Venture Capital Strategy & Introduction Screening (C) 1990, 1993 Marions Panyaught Consultancy of Samani Intl Entps --- [Reproduce freely if in entirety. TLX (23) 6503536867] --- [*] PEOPLE-CHEMISTRY QUESTIONS: What have you done before? had partners? succeeded? Who do you know in your chosen industry? How do you intend to attract the right kind of employes? Tell me about workaholics, work intensity and family values. Should sales quota pressure be countered by accountants? How do you plan to avoid yes-men? How can you spot a loser? How do you plan to grow from controlling everything to delegation? Are you crazy enough? Do you inspire people? Why is your life on the line? How do you plan to create a tension of urgency to keep your mind switched on? What requisite skills does your team inevitably lack? What causes employe turnover? [*] MARKETING QUESTIONS: Why is your product better than what's out there? Convince me you're not just another clone. How do you add value? Why is your marketing better than others? What special need do you satify? How big is that need (potential market)? Why should it grow? Why isn't that need being satisfied already? Numerical goals: eg # calls. NOTICE THAT IBM & LOTUS SUCCEEDED WITH EXISTING TECHNOLOGY VIA BETTER SERVICE. I don't want to find money for research projects, I want to make money. How many potential buyers? How many up/downmarket products to link with? Have you actually talked to any customers? What do they think? Orders? What future products synergise with initial product? Value added services? Stage/rate of product/industry growth/maturity/cyclicality/share? How good are your forecasts/schedules? Social/Eco/Tek/Legal trends? Niche. Credibility. Pricing [cost v cust abil/need v compet v reguln]. Positioning. Image. Warranty. Ads/PR/Promo/Mail/Shows/Distrib/Export. Entry barriers for competitors? Proprietary,Supply,R&D,Experience,Svc, Cost,Scale,Switching costs,Exit barriers,Differentiatn. Price elasticity How do you plan to measure marketing effectiveness? Likelihood of competitive retaliation - Who? Substitute products? Imports? Which competitors matter? Why? Segements? Reputation? Anlst rpts/Trade mags How can we delay provocation of competitors? Advantageous to do so? How competitors better able react? Mktg,Fnc,Prdxn,Cost,QC,Dstbn,Svc,Eqp,Loc Major Buyers? Who money/authority/desire/rating? Distribs/OEMs? Export? Decision:Awareness->Comprehension->Conviction->Action Media/freq/message? How ads(Want[concept]/devlop[latent]/focus[convert]/satisfy[keep])? Likelihood of backward integration by buyers? Demographic/trend/segment? Suppliers? Who are? How reliable? Exit barriers to them? Seasonality? [*] FINANCE QUESTIONS: What have you spent so far? What is the asset value? Do you maximally lease leverage your assets? Interest expense of inactive assets? Leveragibility, defendability, effective life & revenue for patents, intangibles? How much do you need, for what, until when? Do you have any debt, patents, incorporations? What does it cost to produce? Including your time? Gantt timeline schedule. Revenue, net income, breakeven, cashflow (sustainable?), NEBIITDOC, sweat equity? Tax, perks, regulatory liability, fund availability? Why is your cost structure better? How will it evolve? Debt management? How do you plan to control, coordinate and synchronise sales, cash flow, production and development? Can you accept owning less than a tenth of your firm in ten years? Will net income match the competition in seven years, half in four years? Will net quick assets cover most of the venture capitalist downside? Include: Inventory flux, unsolds, ad budget, commissions, benefits, insurance, rent, utilities, supplies, uncollectibles, payables, tax, interest. Plant Dependability, Efficiency; Supplier credit; Project liquidity. Compare with Dun's Standard Business Ratios. Explain EVERY assumption in notes. [*] CAVEAT: A strategic plan should be the coordinating brain of a firm, making sure everything fits together without gaps or redundancies. It is not a piecemieal rulebook but a mindset from which specific action plans follow. A good strategy is obtained from managers - at their full, unencumbered, uncluttered cognitive attention -- thinking cohesively together, not by submitting incrementalist, satisficing piecemeal plans which take on a life of their own. This is why a plan must be made by experienced line managers, not imposed by far-away staff. This is why pay, budget and control should be subservient to strategy; increased allocations should be conditional on achieving projected results. A plan is a strategically opportunistic way of dealing with worst and best scenarios: you don't plan on luck, rather you are ready to take advantage of good or bad luck when it arrives by knowing what you want. Strategy allocates skills, technology, financing, production, inventory, service, sales and distribution - on time - without waste or scarcity; value drivers and destoyers in these areas should be accurately identified so each new major action can leverage existing strengths. You plan on stealth and randomness to confuse your opponent's retaliation but you also inevitably expect them to discover the truth; likweise you must determine your competitor's motivation, share, niche and costs. You divide your firm into a portfolio of distinctly operable businesses, investing in high growth, milking low growth and divesting low share. Joint ventures are only for learning. For turnarounds, you must shock, then lead, access total information, maximise cash flow, simplify, then demobilise and grow again; you must negotiate everything and seek allies but post-emergency management is like post-traumatic stress: need positive images to displace painful memories, but need period of grieving, too. But fundamentally, strategy is thinking -- no formula can ever substitute for thinking. ----NOTES/ADDENDA-- Limit the number of primary participants to people who can consciously agree upon and contribute directly to that which the enterprise is to accomplish, for whom, and by when. Single-digit odd number. Define the business of the enterprise in terms of what is to be bought, precisely by whom, and why. Concentrate all available resources on accomplishing two or three specific, operational objectives within a given time period. Prepare and work from a written plan that delineates who in the total organization is to do what, by when. Employ key people with proven records of success at doing what needs to be done in a manner consistent with the desired value system of the enterprise. Reward individual performance that exceeds agreed upon standards. Expand methodically from a profitable base toward a balanced business. Project, monitor, and conserve cash and credit capability. Maintain a detached point of view. Anticipate incessant change by periodically testing adopted business plans for their consistency with the realities of the world marketplace.