By now you should have received your grades on this assignment. If you have not, please contact me.

As you now know, this was not an easy assignment. It is a subjective
area and there is no one-size-that-fits-all answer. I was very
impressed by your papers. Everyone in the class did well on the
assignment with several earning bonus grades for going to the trouble
to test their scorecards on actual investors.

I hope you will try to grade your group projects with your respective
scorecards as this will help you to create a stronger final paper and
pitch. In an ideal world, I would have liked to see you roll up your
findings with those of your teammates to devise a team version of the
scorecard that we could debate in class. Unfortunately, we don't have
the time.

As I graded your papers over the weekend, I tried to keep a running
list of the most common scorecard features to share with you when we
summarize in class. This list is by no means complete or organized
according to any particular classification. I trust the following will
help you if you decide to use your scorecards outside of the class.

 

Target Audience for Scorecard

• angel investors, entrepreneur looking to determine investor
  readiness, some may apply to VC or businesses looking for M&A
  prospects

Deal size

• criteria for selection (ranges)

Showstopper, Deal Breaker

• criteria that eliminates deals from consideration
• eliminate deals that have fundamental flaws or not
  relevant from those, keep those that hold promise or that can be remedied

Other attributes

• - simple categories
• - appropriately weighed
• - rationale for weight is clear and adjustable for
  specific industry segments

Purpose of Scorecard

• objectively evaluate an opportunity
• compare opportunities
• predict probability of success
• mitigate risk, make better decisions
• speed up decision-making
• filtering mechanism to identify prospects worth
  investigating further,
• screening mechanism
• identify best reward opportunities for risk
• balance speed and accuracy
• encourage objectivity
• meet risk profile of investor
• match stage of investment with investor interest

Entrepreneur

• - track record
• - public company experience
• - merger/acquisition experience
• - investor in venture?
• - entrepreneur business experience?
• - will to win

Management team

• - management team cohesiveness
• - management team experience together
• - entrepreneur/team trustworthiness
• - entrepreneur/team references
• - openness to coaching/participation

Board

• - advisory board?
• - formal board of directors?

Other Management

• - goals realistic
• - team familiar with industry
• - team contacts in industry
• - team organizational skills
• - team ability to execute (experience with similar
  projects)
• - team focus (100% effort?)
• - have they invested own money?

Product/Service

• - can be patented?
• - other barriers to entry?
• - functional prototype?
• - can product or service be produced cost-effectively?
• - regulatory issues?
  (e.g. subject to regulation)
• - interest rate dependence
• - resistant to obsolescence? (rate of change)
• - service revenues?
• - liability risk?
• - existing fee structure that is tested?
• - must have vs. nice to have, solves a significant problem

Market

• - existing market or new market?
• - market growing
• - niche market?
• - Dominant player?
• - distribution channel?
  (go to market strategy)
• - lots of competition? Needs time to become profitable
• - demographics - boomer?
• - potential for strong market position
• - competitive advantage
• - early mover advantage
• - compelling and sustainable market differentiation

Control

• - dependence on highly skilled labor?

Financial

• - ROE of 15X+ within 5 years?
• - payback period

Business model

• - scalable

Other

• - actual or threatened litigation?
• - realistic valuation
• - other investors
• - at or approaching profitability

Investor fit

• - fit the amount investor can invest?
• - fit profile of investor experience
• - geographically close

Business Plan

• - realistic?
• - sources?
• - sufficient detail?
• - reasonable financial projections?
• - risks outlined?

Request

• - $ amount and equity stake clear?
• - control clear?
• - use of proceeds clear?
• - controls on spending clear?
• - exit clear?
• - ROI supported by comparables?