[VICTOR V. BUBUIOC] Winning Angels: Insight Into Entrepreneurial Financing: Part 2: Evaluating

[BUBUIOC INC.]

“Good judgment comes from experience and experience comes from making bad judgments” - Amis & Stevenson.

Last week we talked about Sourcing (please see article here)  - the first step in entrepreneurial financing aimed at exploring the fundamentals of early stage investing. Sourcing, as you might recall, refers to identifying entrepreneurial projects that represent potential upside value and positive future returns.

As promised this is a follow-up that will discuss the Evaluating aspects of early stage investing. Evaluating is closely related to sourcing (first step). In fact some investors do most of the evaluating as part of the sourcing process. Basically a great Sourcing process provides for easy Evaluating. Evaluating is relatively easy to understand. The hard part is doing it well.

Some investors spend very little time evaluating an opportunity. However, for most, to do it well, it takes a considerable amount of time. This is why the first part, sourcing, is so important – it saves lots of time when the deals are well screened ahead of time.

Every investor has his/her own checklist of elements that contribute to the success of a particular venture. Like all else in life, there is no magic bullet when evaluating an opportunity. Every deal is different, and as such requires various elements for its success.

In his 1996 HBS Publishing, Some Thoughts on Business Plans, William Sahlman identifies four elements essential to the success of a venture - The Harvard Framework. These are: people, opportunity, deal, and context. (For more information on the Harvard Framework please see How To Be an Angel Investor). Mr. Sahlman argues that if any of the four elements is out of sync, failure is likely. Throughout my research, The Harvard Framework has held up pretty well. The People and Opportunity elements have resonated most.

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Posted By BUBUIOC INC. to VICTOR V. BUBUIOC at 6/02/2013 10:41:00 PM