Business Evaluation and the 7th Filter

Will Price at Hummer Winblad summarizes an interesting Investment & Business Evaluation checklist derived from the book "Seeking Wisdom – From Darwin to Munger"

I enjoy reading Will’s posts as they include valuable insights into the venture capital thought process, a perspective on emerging industry dynamics and disruptive strategy….. and his thoughts are presented through clear, sharp writing and examples.

While the list and the book are helpful tools, I appreciate Will adding the 7th filter to the Business Evaluation checklist….

"The book’s checklist follows. While perhaps the book’s list is not perfectly suited for early stage investing….like many frameworks, the real value lies not in the specific framework itself, but in the consistent application of a mental model that ensures diligent analysis and carefully weighed decision making.

Filter 1: Can I understand the business – predictability?
Reasons for demand, Return Characteristics, Industry Structure, Real Customers

Filter 2: Does it look like the business has some kind of sustainable competitive advantage?
Competitive advantage, Value, Profitability

Filter 3: Able and honest management?

Filter 4: Is the price right?

Filter 5: Disprove
How can the business get killed? Who could kill it?

Filter 6: What are the consequences if I am wrong?

At Hummer Winblad, we add:

Filter 7 – what disruption will aid the company in driving growth?

The book is a fun read and one to have on your desk."

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