Feasibility Calculator
Santa Fe venture capitalist David Silver, author of Smart Start-ups, (John Wiley & Sons, June 2007) has boiled venture backing feasibility down to a formula: V = P x S x E. In Silver's First Law of Entrepreneurship, V stands for valuation or wealth, P is the problem that the business intends to solve for its customers, S is the elegance of the solution that it will offer, and E is the skill of the entrepreneurial team.
A maximum for any P, S and E is 3. A zero on any item will produce a value of zero. In addition, Demonstrable Economic Justification (DEJ) factors, of which there are eight, are each worth 1 point. Finally, up to 10 more points are awarded for "Float Many Clubs." If your business will receive money from customers in advance (float), you can receive anywhere from 1 to 6 points. If you're able to generate revenue from multiple channels then you can earn another 2 points. If your customers band together in groups or "clubs," you can tack on another 2 points.
Taking all these criteria, the top score is 45, figured by multiplying 3 x 3 x 3 to get 27, and then adding 8 points for having all DEJ factors and adding 10 for a perfect score on the last three factors. An idea scoring a perfect 45 is a business Silver will likely back.
So how does your idea stack up? Punch your numbers into the calculator to find out.
$250 million to $999 million
Under $250 million
First to market, difficult to replicate
First to market
| Entrepreneurial team has managed a launch before; knows how to operate a company. |
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| Entrepreneurial team has at least one person who has launched and operated a company before. |
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| Entrepreneurial team has no prior launch experience. |
| There are many potential consumers of your solution and are they aware of the problem that your solution addresses. |
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| The consumers of your solution will accept a standard product or service, and you will not have to customize it. |
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| You don't have to tell your customers that they have a problem; they are aware of it and are willing to pay for a solution. |
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| The solution delivery system does not require an expensive sales person and long cycle from presentation to sale; a competent sales person could make the sale quickly. |
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| No restrictions must be removed before your product or service can be introduced into the market, e.g. FDA approval. |
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| The product or service will not require advertising on a grand scale. Instead, the benefits of the product or service will get passed along by word of mouth. |
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| Your company can be built quietly without news leaking out in the press or otherwise, thus preventing accidental or intentional competition. |
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| Your product or service's gross profit margins will be high, around 80 percent. |
| Total: |
Silver says if your total score is 35 or greater--launch it! |
