How we use 'The 7 Powers' to assess early stage ventures at Paloma

The book argues that a business must possess at least one of seven powers to survive: Process Power, Cornered Resource, Branding, Switching Costs, Counter-Positioning, Network Economies, and Scale Economics.

Pitch Deck Stage

The only two Powers determinable at venture origination are Counter Positioning and Cornered Resource. Does the new venture have a product or model that would be very difficult for the incumbent to replicate?

Build Stage

The relevant powers are Scale Economies, Network Economies and Switching Costs. Our ventures should be optimising for either number of customers or making it super hard for customers to leave.

Growth Stage

Brand and Process Power can only be attained over a long period. By the time our ventures have been operating for a few years, it should be easy to identify which powers they're strong at. If they aren't nailing any of them, it's a good indication they don't have a defensible moat.