Search for Sea Changes

Probably the most profound but simple criterion for the highest poten­tial ventures came from famed venture capitalist Arthur Rock: "We look for ideas that will change the way people live or work." As a lead investor in Apple Computer and a host of other world-class start-ups, he knows of what he speaks. The best place to start in a macro sense is to iden­tify significant sea changes that are occurring, or that will occur. Think of the profound impact that personal computing, biotechnology, and the Internet have had on the past generation. The great new ventures of the next generation will come about by the same process and will define these next great sea changes. Exhibit 1.4 summarizes some cat­egories for thinking about such changes. These include technology, market and societal shifts, and even opportunities spawned from the excesses produced by the Internet boom. Certainly, Moore's Law (that the computing power of a chip doubles every eighteen months) has been a gigantic driver of much of our technological revolution over the past thirty years. New breakthroughs in gene mapping and cloning, biotechnology, nanotechnology, and changes brought about by the World Wide Web will continue to create huge opportunities for the next generation. Beyond the macro view of sea changes, how can one think about oppor­tunities in a more practical, less abstract sense? What are some param­eters of business/revenue models that increase the odds of thinking big enough and that therefore appeal to the food chain?

Exhibit 1.3  Opportunity Spawners and Drivers

Root of Change/ Chaos/Discontinuity

Opportunity Creation

Regulatory changes

Tenfold change in ten years or less

Reconstruction of value chain and channels of distribution

Proprietary or contractual advantage

Existing management/investors burned out/undermanaged

Entrepreneurial leadership

Market leaders are customer obsessed or customer blind

Imperfect information and markets

Disruptive technologies and exogenous events

Cellular, airlines, insurance, radio and television, telecommunications, medical, pension fund management, financial services, banking, tax and SEC laws

Moore's Law—computer chips double productivity every eighteen months; financial services; private equity, consulting, Internet, biotech, information age, publishing

Superstores: Staples, Home Depot; all publishing; autos; Internet sales and distribution of all services

Technological innovation; patent, license, contract, franchise, copyrights, distributorship

Turnaround, new capital structure, new breakeven, new free cash flow, new team, new strategy, owners' desires for liquidity, exit; telecom, waste management service, retail businesses

New vision and strategy, new team = secret weapon; organization thinks and acts like owners

New, small customers are low priority or ignored; hard disk drives, paper, chemicals, mainframes, centralized data processing, desktop computers, corporate venturing, office superstores, automobiles, software, most services

Intangibles, art, private equity and venture capital, antiques

Internet services, wireless telecommunications, LED lighting, handheld personal communications devices; September I I, 2001

Exhibit 1.4  Ideas Versus Opportunities: Search for Sea Changes

Where Are Opportunities Sam?

Tec	TlOlOg	-Sea	c-	ange
	■ Moc	o's L-	w
	*  Met; •  D sr	prion	_a	v

Mar-ret	Sea	Change
■Value cha	"i  C	S'LDt C"i/
obsolesce	-ce;	vu.re'ab'iity
• jeregulat	on

Co	-e
spa«	nmg
grou seer	-ids frcr
50"	sOO
fo	A

Societa	Se	a Chf	nge
"Changes leair, wo	n ' k,	,'ays \ elc	•e   !ve
•Gilce-'s L	aw	-10;	sin
10 years

3ior	bos	nur	jsF	acior
• A/rcga	ce
*       1 OSS 0 *     jeacer	pe ed	ipr "e!	e-a exe	yisio ~.—II	ling
:he tar	<er
• Exams	OS'	IB	Jl 1	3 70s	SOS;
U.S. a:	lor	ak	id	96Cs	-/Cs,
a-ge s	eel	CO	~pa	"i es

I'rariong' Exuberance ■ Cndcrva'LOd asscrs

More thematic eBooks are located at : raising capital