5 - 1

Screening Venture Opportunities

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Dragon’s Den

• What are the factors the Dragons are looking for?

• What do they bring to the table other than money?

• Are the entrepreneurs being ripped off?• Shark Tank Equity Moment

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Superior Businesses…

• IDEA -> OPPORTUNITY• Create or add significant value to a customer or

end user• Solve a significant problem, or meet a

significant want or need, for which someone is willing to pay a premium

• Have robust market, margin, and moneymaking characteristics

• Have a strong management team that can quickly exploit the opportunity

• …work!

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Screening Methodologies

• QuickScreen• Provides a broad overview of an idea’s potential• Enables the entrepreneur to conduct a preliminary

review and evaluation of an idea in a short period of time

• Venture Opportunity Screening Exercises (VOSE)• Segments the screening of ideas into extremely

detailed but manageable pieces

• I have mixed feelings• Are these are best screening instruments available• Is it possible to know all the answers to these questions so

early?

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Adams On Customers•Before you build it, validate the market

• Don’t have a solution looking for a problem• The ready-fire-aim approach• Common illusion – I know my customers

• Limited feedback and personal experience generate the illusion

•Why validate?• Get the product right the first time• A beta community emerges• You generate a ready-made contact list of first

customers• You can more easily raise smart investment

capital• You use capital more efficiently• You clarify your competition

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Market Validation

•You cannot sell to everybody• A target market is a limited, discrete subset of

companies or individuals whose pain is so great without the product that they will readily buy it

• Your solution should be a “must-have” for your targets

•Pyramid of influence• Stage 0: Secondary research• Stage 1: Primary market research• Stage 2: Quality influencers (see book)• Stage 3: Leverage influencers (see book)

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Stage 0-1• Secondary research

• Market size, trends, growth• Research competitors, customers• Read the industry press & specialized reports• Remember that secondary research is not validation

• Primary research• Who needs the product most?

• Who has the worst pain?• What does this market look like?• Test at least 3 hypotheses with data

• Be prepared to revise hypotheses and start again• Interview at least 100 customers

• Understand the customers and develop a sense of their pain• Make it everyone’s job to interview – even engineers!• Get a professional firm to develop questions and analyze

data• Eliminate temptation to lead customers or offer solutions

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Eastwind Case

• Is this an attractive opportunity?• Practice using my quick screen form

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Class Exercise

• In groups of three:• Pitch your idea to your two group members in

five minutes• Rate the pitch using the quick screen form

• Ask questions if necessary• Share your analysis with the proposer

• At the end, share your scores with the class• You have 30 minutes

• The highest scores at the end of the evening will present to the class.

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Additional questions

• What good news or information will arrive (or can you cause to arrive) that will enhance your opportunity?

• What can you do or learn to make you the most knowledgeable competitor in this industry?

• How much room for error is in your strategy?• Does your venture opportunity have any fatal

flaws?• Faulty assumptions, major risks?