Accounting, finance & control

The pitfalls of making a start-up "investor-ready"

November 18, 2015 | 1 min read

It is often difficult for innovative start-ups to find an investor to finance their business because it is difficult to assess the business risks. Investors see high risks and, therefore, want higher returns.

During a Value Roadmapping workshop Polle-Tobias Taminiau offers MBV MIF BA investors and entrepreneurs insights into assessing the risks of an innovative start-up and making it "investor-ready."

What method do you use during the workshop?

"I use the Value Roadmapping concept developed by Dr. Robert Phaal from the Institute for Manufacturing of the University of Cambridge. This method helps look at the future and determine, through backcasting together with the entrepreneur, the roadmap to create value. There is no alternative method that does the same, that is why I am so excited about this method.
The method was published in 2009, and after I read the paper I began to apply it in my practice. I noticed that there were still some areas for improvement. So, when I was in England, I mailed Dr. Phaal asking him if we could discuss this. He was open for discussion. Robert Phaal, Joy van der Veer (senior lecturer at TIAS), and I are now working together to refine the model and will soon publish an article on our findings."

Sometimes too optimistic about the future

How does this method help entrepreneurs find financing?

"I notice that innovative entrepreneurs are so enthusiastic about their businesses that they often sketch too optimistic a future when they talk to investors. This creates risks for investors. If entrepreneurs fail to articulate those risks clearly, investors may refuse to provide funding, or they may offset risks with very high premiums.

This model helps entrepreneurs look into the future: Where will the company be in a few years' time? Where is the company today? What are the alternative ways of realizing this vision of the future? A quantitative analysis is made based on this qualitative analysis. Those figures show, for example, how revenues, costs, and working capital are expected to develop. The product or market risks are thus translated into money. A Value Roadmap helps investors form a clear understanding of how shareholder value can be created and where the pitfalls lie."

Are you an investor or entrepreneur?

Polle-Tobias Taminiau will give a Value Roadmapping workshop on November 26. You will learn how to backcast business models in a qualitative way and how to forecast to reach a realistic roadmap for value creation.

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