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Purchase Dr. Wright's timely Report titled "The How & Why of Technical Due Diligence" for US$25.
Read and Save Dr. Wright's Free pdf article titled "Technical Due Diligence, Errors & Uncertainty".
Read about Dr. Wright's unique Program that saves both Time and Money - Lowers Risk!
Read Dr. Wright's article published in the March 1, 2001, issue of "Expert-Zine.com".
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Discover how Dr. Wright's Technical Due Diligence Process Can Significantly
Lower Your Risk Before Investing in New Business Ventures!
The Problem
The guiding principle for all business ventures is that any investment must earn more than its cost of capital for it to be worthwhile. Therefore, the more profitable the venture, the greater the justification for putting the capital at Risk! Note the use of the term "Risk" at the end of the last sentence. Profitable ventures usually require investors to take Risks! In fact it can be generally stated that as the Risk of a potential investment increases, there is an increased probability for both higher profits and losses. The goal of the investor is to select those projects where the probability of obtaining a large profit is much greater than sustaining any loss.
When a business venture is conceived, a model of the proposed business is constructed and presented to potential investors in a document called the Business Plan. The authors of this document take great care in developing their business model, creating a Pro Forma, and writing the final Business Plan. However, it must be remembered that the Business Plan is their sales document! Therefore it may be biased, albeit generally without the intention of fraud, due to their strong conviction that the project is a fundamentally sound investment.
Dr. Wright developed Technical Due Diligence as a systematic process to evaluate complex ventures that use new and emerging technologies and are therefore defined as exceptionally risky. Regardless of the apparent obstacles to developing these so-called new and emerging technologies, it has become increasingly apparent over the past 20 years that they are the most likely place for businesses to seek real growth. "Technical Projects" is the name I have given those ventures that attempt to commercially exploit new and emerging technologies. However, Technical Due Diligence will be shown to be the "method of choice" to ascertain the Risk of not only complex Technical Projects, but of all Projects that are seeking investors.
The sources of "Uncertainty" in Business Plans make a long and scary list. However, most are a result of what I call the Technical Axiom of Business Uncertainty, or TABU, for short.
Technical Axiom of Business Uncertainty - The less you know about a Project,
the higher your uncertainty regarding the Project.
The TABU is so trivial that is often forgotten and ignored. Below I have listed some of my observations regarding the uncertainty in Business Plans, but you will probably notice that most are actually simple corollaries of TABU.
- Those that treat a project's Business Plan as "fact" are telling you how little they know about the Project!
- As estimations in a business model are moved further out in time, their uncertainty will most likely increase.
- "Surprises" discovered after a Project is underway will nearly always adversely affect its profitability.
- Cost estimations will most likely be underestimated, rather than overestimated.
- Income estimations will most likely to be overestimated, rather than underestimated.
- Technologies that are untested at the size required in a Business Plan automatically have a significant Uncertainty. This is due to the significant cost of R&D to scale the technology.
- The added costs due to the use of new technologies must generally be repaid from increased sales or profits at the end of the project.
- New Technologies seldom lower up-front expenses such as required capital or construction costs.
- Savings that are expected from operating in a less developed country will seldom be as high as predicted. Unexpected operating factors, a primitive infrastructure, and sometimes-bureaucratic graft will certainly raise costs.
One conclusion that should be obvious as you examine these corollaries of TABU is that increased knowledge about a project should reduce one's risk. However, it should also be noted that any increased knowledge about a project would not necessarily increase its profitability. It may be that as we discover more about a project it will become apparent that it will not be as profitable as was originally thought. And since our knowledge is increased, our risk is reduced because we are not as apt to take the chance with the project with the decreased profitability.
Technical Due Diligence is Your Solution!
Dr. Wright's Technical Due Diligence is a highly organized and systematic method designed to protect potential investors. Technical Due Diligence has proven to be the "method of choice" to quantify the Risk of the complex investments and offers the following benefits to the investor.
- Technical Due Diligence is a disciplined process that increases the total knowledge about all new business ventures, especially those with a great deal of potential risk.
- Technical Due Diligence includes Technical System Analysis that is used to evaluate whether or not all technologies will perform as required by the Business Plan. This is especially important for investments that rely on new or emerging technologies that are commercially unproven.
- Technical Due Diligence determines the steps of any "proof of principle" processes that may be required to verify whether or not a technology is commercially feasible.
- Technical Due Diligence includes Monte Carlo Risk Analysis that quantifies the Risk of potential investments.
The ability of Dr. Wright's Technical Due Diligence to help protect investors is proven!
- Projects ranging in size fromUS$500,000 to US$20 Billion have been successfully evaluated using Technical Due Diligence.
- Programs as diverse as the U.S. "Star Wars Program" and many Projects in the private sector have been successfully evaluated using Technical Due Diligence.
- Dr. Wright literally wrote the book on the subject - James F. Wright, "Monte Carlo Risk Analysis and Due Diligence of New Business Ventures", (New York: AMACOM, 2002).
How Can I Utilize Technical Due Diligence?
Technical Due Diligence can be utilized one of three ways.
- Phone Dr. Wright at 01-432-367-1542,
- Email Information Request to: drjfw@drjfwright.com, or
- Purchase Dr. Wright's book (see above) and utilize his methodology.
Further, Dr. Wright's unique Quick Question? Quick Answer! program may provide you with the just the answers you need to make a knowledgeable and timely business decision! A brief summary of his Qualifications and Experiences as a Technical Due Diligence and/or Technical Risk & Technical Systems Analyst Consultant for Investors can be examined by following the Links below.
- A. Technical Due Diligence
- i. Technical Systems Analysis
- ii. Technical Risk Analysis
- iii. Monte Carlo Risk Analysis
A. Technical Due Diligence
- Authored Book titled "Monte Carlo Risk Analysis and Due Diligence of New Business Ventures", 2002.
- Managed and worked on Teams that performed Technical Due Diligence of Chemical Process Plants, Petroleum Refineries, Equipment Manufacturing Facilities, Hazardous Waste Treatment and Disposal Facilities, and Oil and Gas Field Development Projects in the US, Mexico, Eastern Europe and the Former Soviet Union.
- Served as Project Manager and worked on Teams that performed operational and environmental Due Diligence for petroleum production purchases in ecologically sensitive areas.
- Chaired the National Particle-Beam Technology Study Group for the Secretary of Defense that consisted of 60 prominent Scientists charged with laying out a Five-Year Development Plan for Nuclear Particle-Beam Weapon Technology. Authored Classified Report.
- Written a full range of documents from Executive Summaries to complete Feasibility Studies for various Technical Projects in order to obtain funding through Venture Capital, IPO's, Bridge Financing, Asset Lending, Equity, and both Factoring and Forfaiting Receivable Accounts.
- Served as a Member of the Management Committee that evaluated proposals and monitored projects for a $17 million/year internal R&D budget.
- Made written and oral presentations to Individuals, Major Corporations, Congressional Committees, Investment Banks, and other Financial Institutions.
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