1. Opportunity Assessment
ELEC5701
Opportunity Assessment
sdfl
Matt Barrie Bill Bartee
Chief Executive Managing Director
Freelancer.com SXVP
Matt Barrie

2. Opportunity Assessment
“Every problem is an opportunity”
-- Vinod Khosla (cofounder of Sun & VC)

3. Opportunity Assessment
“No problem, no market.”
-- Vinod Khosla (cofounder of Sun & VC)

4. Characteristics of opportunities include:
Introduction
An opportunity is a favourable set of circumstances with a good chance of success.
Characteristics of opportunities include:
Timeliness (not too early and not too late)
Known the “solution” to a particular problem
Important
Profitable
Favourable context

5. Ideas are easy to find but hard to evaluate
The Challenge
Your challenge is to:
Seek important opportunities with valuable potential returns
Select one in a short time period
Creatively explore the opportunity and create a valuable solution
Convert the opportunity into a workable and marketable business
Ideas are easy to find but hard to evaluate
How do we find opportunities?

6. Finding Opportunity
“How many opportunities you find is proportional to how many overlooked things you discover” -- Donald Latumahina 
Opportunities sometimes come out of personal need (Necessity is the mother of invention)
Opportunities sometimes come out of crisis or tragedy
Sometimes they come out of personal experience
Some great opportunities arise from cross-pollinisation
Some opportunities arise from development of other disruptive technologies (e.g. the Internet, stem cell therapies)

7. Finding Opportunity
Sometimes its just being at the right place at the right time
Some opportunities arise due a shift in legislation or government policy
Sometimes they are found by accident
Often they are disguised as problems
To describe a good opportunity you should be able to describe the customer’s pain.
A new technology by itself is not a solution.

8. Nine Categories of Opportunity (Byers)
Increasing the value of a product or service
New applications of existing means or technologies
Creating mass markets
Customisation for individuals
Increasing reach
Managing the supply chain
Convergence of industries
Process innovation
Increasing the scale of the firm
1. Fair Trade Coffee 2. Applying credit card technology (mag stripes) to hotel door locks. 3. Disposable cameras 4. Dell 5. Expanding online 6. Walmart 7. Genetic engineering (electron microscope, micromanipulation and supercomputing 8. Fedex 9. Consolidation of US railroads

9. Trends can create opportunities
Examples of Trends
Growth in computing power, cloud computing
Reach of the internet, demographics
Spread of mobile communications, personal area networks
Miniaturisation of technologies
Change in lifestyles
Rising middle class in developing nations
Cloud computing
Aging of the population
1. Fair Trade Coffee 2. Applying credit card technology (mag stripes) to hotel door locks. 3. Disposable cameras 4. Dell 5. Expanding online 6. Walmart 7. Genetic engineering (electron microscope, micromanipulation and supercomputing 8. Fedex 9. Consolidation of US railroads

10. Opportunities can be found where there are discontinuities
Society
Technology
Markets
Aging society
Innovation
Deregulation
Lifelong education
Disruptive technologies
Supply chain disruption
Food & population
New knowledge
Globalisation
Regulation
Opportunities can be found where there are discontinuities
Entrepreneurs add value to an opportunity by creating a response to it
This works best when there is a good fit with the team’s experience, skills and passion

11. Evaluating Opportunities
How do you make money?
Can you express the problem and opportunity clearly and concisely?
Invest less time and effort in evaluating the opportunity than it will be worth in 1-2 years
Spend time to do detailed analysis of the current state of the market and where it will be in 3-5 years
Does the idea lend itself to building a company or is it a one hit wonder?
Can your team execute on the idea?

12. Evaluating Opportunities
Will the customer enable you to profit from the opportunity?
How large is the market? Do you believe this? Segment the market.
Who will buy the dog food? Why will they buy? How much will they pay? How long does it take to sell to them? Is the sales process repeatable and scalable?
Is the expected return consistent with the risk?
What is the opportunity cost of pursuing this venture?
If the opportunity doesn’t work out, can you fail fast with minor losses?

13. Evaluation Frameworks
See the course blog for frameworks for the top VCs
Factor 1 2 3
Problem to be solved (P)
Small
Under $100M
Medium
Up to $1B
Large
Over $1B
Sophistication of solution (S)
Non-proprietary Tech AND Non-existent channel
Either proprietary Tech OR
In-place channel
Proprietary Tech
AND
Quality of Entrepreneurial Team (E)
Inexperienced Team OR No Team
Some Related Experience
Deep Background of Experience
P, S, E out of 10
D = demerit points
Value = P * S * E – D

14. Is the whole team committed and passionate about it?
Finally
Is the whole team committed and passionate about it?

15. What to do next
Describe the problem
Write the elevator pitch
Write the vision for the company
Write the mission statement
What is the business model?
Why is your solution compelling and does it have a sustainable competitive advantage?
Write up an executive summary
Do some basic modelling (e.g. how do you make $1m?)