Startnowhow - Opportunity Recognition and Evaluation

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StartNowHow

• Open seminar series for active and prospective entrepreneurs

• 10 sessions on monthly basis until summer 2017

• Covers relevant theoretical and practical aspects of entrepreneurship

• Based on lecture „entrepreneurship“ @Bogazici University

• Based on experiences of entrepreneurs, investors, mentors and consultants

• Each session with guest speaker (entrepreneurs, investors, mentors, etc.)

• Certificate provided for participants (from BIC Angels / Bogazici University Entrepreneurship Center) joining at least 70% of the sessions

• Language: English / Turkish

• Thursdays 17.15h – 19.30h

• Next session: Thu 9. February 2017

• Topic: Market and Competitor Research

• Early registration for each session required (eventbrite), limited capacity!

• Priority for regular participants

Startnowhow – Seminar 2 12.01.2017 2

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StartNowHow - Seminar Topics (preliminary)

1. Thu 22.09.16: The entrepreneurial ecosystem in Turkey

2. Thu 20.10.16: Entrepreneurship as a profession

3. Thu 17.11.16: Financial planning for startups

4. Thu 15.12.16: Planning, developing and testing a business model

5. Thu 12.01.17: Opportunity recognition and evaluation

6. Thu 09.02.17: Market and competitor research

7. Thu 09.03.17: Funding the startup – stage financing for ventures

8. Thu 06.04.17: Startup valuation

9. Thu 04.05.17: The investment process – pitching, negotiations and termsheet

10. Thu 01.06.17: Success and failure as an entrepreneur


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StartNowHow - Literature

• Bowers, Brent, 8 Patterns of Highly Effective Entrepreneurs, Doubleday, New York, NY 2008

• Bygrave, William D. / Zacharaiks, Andrew, The Portable MBA in Entrepreneurship, 4th ed., Wiley, Hoboken, NJ 2010

• Drucker, Peter F., Innovation and Entrepreneurship, 1st ed. 1985, reprinted 2010, Elsevier, Kiddlington, 2010

• Harper, Stephen C., Extraordinary Entrepreneurship: The Professional’s Guide to Starting an Exceptional Enterprise, Wiley, Hoboken, NJ 2005

• Hirshberg, Meg Cadoux, For Better or for Work, All Inc., New York, NY 2012

• Hisrich, Robert D. / Peters, Michael P. / Shepherd, Dean A., Entrepreneurship, 9th ed., McGraw-Hill, New York, NY 2012

• Kuratko, Donald F., Entrepreneurship: Theory, Process, Practice, 8th ed., South-Western, Mason, OH 2009

• Leach, J. Chris / Melicher, Ronald W., Entrepreneurial Finance, International Edition, 4th ed., South-Western, Hampshire 2012

• Osterwalder, Alexander / Pigneur, Yves, Business Model Generation, Wiley, Hoboken, NJ 2010

• Ries, Eric, The Lean Startup, Crown Business, New York, NY 2011

• Smith, Janet Kiholm / Smith, Richard L. / Bliss, Richard T., Entrepreneurial Finance – Strategy, Valuation, and Deal Structure, Standford University Press, Stanford, CA 2011

• Stokes, David / Wilson, Nick, Small Business Management and Entrepreneurship, 6th ed., South-Western, Hampshire 2010

• Taleb, Nassim Nicholas, The Black Swan – The Impact of the Highly Improbable, revised ed., Penguin, London 2010

• Timmons, Jeffry A. / Spinelli, Stephen, New Venture Creation – Entrepreneurship for the 21st Century, 9th ed., McGraw-Hill, New York, NY 2011


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Entrepreneur Profiles – Motivations

• Pull influences („opportunity-based entrepreneurship“)

• Desire for independence

• Desire to exploit an opportunity

• Turning a hobby / previous work experience into a business

• Financial incentive

• Push influences („necessity-based entrepreneurship“)

• Redundancy

• (Threat of) unemployment

• Disagreement with previous employer

• Desire for independence

• (Source: Stokes / Wilson, Small Business Management, pp.37-38)

• .... But: „Who is the Entrepreneur“?

