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Volume 15, Number 8: Faculty Focus
August 2009

Listen to a 5-minute interview with Ron Close on the New Venture Project   Listen (5.1MB)   Subscribe

Ron Close, Executive Entrepreneur-in-Residence at the Pierre L. Morrissette Institute for Entrepreneurship at The Richard Ivey School of Business teaches, mentors, and leads undergraduate and graduate business students through the New Venture Project (NVP). The NVP is an entrepreneurial, team-based field project that takes students through the process from developing to launching a new venture.

Ashleigh Nimigan recently sat down with Ron to discuss the New Venture Project and its impact on students. She started by asking him to explain what the New Venture Project is and how it works at Ivey.

A. Sure, Ashleigh. It’s a project where teams of 4 or 5 students work together and with me and also with a virtual entrepreneur in residence to gain additional real world insight. In that project they come up with an idea for a new business and they do all of the research surrounding that idea, from market research and competitive research to the strategy and financial model. The two deliverables of the New Venture Project are a full business plan as well as an investor presentation, which is a very brief 20 minute investor pitch of their business plan. It’s a detailed, professional, comprehensive exercise that covers all aspects of business and about a third of those teams, I would say, actually go on to start up these companies.

Q. What are some common challenges or difficulties encountered by NVP teams?

A. I’ll give you three examples of challenges we face. The first one is if the research being done by the teams reveals that their original idea was actually a weak business idea. That could be because they underestimated the competition, or economically it doesn’t work, or they’re unable to find a way to deliver it profitably, or the technology isn’t quite there yet. There are a many different reasons why they might get a month into the project and realize it isn’t such a good idea. In which case they have to modify their idea or perhaps replace their idea with a fall back plan. In some cases they might even continue to pursue that idea even to a no-go recommendation. But generally, they will modify or replace their idea. The first challenge then really is that “gotcha feeling” when your research reveals that the original idea was weak.

The second main challenge is learning to work in a team of peers. Even though these students are adults, the New Venture Project is quite a pressure cooker. They’re dealing with the processes of decision-making, of communicating, of inclusion –are we going to make decisions democratically, does it have to be done with everybody in agreement, how do we build agreement –who calls the meetings, what are our obligation to other team members about attending the meetings and paying attention, how do we delegate the work…so there is a whole secondary sweep of learning and tools that we work on through this project about effective team working and leading from within a team of your peers.

The third challenge I’ll share with you is the difficulty inherent in summarizing a very complicated 25 or 35 page business plan into a 10 slide investor pitch or investor presentation. How do you get at the essence of what made this business idea compelling and share that very succinctly and in a compelling fashion with potential investors? That’s a real challenge.

Q. What are the benefits for Ivey students who execute this project?

A. I think one of the key objectives of the project is learning what makes a business plan compelling. What’s the difference between a really excellent, very compelling business plan and an average or a mediocre business plan? There is also good experience and exposure to thinking about risk. How do you de-risk your business plan? There is a popular myth that entrepreneurs are very willing to absorb and take risks. My experience, most of the entrepreneurs actually work very hard to take the risk out of their plan. They think about what might go wrong and how to deal with all these potential hazards. So it’s a different approach to draining the swamp, instead, identify the key risks and one by one work through to de-risk your business plan.

It also provides an opportunity to learn how to develop a useful financial model. This is a monthly bucketed forecast, probably going out 24 or 36 months, and that allows the students to really analyze different scenarios through what-if analysis. For example, what if my selling price is 19 bucks and what if I change it to 14 bucks? How does that affect my cash flow and the money I need to raise to successfully launch my business? So if you have a financial model you can tweak things up and tweak things down. What if I have to pay more for my raw material, what if I get to pay less for my raw material? That kind of sophisticated variable oriented business model using excel is a real opportunity for them to understand economic drivers of their business and where the key sensitivities and risks are economically.

Finally, I think underlying all of this stuff, the key benefit of the New Venture Project at Ivey is the confidence that students gain. It’s the entrepreneurial know-how and the confidence that they gain knowing that they can do this. They can pull stuff together, they can do the research, their ideas can be turned into really good and compelling business plans, and they can attract financiers.

That was Ron Close, Executive Entrepreneur-in-Residence at the Pierre L. Morrissette Institute for Entrepreneurship at The Richard Ivey School of Business.