Entrepreneurs are the engine that drives
economic growth. Small businesses are the largest employer
group worldwide, and continue to add more jobs than any multi-national
corporate giant could ever hope to create. Entrepreneurial
ideas and new technologies will keep us in the forefront of
continuous innovation, while constantly creating new sources
of wealth.
It
all begins with a spark, an idea that eases the pain of a
dire need – a need that no one else has been able to
fill.
Pejman
Makhfi, Managing Director of VentureChoice, had such an idea.
As a serial entrepreneur, investor and consultant to the industry,
he constantly ran up against the challenge of evaluating proposed
ventures and difficulty of separating an entrepreneur’s
enthusiasm from the cold hard facts that are necessary to
gauge the viability of a project.
What is often ignored by entrepreneurs is how investors look
at their proposition. As a result, funding requests are often
rejected, leaving entrepreneurs disappointed and investors
short of investment opportunities.
As a specialist in process improvement, Mr. Makhfi was convinced
that there had to be a process-based solution. His experience
over many years of working with start-ups and investors and
his deep familiarity with successful venture models led him
to develop Heptalysis, a patent pending planning and assessment
methodology that has now been launched.
Heptalysis takes its name from the seven assessment areas
that investors use for evaluating investment opportunities
in startups or business ventures. Referring to the picture
below they are:
1.
Market Opportunity
2. Product/Solution
3. Execution Plan
4. Financial Engine
5. Human Capital
6. Potential Return
7. Margin of Safety
How
Important is Each Element?
Of
course, investment decisions are entirely subjective and cannot
be generalized. However, Heptalysis allows entrepreneurs,
consultants and investors to develop, test and standardize
their own internal model, customized to their own needs.
There are different types of investors, such as Angel investors,
Venture Capitalists, Private Equity firms and Strategic investors.
Each
category has a different view of each element and hence assigns
different weights to each. For example Angel investors would
put a much higher value on human capital than corporate and
strategic investors. Heptalysis calibration capability allows
users to adjust the elements according to their target audience
and financing preferences, while allowing for real-time adjustment
according to specific circumstances.
Answer
Simple Questions; Gain Sophisticated Analysis
The
software prompts you to answer a series of questions that
score each element’s ability to fulfill its function
or promise. These questions differ slightly depending on the
industry and revenue stage of the venture.
Based
upon your answers, Heptalysis actually graphs the viability
of each of the seven elements. A graph is constructed so that
a perfect investment opportunity corresponds to a fully symmetric
heptagon as shown below in yellow. However, most investment
opportunities will have a deformed shape. For instance, the
pink shaded area below denotes a venture’s strengths
and need for attention to risk margin and financial plan.
In
addition, the Heptalysis model can capture your confidence
level in each aspect of the assessment to visually show areas
of uncertainties that need to be dealt with. In the following
graph the blue line represents the score of the elements.
The red line represents the confidence level relative to each
score. Yellow represents areas of uncertainty.
For a more accurate reading and to simplify usage in analysis
and planning, each element can be broken down into composite
sub-elements, which collectively produce the result for the
main element.
Heptalysis
is so much more than just a collection of best practices.
Properly used, the program produces an instantly visible snapshot
of a venture’s strengths, as well as areas in need of
attention. The complementary eBook will provide guidance in
planning your venture and addressing its shortcomings.
With
extensive questionnaires, calculators, templates and other
tools, Heptalysis guides the user through a rigorous process
of planning and analysis, while leaving room to calibrate
output to specific needs.
The sophisticated graphic reporting capabilities of Heptalysis
are easily shared with team members and/or advisor. Graphs
are constructed for each assessment element and for the venture
as a whole. This enables the team to precisely zero in on
areas that require attention before presenting the venture
to investors.
Of course, investment decisions are entirely subjective and
cannot be generalized. However, Heptalysis allows entrepreneurs,
consultants and investors to develop, test and standardize
their own internal model, customized to their own venture
needs.
Web-based and easy to use, Heptalysis simplifies sophisticated
mathematical modeling techniques to help you plan, develop,
and pitch your venture successfully – every time.
