Starting a new business - framework

Question 1

Two brothers from Ireland want to start a travel magazine. They’ve come to us for strategic advice and help developing a business plan to get started. What do you tell them?

How would you approach this problem?

Answer 1

1. Investigate the market to determine whether entering the market makes a good business case
2. Once we determine there are no significant barriers to entry, then we should look at the company from a VC POV. Would you as an outsider, invest in this start-up? Would you rinks your own money? VC don’t simply buy into an idea or product, they invest in:
3. Management
4. Market and strategic plans
5. Distribution channels
6. Products
7. Customers
8. Finance

Question 2

[New Business] What do venture capital firms invest in? (6)

Answer 2

1. Management
2. Market and strategic plans
3. Distribution channels
4. Products
5. Customers
6. Finance

Question 3

[New Business] What questions do you ask to assess the market to determine whether entering the market makes good business sense? (4)

Answer 3

1. Who is our competition?
2. What size market share does each competitor have?
3. How do their products/ services compare to ours?
4. Are there any barriers to entry? These include: capital requirements, access to distribution channels, proprietary product technology / government policy?

Question 4

[New Business] What questions would you ask to assess management? (4)

Answer 4

1. What is the management team like?
2. What are its core competencies?
3. Have they worked together before?
4. Is there an advisory board?

Question 5

[New Business] What questions would you ask to assess market and strategic plans? (3)

Answer 5

1. What are the barriers to entering this market?
2. Who are the major players and what kind of market share does each company have?
3. What will the competitive response be?

Question 6

[New Business] What questions would you ask to understand the products? (4)

Answer 6

1. What is the product / technology?
2. What is the competitive edge?
3. What are the disadvantages of this product?
4. Is the technology proprietary?

Question 7

[New Business] What questions would you ask to understand the customers? (4)

Answer 7

1. Who are your customers?
2. How can we best reach them? Can we reach them on the Internet?
3. How can we ensure that we retain them?

Question 8

[New Business] What questions would you ask to understand the finance? (3)

Answer 8

1. How is the project being funded?
2. What is the best allocation of funds?
3. Can we support the debt? (What if interest rates change? What if the economy turns sour?)