Valuation Part 1

The first year TI:GER course has shifted focus from customer discovery (although those interviews are still on-going, we have one on Monday with a solar panel installation start-up in the Atlanta area) to valuation.

Valuation is being taught by guest lecturer Mark Buffington who works as a venture capitalist in Atlanta. He provides great insight into how start-ups, specifically tech start-ups, are valued in the market. Since a large majority of entrepreneurial ventures require outside capital, learning how firm value is derived is important not just to VC's but to the entrepreneurs themselves.

So far, we have learned several different valuation methods: comparable transactions, revenue multiples, and discounted cash flow. We are now moving in to monte carlo simulation modeling that will allow us to assign weights and probabilities to a variety of success levels. This is particularly important when valuing start-ups because their chance for early exit is very high. Specifically in the medical device industry, the probability of achieving FDA approval and passing clinical trials must be included in any pre-approval firm.

Learning more about how firms are valued will allow us (over the next two weeks) to create a valuation for our start-up. We're at work practicing the monte carlo simulation tools this week, then it's time to assign weights to our on probability of success. I'm looking forward to really seeing how much of an impact our choices today will affect future value.

Customer Discovery Round 2

Our first year TI:GER teams are now in the middle of customer discovery interviews. This has been an incredibly interesting process and has been my favorite TI:GER experience so far. It's interesting to see ideas and concepts formed within a small group get such varied reactions when explained to the people whom would actually use our product. 

We met on Friday with Campus Services at Emory University. Both an environmental engineer and the director were on hand to answer questions from our team about sustainable design at Emory. The campus already hosts the highest number of LEED certified buildings on any campus in the nation, so our team decided they'd be a great place to start. 

What came out of our interview was that one of our more minor "customer value propositions" (aesthetic appeal) was, for Emory, a major concern. They believe current solar technology is being held back by appearance as well as costs. This finding has certainly shifted our group's focus to aesthetic design in a strong way. 

That is, at its core, what the customer discovery process is all about. We are working towards creating a prototype that is tailored to customer needs and that involves getting out of the office to talk to customers! We have several interviews left with folks further on the construction side of the industry. Emory provided some great contacts with various links in the building materials supply chain. Hopefully understanding more about this process will allow our team to target the correct channel as well as customer to get our product to market. 

TI:GER Integration with MBA program

Our TI:GER team is still hard at work interviewing potential customers and industry players. We have found some early success in reaching out to these decision makers and influencers but still have several more to go to complete our customer discovery assignment. 

For this blog post, I'd like to talk about the TI:GER program as a whole and how it fits in with the MBA program. We're about to start the 2013 recruiting season and having spent a semester and change in the program, it seemed like a good idea to reflect about the experience. 

I see the TI:GER project as an integrative complement to my other classes. Many business school classes are case-based which provide an excellent opportunity to analyze how companies addressed various subject specific challenges. The TI:GER project is different in two main ways. First, the project is entirely new. Instead of critiquing an unsuccessful plan or praising a successful idea, the project requires more imaginative thinking to create an answer when none exists. Similar to the difference between multiple choice tests and short answer, this is an alternative way of thinking and helps reinforce concepts learned in core classes. For example, we have spent time in our Marketing class critiquing other company's plans and advertisements. This information has been used fully with our TI:GER project as we generate target segments and value propositions for our product. 

Secondly, the TI:GER project reaches across subject area. Between IP law lectures, finance valuation practice, and the economics-of-cost, we are learning the basics of all facets of a start-up company. Using a single core idea and seeing how each of the concepts relate to it allow us to understand how all the pieces fit together and influence each other. Very few jobs are "finance" or "operations" and require an integrated understanding that is often hard to learn in core classes. 

So far I have really enjoyed our project, the team dynamics, and the learnings of the TI:GER class. It provides a nice complement to the more subject specific core classes in addition to the entrepreneurship content.