2014 Opportunity Assessment by John Mullins
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This document discusses frameworks for entrepreneurs and investors to assess market opportunities. It begins by summarizing four case studies of different companies: ProCom, which was bootstrapped and raised funding but has not exited; Oxiden, which raised funding but failed after 4 years; Darian Holdings, which found success after an acquisition; and Glencoren, which took a long time to raise funding and have products reach the market. It then discusses common points of confusion around market versus industry, macro versus micro factors, and what is truly important about entrepreneurial teams. Finally, it introduces the "Seven Domains of Attractive Opportunities" framework to holistically evaluate opportunities across market, industry, and team factors.
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2014 Opportunity Assessment by John Mullins
- 1. © John Mullins 2014 Marston Venture Management: What happened? John Mullins London Business School
- 2. © John Mullins 2014 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”
- 3. © John Mullins 2014 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
- 4. © John Mullins 2014 Darian Holdings • Raised small amount of angel money • An opportunity arose to buy a competitor at a very attractive price • Considerable success: ranked among UK TechTrack 100 for 2005, 2006, 2007, 2008
- 5. © John Mullins 2014 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
- 6. © John Mullins 2014 Research Question How do entrepreneurs (and investors, too) best assess market opportunities?
- 7. © John Mullins 2014 The Conventional Wisdom • Three crucial factors for entrepreneurial success – Management… – Management… – Management!
- 8. © John Mullins 2014 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.”
- 9. © John Mullins 2014 Point of Confusion #1: The Market / Industry Distinction • What’s a market? • What’s an industry? • These are frequently confused!
- 10. © John Mullins 2014 The Seven Domains of Attractive Opportunities Market Domains Industry Domains Market Attractiveness Industry Attractiveness
- 11. © John Mullins 2014 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…
- 12. © John Mullins 2014 The Seven Domains of Attractive Opportunities Macro Level Micro Level Market Domains Industry Domains Market Attractiveness Target Segment Benefits and Attractiveness Industry Attractiveness Competitive and Economic Sustainability
- 13. © John Mullins 2014 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”
- 14. © John Mullins 2014 The Seven Domains of Attractive Opportunities Macro Level Micro Level Market Domains Industry Domains Mission, Ability to Aspirations, Execute Propensity on CSFs for Risk Connectedness up and down Value Chain Team Domains Market Attractiveness Target Segment Benefits and Attractiveness Industry Attractiveness Competitive and Economic Sustainability
- 15. © John Mullins 2014 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
- 16. © John Mullins 2014 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 suppliers, investors, and investment committees
- 17. © John Mullins 2014 Why Else? • At first glance, fatally flawed opportunities can appear attractive – Observers’ views will diverge • Thus, evidence is required – VCs and angels conduct rigorous due diligence on the opportunities they consider – You should, too!
- 18. © John Mullins 2014 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.”
- 19. To Assess Your Opportunity: The New Business Road Test © John Mullins 2014
- 20. To Gather Your Data, an App, for Apple and Android! © John Mullins 2014
- 21. To Fund Your Opportunity, Without Investors © John Mullins 2014
- 22. © John Mullins 2014 Questions? jmullins@london.edu www.getting-to-plan-b.com www.NewBusinessRoadTest.com www.CustomerFundedBusiness.com @John_W_Mullins