The Opportunity

							The Opportunity
The Opportunity Recognition
        Process

   Complex
   Subtle
   Situational
   Dynamic, changing process.
   Pat Answers don’t work
                   The Idea

   It’s a tool in the hands of an entrepreneur
   A beginning point out of which an opportunity
    grows
   Ideas are inert and basically worthless – the
    better mousetrap fallacy.
   An idea is narrow in focus
      Nylon vs Dupont
      DOS vs Computer Operating systems

   Brainstorming can generate ideas from a
    group
           Creative Thinking

   Creativity peaks at around age 6
   From that point on, rules and no-no’s
    structure our thinking and squash creativity
   Evidence that creativity can be enhanced by
    training and practice
    Entrepreneurial Creativity

   The conversion of ideas into businesses is a
    function of pattern recognition
        Using your experience as the glue to piece
         together various parts of an idea into a three
         dimensional whole.
         The Business Opportunity

   Attractive, durable, timely
   Anchored in a product or service that adds value for
    the customer
   It occurs when:
        A window of opportunity is opening
        Market has the right characteristics
        The team can achieve entry
        The venture has a sustainable competitive advantage
        Economics are rewarding and forgiving
        Significant growth potential
The Business Opportunity-General
          Statements
       Ideas interact with real world conditions and entrepreneurial
        creativity, at a point in time to yield an opportunity around which a
        venture is created

       Opportunities are spawned during times of chaos and change.

       Large amounts of capital are not necessary

       Windows of opportunity timing and recognition is important

       Being able to recognize the opportunity from among competing
        ideas, recognize that the window of opportunity is open, in times of
        chaos and uncertainty in order to create a venture that will be
        successful has a strong component of luck.

   See page 92, Exhibit 3.8 for criteria for evaluating
    venture opportunities
             Where to find ideas
   Buy a business
       Geneva Companies
   Buy a Franchise
   Patients-
       Patent Brokers
   Product Licenses
   Not for Profit Research Institutes
   Universities
    Where to find ideas-Industry and
           Trade Contacts
   Trade Associations
   Customers
   Competitors
   Former Employers
   Professional contacts
   Consulting
   Networking
        How to evaluate each idea --
                  quickly
   The quickscreen
       A method of saying no to a lot of ideas
       The four anchors of a successful business
  Four Anchors that Define the
Opportunity as a Superior business

1.   Create or add significant value to a
     customer or end user
2.   Solve a significant problem or meet a
     significant want or need for which
     someone is willing to pay a premium
  Four Anchors that Define the
Opportunity as a Superior business
3. Possess robust market, margins, moneymaking
     characteristics
     a. Large enough market (at least $50 million)
     b. High enough growth rate ( 20% per year)
     c. High gross margins
     d. Strong and early free cash flow
     e. High Profit Potential (10-15 % after tax)
     f. Attractive, realizable returns for investors (25-30
     percent IRR)
  Four Anchors that Define the
Opportunity as a Superior business
4. A good fit with the entrepreneur’s
  personal criteria and needs, and with the
  management team’s needs, at this time
  and in this marketplace with a risk/reward
  balance
        Quick Screen Template
   See page 121 for details.
   Select an idea that intrigues you and do a
    quick screen exercise.
   Start with the exercise 1 on page 123.
   Then, evaluate the potential opportunity
    using the four anchors.
             The Quick Screen
   What is the value for the customer?
   What problem will it solve for him for which he
    will pay a premium.
   What is the market size?
   How fast is it growing?
   What is your gross margin ?
   How much free cash flow will you have?
   How much cash will you need and what will you
    spend it on?
   What wil the IRR be? Will it be attractive for
    investors?
            The Quick Screen
   Is this a good fit for you? --- yes, you!
   How much risk is there and how willing
    are you to shoulder that risk?
   Is it a good fit for you now? After
    graduation?
   What kind of team will you need?
           The Quick Screen
   When you are finished, go back and
    rewrite the exercise 1 with what you now
    know.