JAMES F. WRIGHT, Ph.D Ltd. Co.
"Monte Carlo Risk Analysis and Due Diligence of New Business Ventures"
by James F. Wright, PhD
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JAMES F. WRIGHT, Ph.D Ltd. Co.by James F. Wright, PhD |
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(In Alphabetical Order of Reviewer's Last Name) Ravi E. Dattatreya, Managing Director and Kevin Nee, Managing Director Quellos Group, LLC Seattle, Washington June 7, 2002 - "Many private equity teams speak of a careful due diligence process that all too often has not existed because it has been hidden by the high rates of return realized in the mid- to late-90s. Jim Wright's book addresses the problems in technique that led to many faulty analyses of these failed investments by taking the position that a more rigorous stochastic approach to investment analysis should yield better investment results. There is great value in this approach and such rigor and discipline is currently not present within many private equity firms. Wright's book covers the due diligence of high-risk investments, including those that utilize new or emerging complex technologies. The risk of these projects is quantified by the use of the Monte Carlo process, which requires the disciplined and methodical analysis of the data used by the investment model. There are examples and ready-to-use Monte Carlo Risk Analysis software on a CD included with the book to help the reader quickly apply this methodology. The private equity industry would certainly improve the accuracy of their analysis of investments if Wright's methods were followed. I recommend this book to my colleagues in private equity groups and to all others evaluating investment proposals." Peter Freund, Managing Partner Bank One Ventures New York City, New York June 5, 2002 - "As a VC (Venture Capitalist), I am always seeking better methods to analyze investment opportunities. Jim Wright's book takes that analysis to the next level. Monte Carlo simulation techniques have repeatedly proven their value in addressing some of the world's most complex problems. Unfortunately, the technique is inherently very compute intensive, until now placing its use beyond the reach of most business analysis. A combination of Moore's law, and Wright's very clever unsymmetrical Gaussangular DistributionsTM, now permit ordinary PC/spreadsheet users to employ this very powerful tool. Wright has distilled his many years of field experience into an easily followed, step-by-step, approach to providing very insightful statistical evaluations of complex technical projects. Implementation is facilitated by ready-to-use software and support included on a CD with the book. Monte Carlo Risk Analysis is not only suitable for the most complex problems; it can very usefully be applied to most any business analysis. Within the context of VC investments in speculative, new technologies, Wright's book provides a very potent approach to identifying and quantifying the metrics for success. I highly recommend Wright's book to anybody analyzing business ventures." Philip M. Hamilton, CPA/ABA, CBA, CVA, BVAL, CFE Certified Business Appraiser Austin, Texas June 7, 2002 - "Jim Wright's book far exceeded my expectations. I was prepared to review a book that was strong in mathematics and Monte Carlo Analysis and weak in how to apply this to real-world valuations. Instead, I found a book that business valuation professionals need. Jim provides the software, clear information on how to use it, and methodologies for rigorously analyzing the factors that are critical to reasonable inputs to Monte Carlo. This book shows how to perform both critical parts of risk analysis: Rigorously analyzing the relevant factors and then quantifying the risk in a valid, understandable way. This will help business valuation professionals take their work to a higher level. This book explains the critical importance of quantifying risk...and then provides both the tools and the methodologies to do so in the real world. And does so in a valid, understandable way. This book shows exactly how to thoroughly analyze and quantify risk in the real world...and includes the software to do it! This book shows how to analyze external and internal factors and use this assessment to quantify the risk of any new venture! The methodology encompasses both qualitative and qualitative analyses. Valuation professionals must evaluate risk. This book provides both the methodology and the tools to quantify risk in a far superior and understandable way! This book comes from a wealth of knowledge and real-world experience. It shows the reader how to perform the overall analysis so that the inputs to and results from Monte Carlo analysis are cogent and understandable." Hassan K. Hosseini, Ph.D. Associate Professor of Operations Management Global Business Department Thunderbird, The American Graduate School of International Management Glendale, Arizona June 17, 2002 - "While, for many decades, simulation has been the most commonly used technique available for risk analysis of a variety of complex systems, its meaningful popularity, outside engineering and the sciences, has only started to build. James Wright's book provides a comprehensive guide to the application of the Monte Carlo simulation tool as a means of uniquely quantifying the risk associated with any technical investment project. Even though Wright's book specifically addresses the most complex case of evaluating "technical projects" the process is readily applicable to evaluate high-tech and other investment projects. In Part I, Wright's innovative method of presenting technical due diligence, with its step-by-step approach to building a complex system, contains several practical examples. It is an excellent introduction to the use of Monte Carlo simulation to a broader audience with common interests in venture capital. In Part II, he covers different commonly used discrete and continuous random variables with relevant examples. In this part, Wright's extensive reviews of triangular and angular random distributions, and their applications in analyzing risk for technical projects, provide a helpful approach to simplify the application of the Monte Carlo simulation in other areas. Several user-friendly computer files in an accompanying CD offer opportunities to quickly simulate different systems. Monte Carlo Risk Analysis and Due Diligence of New Business Ventures is an excellent reference for MBA programs with a concentration in finance, entrepreneurship, and technology management." View Publisher's Comments View the Table of Contents |
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(Last Modified 10/15/02)