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 2015

• 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.)

• Each session will end with test elevator pitch by seminar participant

• Seminar materials can be downloaded after the event

• Mondays 17.15h – 19.30h

• Next session: Mon, January 12th, 2015

• TOPIC: Planning, testing and developing a business model

• SPEAKER: Ömer Erkmen, Ideasoft / Mekanist, Angel Investor

• Certificate provided for participants joining at least 7/10 sessions

• Early registration for each session required (eventbrite), capacity 50 people!

• Priority for regular participants

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StartNowHow - Seminar Topics (preliminary)

1. Mon, 20.10.: The entrepreneurial ecosystem in Turkey

2. Mon, 10.11.: Entrepreneurship as a profession

3. Mon, 8.12.: Opportunity recognition and evaluation

4. Mon, 12.1.: Planning, testing and developing a business model

5. Tbd: Market and competitor research

6. Tbd: Financial planning for startups

7. Tbd: Marketing planning and control – the role of key performance indicators

8. Tbd: Funding the startup – stage financing for ventures

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

10. Tbd: Success and failure as an entrepreneur


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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)

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Creativity – The Fear Factor


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

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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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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

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K StartNowHow - Outlook

• Today‘s materials will be made available to participants for downloading

• Next Seminar: „Planning, testing and developing a business model“

• Guest Speaker: Ömer Erkmen, Ideasoft / Mekanist, Angel Investor and Mentor

• Monday, 12.1.2015, 17.15 – 19.30h

• Don‘t forget to register early (eventbrite) - capacity 50 people!

• Priority for participants / registrants from today‘s session

• General rule: Allocation of seats according to participation

• Regular participation = certificate (70% participation)

• Be prepared to pitch!


• Status

• Idea Stage, Product / Service not yet / not fully developed

• No / limited market test, no users, no customers yet

• Limited business know-how, limited knowledge about market, monetization

• Legal unit not yet created, organization not defined

• Too developed for continuing in incubation center, too underdeveloped for angel investment

• Special Needs – “Continued incubation”

• Development and testing of minimum viable product, support for product / service development

• Support for market analysis, market testing, initial market access

• Mentorship (not only monthly but weekly or more frequent support), continuous management consulting needed

• Limited financial support (normally up to 50,000 TL)

• Setup of legal unit and establishment of backoffice services should only happen if startup progresses to next round (seed round)

• If promising, preparation of investor pitch, access to investors for seed round PR

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Characteristics of Early Stage Startups

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BIC Angel Support


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BIC Angel Support

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Source: Timmons, J.A./Spinelli, S., New Venture Creation, p.433

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Investor Role in STARTNOW Pre-Seed Track

• Passive

• 1-2 times a year.

• You invest with others and receive information on the company like all other shareholders. A shareholder meeting is usually held once a year.

• Active

• Average 0.5-2 days a month alone or as a group.

• Usually as a Board Member or Advisor. When you make the investment you have to decide whether or not you want to be on the Board and negotiate it as a term.

• Very Active

• 1 day a week alone or as a group.

• Usually playing an operational role. Need to discuss upfront if you will be compensated for it and if yes, how much and split of cash and equity.

• Adopted from: GoBeyond, Early Stage Investing, Business Angel Training, September 2012


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STARTNOW Pre-Seed Track

• Pre-Seed Track: The Investment Process

• Initially personal and “Convertible loan” by pre-seed investors to founders

• Investment driven by strong lead investor, “personalized deals”

• No formal pitching to group but individual sessions with potential leads

• Very active but informal role of lead investor, BIC and other mentors before incorporation

• Target: Development and testing of minimum viable product

• Target: Development of scalable and profitable business model

• If promising, incorporation of business or integration into existing company at the end of the program

• In case of incorporation, setup of AS with 50,000 TL share capital

• Conversion of initial investor loan into share capital at pre-agreed valuation


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STARTNOW Pre-Seed Track

• Pre-Seed Track: The Deal

• Duration of program: 3 + 3 months

• First 3 months: Build your minimum viable product

• Second 3 months: Gain initial traction

• Evaluation and investor approval for second phase necessary

• Investment of 50,000 TL (cash & services) against equity

• First phase: 10,000 TL cash + 10,000 TL services

• Second phase: 10,000 TL cash + 20,000 TL services

• Investment by lead investor (or lead investor group) and BIC

• 25,000 TL provided by lead investor or lead investor group

• 25,000 TL provided by BIC Angel Investments

• Custom-made deals, start and end possible at every time

• Individual program and individual mentorship for each startup

• Key: Active lead investor knowledgeable and connected in startup’s market

• “Fast track” to BIC seed program (2nd round meetings) if both phases are completed successfully, access to other other investors if meaningful

• Approval by both lead investor and BIC necessary for progression to seed


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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

