| The market |
- Clear definition of market – broad market vs. niche market
- Current and expected market size in next 3 – 5 years
- Large market where the incumbents earn high profit margins
- Market resilient to dramatic shifts in business and disruptive technologies
- Large and growing market with favourable demographic
- Current and future market share estimates
- Low buyer bargaining power and high switching costs
- Potential for large market share with early penetration
- Clear outlook on regulatory action
- Wide pool of qualified staff
- No large entrenched companies with superior distribution channels
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| The product |
- Revolutionary new product/technology
- Superior production technology
- Patents on product/production process
- Well tested product with large market potential
- Multiple use of product preferred or highly differentiated product
- Market test on product pricing including pricing of competing products or substitutes
- Ease of access to key production inputs
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| The business model/strategy |
- Clearly articulated model, either based on cost efficiencies or differentiated premium product/service
- Comparison between your model and competitor models
- Scope to outsource non-core activities/processes
- Concise marketing and sales plan tying back to overall company strategy
- Estimates of capital reinvestments required to sustain business model
- Good customer focus
- Scalability of business model when it comes to taking advantage of new mega trends and innovations
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| The competition |
- Early mover advantages from being pioneer of the product/concept and largest player
- Market size big enough to accommodate several players with minimal market structure disruption
- Dominant player in the market is accommodative of new entrants and doesn’t employ predatory strategies
- No competitors
- If market is crowded, scope to curve out and service sizeable market segments
- Barriers to market entry
- Attractive customer value proposition
- Key partnerships with large clients in place
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| The Management team |
- Experienced management team with good business track record
- Key management team has long-term contracts with the company
- Track record of optimal use of capital to execute strategies
- Well regarded management team able to recruit and retain the best employees
- A management team with strong entrepreneurial background
- Company is not highly reliant on founder/CEO. Clear succession planning
- A diverse well balanced aggressive team
- Management has good reputation in the industry
- Strong board in place therefore investor is not required to dedicate too much time to one portfolio company
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| The Deal terms |
- Valuation is attractive and should give high returns if successful
- Strong likelihood of high exit multiples
- Staggered funding contingent on attainment of set milestones
- Quality, experience and track record of other early investors
- Possibility of early exit or acquisition
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