Business Model Validation

The following are among the hundreds of issues that we consider when determining the validity of business models:

• What is the firm's susceptibility to the Icarus Paradox?
• What kinds of adaption chain risks are inherent in the business model?
• What degree of exposure does the business model have to the Las Vegas conundrum?
• What is the significance of "veto power" in business models?
• How compressible is the business model?
• Are the company's products guilty of technology overfitting?
• What kinds of principal / agency risks does the company face?
• How high are the customers' switching costs?
• What is the business's exposure to platform transition risk?
• How viable does the business plan appear when considering analogs and antilogs?
• What kind of evidence do you have regarding the business model's portability?
• What is the symmetry between the business model and its stakeholders?
• How clearly has management delineated customer migration paths?
• How should analysts divine the predictive power of endorsements for a product launch?

The following are among the components of business models that we review:

• Market size projections
• Industry growth drivers and hurdles
• Intensity of competition
• Power dynamics vis-a-vis supplies, distributors and customers
• Robustness and redundancy of supply chain
• Capital intensity
• Sales cycles
• Liquidity sufficiency
• Pricing strategy
• Marketing strategy
• Profitability analysis
• Management team cohesiveness
• Capital efficiency metrics