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Business Model Evaluation

Imagine you are a venture capital investor who considers investing into a start up.

In terms of due diligence there is not much to analyse except a team and an idea expressed in a business plan.

What method would you use to evaluate the business model if you don't want to rely on your gut feeling alone?

Here's what I've found so far:

1) Business Model Generation (2010):

Two-fold evaluation: SWOT for Canvas as big picture and SWOT for each single component.

2) Morris, Schindehutte, Richardson, Allen (2006):

7 performance indicators: uniqueness, profit potential, internal consistency, imitability, robustness, adaptability, sustainability.

That's great so far, however unclear how to operationalise this. There seems to be no method how to actually measure this.

3) Amit, Zott (2001):

4 performance indicators in their NICE-framework: novelty, lock-in, complementarity, efficiency.

4) Hamel (2000):

4 performance indicators: efficiency, uniqueness, fit, profit boosters.

Which ones do you find useful and have you come across other approaches that can be operationalised and are therefore useful for practitioners?

Regards,

david

Tags: VC, assessment, capital, due, evaluation, indicators, investment, investors, performance, venture

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Permalink Reply by Tony Thomson on January 23, 2013 at 10:21am

Hi David,

I am relatively new to the business model canvas, but I use a range of tools of which the Business Model canvas is just one. A good tool for assessing viability and market dimensions has been developed by my good friend Lars Welinder. Have a look for him on LinkedIn and look at his one page business plan. If properly formulated for investment this clearly shows what you need to know.

tony

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Permalink Reply by brendan coram 32 minutes ago

What about evaluation through customer development / lean startup concepts? i.e. what customer feedback are they getting, and how are they pivoting the business model in their search for a business model that works?

Any ideas on how to help VCs use lean concepts in evaluating business models? I heard of a lean marketing business (based in Brisbane) that offers business model hypothesis testing. very interesting