New Ventures 1: Opportunity Evaluation

Strategy 848

Syllabus


Instructor / academic advisors


Jon Fjeld                        email: fjeld@duke.edu
Ashish Arora                  email: ashish.arora@duke.edu
Rich Burton                    email: rmb2@duke.edu 
Aaron Chatterji              email: ronnie@duke.edu
David Robinson              email: davidr@duke.edu 
Chris Moorman              email:moorman@duke.edu
            

________________________________________________________________________

References

  1. Guidelines for Creating and Growing Ventures: Center for Entrepreneurship and Innovation Wiki: http://www.dukeven.com/
  2. “Opportunity Evaluation Process Overview”: Description of the process for evaluating an entrepreneurial opportunity.

New Ventures: Opportunity Evaluation

The student team will conduct an evaluation of a technology or business idea. At the end of the course, the team will make a recommendation concerning whether the business idea has commercial potential and merits further investment of resources.

Enrollment process

The NV: Opportunity Evaluation is a course structure for executing the first step in creating a new venture.
In order for a group of students to enroll in a particular instance of this course of work, the following conditions must be satisfied:
  1. They must be working on a project that has been approved by the Program for Entrepreneurs Advisory Committee.
  2. A student is identified as project lead.
  3. This student has assembled a team of students to enroll, and the instructor has approved this team.
  4. The student has submitted and obtained approval from the instructor of a proposal outlining the specific business idea being evaluated.

Course content

The course is organized to allow teams to follow a structured process in doing their analysis and making a recommendation. Five major questions guide the work of the student teams.
  1. Is there a market opportunity? Answering this question begins with a hypothesis about a need or problem and a set of people or organizations that have that need or problem. The team will perform primary market research to try to confirm the hypothesis. The team will also perform secondary market research to create an initial rough sizing of the potential market (assuming one has been found). The primary market research will also investigate issues of value, alternatives, parameters of an acceptable solution, buying process, etc.
  2. Is there a feasible solution? This question has two major components.
    • Market feasibility: The student team must make a case that a solution or product can be developed that will be acceptable to the potential customers. An important focus of the primary market research will be to probe sufficiently so that the parameters of an acceptable solution are understood well enough for this evaluation.
    • Technical feasibility: The second dimension of the feasibility question concerns whether the solution can actually be created within the parameter set, including cost, function, effectiveness, etc. as appropriate.
  3. Is there a basis for sustainable competitive advantage? Competitive advantage is generally taken to consist in a set of assets that are valuable, rare, inimitable and non-substitutable (VRIN). Competitive advantage is sustainable if it does not dissipate over a relevant time horizon. In technology based companies, competitive advantage is usually grounded in protected intellectual property. If there is indeed a market opportunity and a feasible solution, then a venture can be created that will capitalize on that opportunity. This venture should create an attractive return for investors. This is the case that the student team will have to make.
  4. Can a team be assembled that can execute a commercialization plan? Professional investors often say that the most important criterion in evaluating an investment opportunity is the team. That is, they invest in people rather than business ideas. Alternatively, investors will say that good ideas are plentiful but good people are rare. The student team will analyze the skills, experiences, relationships, etc. that would be needed successfully to capitalize on their business idea. The team will also perform an analysis of the availability of the relevant talent and propose a strategy and timeline for assembling the right team.
  5. Is the risk / reward profile sufficiently attractive to merit investment of capital?
As the final step in their analysis, the student team will create a small set of scenarios of the projected financial performance of the venture. They will articulate the assumptions that drive these various financial models and will make a case for the likelihood of the various outcomes.
This exercise will not be based on a great deal of concrete facts at this stage of the venture, but will introduce the discipline of rendering assumptions explicit and also of thinking objectively and concretely about risk.

A more detailed description of the process can be found at: Opportunity Evaluation Process.

Deliverables

The team will create the following deliverables:
  • A complete submission of the appropriate information using the Opportunity Evaluation Template document below, including a summary of the team recommendation whether to proceed with the project and therationale behind the recommendation.
  • An oral presentation of the analysis and recommendations to a panel consisting of the Duke Ventures Project Advisory Committee and other investors.

Grading

The instructor will grade the team based on the set of deliverables. 75% of the grade will be based on the written report and 25% on the final presentation.
Course schedule

Students require permission of the instructor to enroll in this course.

Keys to success

1.    Organize: divide responsibilities / create a plan / track your progress.

2.    Get started early - pace yourselves – stick to your plan.

3.    Get started early on the primary market research – this will always take longer than you think. You need to identify people to talk to, make contact, set up conversation, etc., and it does not always work out.

4.    Decide what is critical to making a go/no go decision and focus on that. (How the process outline is to be tailored to this particular opportunity: what is the scope of the analysis and what are the areas of particular focus?) 

5.    Decide how you will make decisions in advance – don’t wait for an issue to arise.

6.    Be open and flexible – your specific idea may not be the ultimate idea.

Subpages (1): 2009
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Jon Fjeld,
Nov 3, 2013, 8:34 PM
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Jon Fjeld,
Nov 3, 2013, 8:35 PM
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Howie Rhee,
Dec 1, 2009, 8:22 AM
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