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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David,

Not sure what the problem is with the pdf file.

This is my email address:

paul.anderson@soundgovernance.com.au

Reply to that and I will send you the pdf by email.

Cheers

Paul Anderson

David

 

I agree that although SWOT is useful, it can be limiting especially for start ups.  I think Morris et al's model can be further expanded upon. For example to measure profit potential one can maybe underpin that concept with Porter's 5? Perhaps we can overlay sustainability with macro factors (GDP) and industry / near industry growth too. NICE is brief and to the point.

 

Lydia

Lydia and David,

 

In fact, I believe that the SWOT analysis has a great vulnerability, by its subjectivism. The SWOT must be preceded by a deep research before being confident enough to be considered as a model for business model evaluation.

This is a good concept to „separate the wheat from the chaff“ http://vencorps.com You could adapt the concept or contact participants of that site. I believe that this is a great concept. After all any new invention is for the market out there why not let them decide if they like it or not. After that selection you can still use your other evaluation tools.

 

BTW: I have a start-up in the works (business planing, filing patent etc.) and searching for Investors. Would you be interested in hearing more?

 

Regards,

 

Tansel

For me an important issue, about valuating a new business model, its related to create a powerfull lock-in with the customer.

 

Best regards,

Arturo

I prefer BMG because of the visual and focussed approach. nI also advise customers on the other end. Them who want to sell (part of) their company. Instead of just polishing the frontdoor, BMG helps them to further focus and get the optimum in valuation due to the BMG results and follow up.
Clean Tech Open (www.cleantechopen.org)  uses BMG in a way that allows for evaluation.  The Canvas is used as an idea generation platform.  The flexibility of the model allows what the group calls "strategic pivots".  After a Canvas is developed, the team then sets out to create a business plan.  The business plan is scored using a developed evaluation system specific to Clean Tech projects.

In my opinion, start-up venture capital is for the entrepreneur who is ready to challange and overcome all kind of risks with passion. Therefore, I recommend that his experience with passion + another pipeline of key resources which can help the guy overcome the risks are added to your success factor list. 

Sincerly

Is your intent to develop Business Model Canvas sheet for the four analyses tools?
I would also add to your list the last post from Alex :

7 QUESTIONS TO ASSESS YOUR BUSINESS MODEL DESIGN

Is there any example of The Canvas Analysis of Joint Venture company? More interested in that than the evaluation of the Business Model. I might be naive or plain wrong, but since intuition and common sense play a great part in business success, too much emphasis on the method of evaluation of Business Model , I think is unnecessary. Anyway I appreciate this work very much, but I don't read all of the evaluation method, just focus on the BMG model...

Hi David,

tried to find the literature, without success. Could you specify the source of  Morris, Schindehutte, Richardson, Allen (2006)?

Harald

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