Thursday, September 26, 2013

Financial estimating with zero data - what a business

I've recently had the pleasure of attending a series of seminars about angel investing.

First a shout out to the National Defense University and its associated Foundation for setting up outreach to bring an under-served population (military veterans) to the attention of the investor community. I agree with NDU that the veterans' reliability and creativity, especially under stressful situations, makes them great potential partners, and looking at the correlation between huge business successes and military service it certainly makes sense to look beyond MIT, Stanford and Caltech once in a while.

What does this have to do with governance?

○ It's good to work with people who understand the word "integrity".  But still you need to make sure the documentation is straight nonetheless.

○ Unlike Shark Tank and the true venture capital phase of a business, the angels don't expect to be handed an already thriving business. They supplement whatever factual data may be available with their knowledge of their special market areas, with the sense of how the would-be entrepreneur will be as a partner (see previous bullet) and a strong helping of gut feel.  Don't use this as an excuse to shirk your due diligence. Angels are using their own money and a lot of domain expertise and there IS no better data (they will indeed do due diligence!). If you are in the PM business you have a fiduciary responsibility to someone - the taxpayer or shareholders, or at least the executives who must make the decision.

What makes this work is a solid concept of the operation. If you really understand what problem you are trying to solve, and more or less how the solution will solve it, then you'll be able to develop a fairly coherent narrative of how the business (or project) will evolve and from there you can probably start putting some number ranges around it.  Surely the average project with much better defined situations should be able to do at least as well.


No comments:

Post a Comment