12.01.2017 5 Entrepreneurship

Source: Timmons / Spinelli, New Venture Creation, p. 55

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Entrepreneurship and Innovation

Startnowhow – Seminar 1

Source: Bygrave / Zacharakis, The Portable MBA in Entrepreneurship,, p.32

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Paths of Idea Generation

• The Alertness Path:

• Discovery by constant alertness, constant scanning of environment for opportunities

• Source of ideas: Environment

• Source of differentiation: Learning

• Process: Spontaneous

• Basis of discovery: Subconscious

• Fit with entrepreneur: Typically poor

• The Search Path:

• Discovery by systematic search for a problem solution

• Source of ideas: Information channel

• Source of differentiation: Knowledge

• Process: Deliberate

• Basis of discovery: Conscious

• Fit with entrepreneur: Typically strong

• Often, idea generation is a mix of both paths

• Ideas are often generated by a combination of play, improvisation, and observation

• (from: Bygrave / Zacharias, The Portable MBA in Entrepreneurship, pp.30-31)

12.01.2017 7 Startnowhow – Seminar 3

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The Seven Sources for Innovative Opportunities

• The Unexpected

• Example: Unexpected success of IBM PC

• The Incongruous

• Examples: Invention of container ships / roll-on-roll-off ships, overnight package delivery

• Process Needs

• Examples: McDonalds, microwave ovens

• Industry and Market Structures

• Examples: Printing industry, ERP software, media industry

• Demographics

• Examples: Health care industry, universities in Turkey

• Changes in Perception

• Examples: Fashion industry, organic food

• New Knowledge

• Examples: Electricity, light bulb, internet, mobile phone, robotics, ...

• Source: Drucker, Innovation and Entrepreneurship, pp.27-117


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Creativity – The Fear Factor


Source: Bygrave / Zacharakis, The Portable MBA in Entrepreneurship, p. 37

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Characteristics of Superior Business Opportunities

• Added value

• Venture creates or adds significant value to a customer or end user

• Venture solves a significant problem

• Venture adds value by solving a significant problem, removing a serious pain, or meeting a significant want or need

• Someone is willing to pay a premium for solving this problem

• Venture has robust market, margin, and money-making characteristics

• Large enough market (min. 50 Mio $)

• High growth expectation (min. 20% p.a.)

• High gross margins (min. 40%)

• Strong and early cash flow (recurring revenue, low assets, low working capital)

• High profit potential (min. 10% - 15% after tax income)

• Attractive, realizable return for investors (Internal Rate of Return IRR min. 25% - 30%)

• Venture fits to skillset

• Good fit with founder(s) and managment team skills for that time and marketplace

• Attractive risk-reward balance

• Source: Timmons / Spinelli, New Venture Creation, p.150


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Sustainable Competitive Advantage

• Necessary: Resource bundle that is valuable, rare and inimitable

• Resources are all inputs to production process – land, raw materials, machinery, other fixed assets, patents, licenses, employee skills, management skills, knowledge, ...

• Resource bundle is valuable when it enables the firm to pursue opportunities, neutralize threats, and offer products and services that are valued by customer

• Resource bundle is rare when it is possessed by few, if any, (potential) competitors

• Resource bundle is inimitable when replication of this combination of resources would be difficult and / or costly for (potential) competitors.

• Core resource: Entrepreneurial knowledge

• In mind of entrepreneur, or in collective mind of employees / management team

• Source: Market knowledge

• Source: Technology knowledge

• Source: Hisrich / Peters / Shepherd, Entrepreneurship, pp.67-70


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Opportunity Screening Process Funnel


Source: Harper, Extraordinary Entrepreneurship,, p.127

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Classification Guidelines for the VOS Indicator


Source: Leach / Melicher, Entrepreneurial Finance, p.55

BIC ANGEL INVESTMENTS Dr. Joachim Behrendt

Phone: +90 212 328 1939 Fax: +90 212 328 1933

www.bicangels.com http:/twitter.com/joachimbehrendt http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a

Email: [email protected]

http://twitter.com/joachimbehrendt

http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a

