We excerpt from stories about an investment opportunity to support judgments about the key drivers of the odds of upsides & downsides to that investment's future returns. These key drivers can include the odds of HVR being one of only a few alternatives for training in OR High Risk settings, and the video below shows us supporting our judgment for this with a compelling excerpt from management's slides.
Our VR offers 10x efficiency improvement vs. in-person simulation and 250% learner performance improvement over eLearning.
With our judgments for key drivers, together we produce many scenarios for long-term cash flows. For example, we see a one-third chance this company will produce more than about $600 million of cash over the long-term, which it could do if it’s One of Many alternatives in its first 2 target markets but One of only a Few in its 3rd market, the much larger market for resuscitation training. To read the table below on a smartphone, flipping to landscape may help. Then drag the dot at the top to the 90th percentile to see why we see a 10% chance it makes more than $1.6 billion!
We can even produce scenarios for expectations for those long-term cash flows by other investors in the future, such as in 2 years. Here we see 100 scenarios for those expectations for cash balance. Those expectations in 2 years will influence multiples in 2 years, and our odds for the expectations enable us to handicap odds for multiples. If reading on a smartphone, flipping to landscape may help. We see a 50% chance that revenue multiple is above Healthstream, the current leader in its market, and a 25% chance it’s above Vocera, a higher-growth comparable. We see a 10% chance it’s more than double Healthstream, and we can see investor expectations for Growth, Profitability & Scale that could motivate that, by hovering dots around that multiple. Try it! On the other hand, we can see investor expectations that would motivate a multiple below Healthstream’s. By estimating odds of those stories, we can estimate odds of exit multiples, which is much more useful than just looking at a wide range of multiples in a data table with no explicit odds for either end of the range.
Our story-driven odds for investors’ outlook for this company at various future horizons help us produce odds for its valuation at various future horizons. We see a 10% chance it is more than 13 times today’s value in 5 years. On the other hand, we see a 50% of losing money and almost that much chance of losing more than 50%. If we had diversified investments like this in a portfolio, we would expect it to return the mean of more than 4 times over 5 years. These odds can help us weigh better whether and how much to invest in this company, and with what deal structure.
Across all training courses, my guess is 75% of them can continue to be done on Learning Management System platforms. For example, the annual state required coursework doesn’t need a VR simulation. The remaining 25% are face-to-face simulations. Of that 25%, maybe 80% (or about 15-20% of total) could potentially be done using HVR.
In general, nurses tend to be more visual learners. They like to touch and feel. And more and more nurses are millennials that want to be involved and connected. Millennial nurses would love using HVR.
One of the biggest challenges as a manager is finding the time for a nurse to complete the competency coursework. A nurse already has a jam packed schedule in their 12 hour shifts. They often receive additional paid time coming in on their days off to fulfill the requirements. Training is performed via online learning as well as face to face simulations, which are essential from a skills development perspective. A nurse can read as much as possible but once they come face to face with a high pressure, life threatening situation, the health system needs to have comfort in knowing they understand the algorithmic approach to handling those events.
The country’s largest private employer is using a VR skills assessment as part of the selection process to find new middle managers, watching how workers respond in virtual reality to an angry shopper, a messy aisle or an underperforming worker. VR training is becoming more common in a variety of industries to educate a large number of workers quickly or assess the technical ability of high-skilled workers like electricians or pilots. But Walmart’s use of the technology to gauge a worker’s strengths, weaknesses and potential is significant because it pushes VR evaluation out to a massive hourly workforce and in some cases helps determine who gets raises and who gets demoted.