Wrong confirmation ID

Email
Favorite
Favorited ×
Download
Embed
Private Content
Copy and paste this code into your blog or website Copy Customize… Close
We have emailed the verification/download link to "".
Login to your email and click the link to download the file directly.

To request the link at a different email address, update it here. Close
Validation messages. Success message. Fail message.

Check your bulk/spam folders if you can't find our mail.

Loading…

Flash Player 9 (or above) is needed to view presentations.
We have detected that you do not have it on your computer. To install it, go here.

+ Follow

Evaulating Business Opportunities

by Tom Keller on Nov 25, 2009

1,977 views

Identifying and Evaluating Entrepreneurial Opportunities

More…

Identifying and Evaluating Entrepreneurial Opportunities

Less

6 Embeds 395

http://tkeller.com	387
http://www.lmodules.com	3
http://www.slideshare.net	2
http://translate.googleusercontent.com	1
http://perevod.yandex.net	1
http://beta.tkeller.com	1

Statistics

Favorites: 2
Downloads: 0
Comments: 0
Embed Views: 395
Views on SlideShare: 1,582
Total Views: 1,977

Everywhere I go, I analyze business. Why is a capuccino $3? Does Saxy’s make more or less than Trident? Skiing this morning – early season; are they making money; why not open more runs?Me: quantitative business (economics, finance, strategy, decision analysis) & computer-head.Back in the day, total internet visionary. I had an excellent software engineering education and an excellent business background, both fresh, and the internet was just beginning – there were opportunities everywhere!Niel & I. StockPhoto.com. City Search. Etc. etc.Examples: Sage -> NetInfra; IntenseDebate -> SendGrid (NOT!)Now – not at the bleeding edge (intensedebate), increasingly outsourcing idea gen
It is hard to become more expert than an incumbent when starting from scratch. In fact, it is pretty impossible.Examples:Geography – gas stationsValue prop – whole foods: organic, fresh, up marketCost structure – EC2Distribution channel – umm web, AmazonTechnology – EC2, TeslaLove the godaddy story. I was in the hosting industry. NetworkSolutions monopoly vanished, you could become a domain name registrar for a couple hundred k. Go Daddy became a domain name registrar, got good at that, dominated market with low prices, opened expanded into hosting, now hosting is surely most of their revenue. I think name registration was just a way to get into the much bigger market of hosting.
Gross margins 50% - $1M annual market OK for 1 guy companySmall enoughDepends a lot on the market, how fragmented it is, but you should be shooting for at least 10-20% of a new marketGeographySki areasGas stationsVenture Capital/Techstars?Product PositioningUp market – whole foods, Southern Sun microbrewsSales channelsZynga - Games for the iPhoneFinancingRocky’s AutosEC2My market size? 50 person company x 500k rev per person => $25M/year rev =>$200M market minimum
Take example company from audience?IntenseDebateSubstitutes: No commenting, editorialsCompetition: Disqus, JS-KitRivalry: no $ to underbid, but some rivalry in that “we’ll do the labor to convert you”Customer power: Lots, if it comes to rev share; easy to play off the 3 competitors since they don’t have any unique special powerSupplier power: none: the linuxdistro had no bargaining power with us!NetInfra / RackSpace- Substitutes: Self-owned and managed serverCompetition: initial sale price competition, not much after because of bonding with adminsRivalry: noneCustomer Power: not much, because of high switching costsSupplier Power: None
Does the person who feels the pain have the authority and budget to make the purchase?Examples: Sysadmin responsible for server purchasing SSL licenseTechStars co’s purchasing mentorship and notoriety with equityProgrammer purchasing SendGridCounter ExampleStudent benefiting from better overhead projector in classCustomer ValuationEach rackspace customer is worth:36 months x $200 / month -> $7,200, less hardware costs of $2200, bandwidth cost of $1,000, and infrastructure cost of $1,000, for a net of $3,000 NPV =? $2,000Customer Acquisition CostMarketing spend of $200 per new customerSales costs (salesman time & expense) of $800 per new customerVirality: will each customer refer a buddy or two? (Increases the value of each customer)Network effects: does each customer increase our value to all customers? (IntenseDebate: Yes)
You have to accrete and manage resources able to capture a minimum of 20% of the market. Can you do that?Will investors trust you with $1B? $100M? $1M? It takes time, and demonstrated progress, to gain investors, employees, and customer trustCan you close the sale of a 747 to United? Can you pitch to the CEO, understand the technical trade-offs of one plane vs another, understand the tradeoffs of delivery schedule and financeability?Know your competitors: IntenseDebatevs Daniel Ha – gregarious vs experienced and analytical
Note this assumes “perfect markets”, and markets probably aren’t at all perfect at the forefront of innovation.Work through an exampleSteve’s market salary: $200kSteve’s Acme salary: $100kSteve’s ownership in Acme: 10%Therefore Acme needs to be increasing in value by $1M per year (and paying his salary) for him to be breaking evenThis is a ceterus paribus example – don’t forget the value of differential learning, ie bigger ponds in the future
Famous ExamplesSteve JobsTed TurnerDavid CohenThe Foodzie people?Counter-examples?
IdeaVRBO – a personal problemeScrip – I love money & banking, internet hasn’t solved this yet. But, a problem looking for a solution?BHAG’s-IntenseDebate – used by NYT, acquired by WordPressHonda as a startup: Yamaha, wotsubusu!Giro, 1989(?): TdF (Lance, 1997?)

