The Rich-Gumpert Evaluation System
I sat through six start-up company funding presentations at the OCTANe VC in The OC event [ www.vcintheoc2011.com/main.html ] last week. I am glad I did as I refreshed myself on what it takes to have a fundable deal. Each of the presentations, to varying degrees, was fundable because of two main attributes, the status of their product/service and the status of their management team.
Rich and Gumpert's system lays it all out on a simple one page graph with product/service status on the y axis and management status on the x axis (Rich, 169). Each is labeled one to four with a 1:1 deal having a "single, would-be founder-entrepreneur" and a "product or service idea, but not yet operable," with the "market assumed." The "most desirable" deal, a 4:4 deal has a fully developed product or service, many satisfied users, an established market and is fully staffed with an experienced managegment team.
Chuck Copin's presentation at OCTANe [ Renewit http://0101.nccdn.net/1_5/1e6/180/1d6/Renewit.pdf ] is a good example. Renewit has sales, which also means the product is fully developed and, basically, embraced by a market place. As importantly, they've taken the time to figure out what their marketplace is. Sales channels are identified, competitors named and strengths/weaknesses pointed out. So the market is described, the product developed, and maybe, a market developed. On the Rich-Gumpert scale, they might be a 3.5 for Product/Service Status.
People-wise, Renewit has a CEO and a Founder with two highly experienced advisors. We don't have a business plan, nor do we know who is managing production and the rest of operations. They're asking for $0.7 million. We might assume that some of the money is going for experienced managers, but we don't know for sure based on the limited information we have so far. Since they are in production and shipping, we can assume that they are out-sourcing, a useful, proven way to go in today's global marketplace. Maybe we can give Renewit a 3.0 for Management Status. Without a full business plan, we have been able to score Renewit's deal as a 3.0:3.5 which actually is a pretty good score. With more information, we might score it differently.
Now comes the hard part. How does your company score on the two scales? Will investors - or maybe, the bank - agree? That's the real test.
Reference
Rich, Stanley R. and David E. Gumpert. Business Plans That Win $$$. Lessons From the MIT Enterprise Forum. Harper & Row. 1985.