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MS&E 272 April 5, 2005
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Concept of FIT People & Resources Context Opportunity Deal Experience
Skill Contacts Attitude Knowledge Favorable Sociological Factors Context Macroeconomy Tax Regulatory Sociopolitical Appropriate Risk/Reward Allocation & Incentives Investor Value-Added Opportunity Appropriate Knowing & Being Known Favorable Technology Macroenvironment Favorable Rules of the Game Opportunity Entry Barriers Customers Suppliers Substitutes Rivalry Economics Deal Allocation of Risk/Reward Incentives Signals Sorting Consequences Project Appropriate Financing Option Preservation
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Opportunity Market Size Who is Customer? Compelling Value? 10X?
Proprietary Advantage? Competition Cash Flow Characteristics
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People Experience (vs the “ideal”) Know and Known Ambition/Objectives
Commitment Attract Who?
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Deal Simple? Fair? Durable? Reward the Right Behavior?
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Context Why now? Who’s watching? Dislocation? Regulation?
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Concept of FIT People & Resources Context Opportunity Deal Experience
Skill Contacts Attitude Knowledge Favorable Sociological Factors Context Macroeconomy Tax Regulatory Sociopolitical Appropriate Risk/Reward Allocation & Incentives Investor Value-Added Opportunity Appropriate Knowing & Being Known Favorable Technology Macroenvironment Favorable Rules of the Game Opportunity Entry Barriers Customers Suppliers Substitutes Rivalry Economics Deal Allocation of Risk/Reward Incentives Signals Sorting Consequences Project Appropriate Financing Option Preservation
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Dynamic FIT Management
People & Resources New Hires Exits Management Structure Change (Good & Bad News) Change (Good & Bad News) Opportunity Cost Robustness Flexibility Sensitivity Incentives Ability to Attract or Abandon Resources Insurance Context Technology Factor Prices New Rules Robustness Option Preservation Exposure Management Flexibility Iteration Opportunity Entry Substitutes Customer Response Pricing Growth Options Deal New Capital New Employees New External Deals Option to Abandon Flexibility Incentives Anticipation What Can Go Wrong? What Can Go Right? Response Risk/Reward Management Learning Experience Pattern Recognition
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Risk Factors Management/Execution Competition Technology
Market/Customers Capital Regulatory Structural (Industry)
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Managing Risk Avoid too much at once Avoid compounding
Identify! Don’t ignore (be honest) FOCUS!
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