2 Favorites

Maria Encinar , Entrepreneur at Garaxe.es Tags business 2 years ago
smparkes 2 years ago

Evaulating Business Opportunities — Presentation Transcript

Identifying and evaluatingStartup Opportunities
Tom Keller
www.tkeller.com
Tom Keller
80’s: Software Engineer
90’s: Financial Analyst, Executive
1997 – Current: Serial Entrepreneur
Net Infrastructure – 2nd fastest growing in Boulder in 2002
ClickCaster
IntenseDebate – 2007 Innovative Co. award, acquired by Automattic (WordPress)
My LinkedIn
Identifying and Evaluating Entrepreneurial Opportunities
2
Tom Keller
Finding Opportunities
Train your mind: analyzing business as a way of life
What areas are you especially expert in?
What problems do you have in your current job?
Be an entrepreneurial nexus
Tom Keller
Identifying and Evaluating Entrepreneurial Opportunities
11/25/2009 - 3
What’s new about your idea?
Defeating incumbents is difficult / impossible
You need one (or more) of:
New market
New value proposition
New cost structure
New distribution channel
New technology
Identifying and Evaluating Entrepreneurial Opportunities
4
Tom Keller
Market Size
Big enough to be worthwhile
Small enough that you can be a “player”
Your network, expertises, processes, team, customers, etc., can (in fact must!) become a competitive advantage
Big markets can be “niche-fied”
Geography
Product positioning
Sales/distribution channels
Financing
Identifying and Evaluating Entrepreneurial Opportunities
5
Tom Keller
Do you have’em by the short and curlies?
5-forces analysis1:
Threat of substitutes
Threat of competition
Threat of rivalry
Customer power
Supplier power
1 This is the core of Michael Porter’s famous “Competitive Strategy”
Identifying and Evaluating Entrepreneurial Opportunities
6
Tom Keller
Market Sales Analysis
Coincident pain / budget / purchase authority
Hypothesize and test…
Due diligence, due diligence, due diligence! (Put down the keyboard, and pick up the phone)
Customer valuation
Customer acquisition cost (and timeline)
Virality / Network effects
Identifying and Evaluating Entrepreneurial Opportunities
7
Tom Keller
Market Size, Part Deux: Big Fish, Small Pond
What is the largest pond such that you can still be the biggest fish?
Constraints: your realistic capabilities
Know your competitors – existing and potential – and your relative strengths and weaknesses
Pond size grows over time (business/career management)
Identifying and Evaluating Entrepreneurial Opportunities
8
Tom Keller
Market Size, Part Trois:No Free Lunch
Is value created in the “Aha! moment”? Or, in the execution?
To the extent value is created in the execution, you’re a participant in a labor market
Thought experiment: assume the labor market is a perfect market; then you can impute requisite market size considering your fair market salary, hypothesized ownership, hypothesized market share and gross profit
Identifying and Evaluating Entrepreneurial Opportunities
9
Tom Keller
Most FundamentalIdea Requirement
Winner takes all; 2nd place kisses sister; everybody else fades to anonymity
Are you, or will you become, the most expert/competent in the space?
Famous examples
Is this your passion? Is there somebody more passionate about this than you? If so, they will eat your lunch!
Paradigm: Job < Career < Hobby
My belief: If job=career=hobby; and, if you work astoundingly hard; then, and only then, you have a chance to be the big fish
My check: do I see myself becoming the expert?
Identifying and Evaluating Entrepreneurial Opportunities
10
Tom Keller
My Process
Idea identification
MBA Analysis: Will it fly? Is it economically interesting?
Self skills critique: Can I envision myself as a leader in this market?
Customer Due Diligence: Would you buy this? For how much?
Passion: Can I articulate a BHAG which inspires me?
Identifying and Evaluating Entrepreneurial Opportunities
11
Tom Keller

Evaulating Business Opportunities

by Tom Keller on Nov 25, 2009

Accessibility

Categories

Tags

Upload Details

Usage Rights

6 Embeds 395

Statistics

Evaulating Business Opportunities — Presentation Transcript