!

FAST PITCH & NETWORKING

TONIGHT

• 30 mins of pitches

• Casual Networking

• Get food, come back

o Around the room, 45 sec per pitch

FAST PITCH & NETWORKING

TONIGHT

• Your Name:• Company name:• Short Description: • Needs: 

John SmithBanana HatsWe make hats for monkeysFinance Guru, Developer

In 45 seconds, say: