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Welcome
James Wicksted, Ph.D. Department Head and Professor- Physics,
Oklahoma State University
Associate Director Oklahoma EPSCoR
Oklahoma DOE EPSCoR Director
ENTREPRENEURIAL WORKSHOPS
EntrepreneurshipPurpose Co-sponsored with i2E, Inc.
Geared toward entrepreneurial-minded college students
Opportunity to learn about the commercialization process
Topics: ranging from business plans to venture capital financing
Successful entrepreneurs and business community members (patent attorneys, venture capitalists, etc.) were invited to interact with and share insights with participants
Served as kick-off event for OK Governor’s Cup Business Plan Competitions
Participants ~125-150 annually undergraduate students
graduate students
faculty
David Thomison, VP of Enterprise Services
THE PROCESS,THE PLAN &THE PITFALLSINNOVATION TO ENTERPRISE
The business concept
is developed
The economic
feasibility of the business is determined
The business functions are established and a trial product is marketed
A product is introduced
and revenues are generated
The business reaches
break even and even
profitability
The business is well
established in the target
market
Business Lifecycle
Valley of Death
Investigation Feasibility Development Introduction Growth Maturity
MA
RK
ET
BU
SIN
ES
SP
RO
DU
CT
Definitions Investigation Feasibility Development
Tangible object, tech or service offered for
sale.
Commercial activity
where goods and services
are sold.
Commercial enterprise that
produces a product/service
to be sold to a market.
Is the product unique?
What problem does the product solve?
Will the product make a profit?
Does it solve a
problem?
Who will buy it?
Will it make sufficient returns to justify
investment?
What will it cost to
produce?
What is the size
of the market?
Who is the management
team?
i2E Commercialization Model
New productPositive MarketLimited capital
Limited expertise
Ris
k
Pro
file
Incomplete teamNo product revenue
Design prototypeInitial BP developed
Complete prototypeExpenses incurredNo product revenue
Valley of Death
Analysis of the business based on:
Product, market, business, finance
and execution
Risk Action ItemsProduct Risk:
Product may not be feasible or lacks unique qualities and cannot be protected.
Define conceptConfirm critical assumptionsSurvey state of the artIdentify critical barriersDetermine technology
Market Risk:
Limited understanding or knowledge of the market can cause a misrepresentation of the growth and size of the market.
Conduct market overview & identify:Pricing structureMarket barriersRisksDistribution channelsTrends and competitors
Business Risk:
Great product or technology, but a new product or technology does not translate into a great business.
Estimate profit potentialConduct self-enterprise and commercialization assessmentsIdentify professional needsIdentify capital needs
Finance Risk:
Proof-of-concept funding for product
prototype is difficult to identify.
Self fundStudy the capital cycleIdentify ten proof-of-concept sourcesIdentify ten seed sources
Execution:
Management at this stage is typically the
innovator. This lack of business skills can be
difficult to overcome.
Learn to manage peopleIdentify ten advisorsStudy management practiceStudy company formation types
INTRODUCTION GROWTHFEASIBILITY MATURITYDEVELOPMENTINVESTIGATION
Risk Action ItemsProduct Risk:
The company is focused on product innovation rather than business development. Intellectual property rights remain a concern.
Develop working modelTest technical featuresAssess preliminary production feasibilityConduct manufacturing assessmentAssess safety & environmental featuresFinalize designs
Market Risk:
Unrealistic market study results can cause misallocation of scarce recourses.
Final product design is dependent on successful outcome of market study.
Identify and quantify:Market sizeCustomersVolumePricesDistributionCompetitors
Business Risk:
Exploring business formation and the plan still lacks expertise and business skills to commercialize.
Formulate financial assumptionsDevelop pro formaIdentify seed capital Form advisory team
Finance Risk:
Cash flow is a problem due to lack of revenues and
early proof-of-concept funding is difficult to attract.
BootstrapPrepare investment strategyPrepare investment presentation
Execution:
The management team is incomplete; therefore, multiple responsibilities fall on a few individuals. Chicken and egg syndrome becomes evident as you need capital but capital won’t follow poor management teams.
Multi-taskImplement appropriate management structurePursue opportunities
INTRODUCTION GROWTHFEASIBILITY MATURITYDEVELOPMENTINVESTIGATION
Risk Action ItemsProduct Risk:
Advancing the product from prototype to manufacturing or production environment requires new skill sets. No longer developing product revenue features.
Develop prototypeIdentify materials and processesConduct testsImplement development methods
Market Risk:
Field tests are not positive and / or competitors respond more rapidly than planned.
Identify marketing team Define target marketSelect market channels Field test
Business Risk:
If choosing a business over licensing, an experienced professional management team will need to be identified. The business needs to enter a revenue mode as opposed to the R&D mode of the past.
Decide venture or license Finalize intellectual propertyIdentify management teamSelect organization structureWrite business plan
Finance Risk:
Significant expenses and no product revenue realized.
Prepare investment strategySelect investment typesTarget appropriate investors
Execution:
Lack of focus and risk of losing founder(s). Lack of
flexibility in accepting new business controls.
Develop organization processesDelegate responsibilities Develop strategic plansTrack progress
INTRODUCTION GROWTHFEASIBILITY MATURITYDEVELOPMENTINVESTIGATION
• Validate the Unit Value in the market
• Approach stages in a sequential manner
• Integrate:
Product, Market and Business
• Focus on performance milestones
• Achieve market validation ASAP
• Develop a profitable business model
Guiding Principles
• Utilize “top down” approach to revenues
• Underestimate “sales cycle”
• Insufficient “lead time” for capital
acquisition
• No “contingency capital”
• Underestimate competitive “response”
• Inadequate “administrative staffing”
Classic Mistakes
Identify Customer Problem
Develop Innovative Solution
Evaluate Customer Value Proposition
Research Markets, Technology, Competitors
Write Business Plan using guidelines
Business Planning Process
Identify the Customer Problem
Awareness of the Problem
Level of Customer Pain
Uniqueness of Innovative Solution
Magnitude of Improvement
Customer Barriers to Acceptability
Deliverability
Business Planning: The Beginning
“We don’t know why we make these,so we’re hoping to find people
Who don’t know why they buy them.”
Problem: 9% of emergency transported patients
NEVER receive an intravenous catheter
or IV due to poor blood vein accessibility
Solution: Medical device that encompasses the arm or
or leg, reduces blood circulation similar to
a tourniquet, BUT then redirects the
constricted blood to the surface area using
pressure
Identify Problem & Unique Solution
Company
Sales Price $x
COGS $x
Gross Profit $x
(Profitability, ROE)
___________________________________________________________
Customer Unit Value Proposition:Defined
Customer
Customer Value $x
Sales Price $x
Customer Benefit $x
(Payback, NPV, ROI, Breakeven)
Why do YOU want to deliver the product/service?
Why will a CUSTOMER write you a check for the product/service?
Sales Price $25.00
COGS $ 5.00
Gross Profit $20.00
Gross Margin 80%
Customer Value Proposition: Company
Increased Medical $85,000
Probability 3%
Customer Value $ 2,550
Sales Price $ 25
Customer Value $ 2,525
Benefit Ratio 101x
Unit Value Proposition: Customer
Idea or Business?
“We’re selling $100,000 shares in an idea we plan to have after raising enough capital to think about it.”
Search Internet/Publications/Associations
TALK with Prospective Customers
TALK with Potential Competitors
TALK with Potential Capital Sources
Business Plan: Research
Dedicate the plan to the business, not the innovation or product.
Remember you are illustrating
a solution to a problem.
More importantly, explain how that solution generates revenue and profits for the business.
Business Plan: Overview
“And this is where therevenue comes out.”
•Limit to a 2-3 page detachable document
Key Points to Include:– Problem and your solution– Company overview and background– Products and technology– Market opportunity– Competition– Marketing strategy and execution– Management team– Source and use of funds– Financial projections and exit strategy
Executive Summary
•Begin with the “Elevator Pitch”
•Business Model •Corporate direction & vision
Key Points to Include:– Founding history– Significant milestones achieved to date– Customer value proposition discussion
Company Overview and Background
•Non-technical product description & functionality (integrate pictures, diagrams, & graphs)
•Focus on unique or competitive advantages•Emphasize the benefit to the end-user
Key Points to Include:– Product/technology developmental status– Product/technology development path & risks– Product/technology barriers – IP status– Customer adoption barriers/challenges
Products & Technology
•Identify the aggregate market size & growth rates
•Convey in-depth knowledge of market & trends•Highlight customer interest in Product/Tech.
Key Points to Include:– Identify customers & purchase decision process– Market communication strategies– Product life cycle/recurring revenues– Customer benefits
Market Opportunity
•Identify competitors & potential competitors•Analyze competitor strengths & weaknesses
Key Points to Include:– Competitor product feature & price matrix/chart
comparison– Anticipate competitive responses to product
introduction
Competition
•Sales distribution strategy: direct sales, value add resellers, mfg. reps., etc.
•Product/technology introduction milestones•Pricing strategies
Key Points to Include:– Identify key “early adaptor” customers
– first revenues plans– Sales channel ramp up– “Bottom-up” development of unit sales & revenues
Market Strategy & Execution
•Highlight management team relevant industry & work experience and performance to date•Identify & timeline all KEY future hires •Current Board of Directors & planned changes
Key Points to Include:– Time sensitive “staffing plans”– Compensation structure & stock option plans– Critical outsourced consulting/professional
services
Management
•Integrated “set” of Financial Projections for 3 to 5 years•Use of Funds identified & associated milestones•Summarize investment transaction details
Key Points to Include:
– Unit Sales volumes consistent with Marketing section– Highlight future unit pricing changes (if applicable)– Revenue & gross margin by Segments– Summarize key SG&A components– Examine “burn-rate” versus current capital funding – Condensed Income, Balance Sheet, and Cash Flow– Source & Use of Funds: include “subsequent”
funding requirements and uses to achieve financial breakeven
– Investment structure and valuation– Exit Strategies
Financial Section
Formatting/Organization
Key Questions to be Answered
Terms, Statements & Beliefs to Avoid
Business Plan Scoring Sheet
Business Plan Checklist
Questions?
NetworkingBreak
15 minutes
David Thomison, VP of Enterprise Services
READY, SET, PITCH!Presenting your idea to the Investor.INNOVATION TO ENTERPRISE
The Goal
• Learn How to Convey Your Opportunity to the Investor
• Guide to the Oral Presentation for the Governor’s Cup Competition
Your Tools
• The Business Plan
• The Presentation
• Executive Summary
• The Elevator Pitch
Your Tools
• The Business Plan– Hour
• The Presentation– 20 Minutes
• Executive Summary– 5 Minutes
• The Elevator Pitch– 30 Seconds
Reverse The Order
• The Elevator Pitch
• Executive Summary
• The Presentation
• The Business Plan
The Elevator Pitch
You just happen to get in the elevator with a well known investor.
You have 30 seconds on the ride to state your idea.
Hopefully, as the Investor steps out of the elevator, you hear, “Interesting, send me your Executive Summary.”
First Sentence
For ___(customers)___ with the problem of ___(problem)____ , we have ___(your idea)_ that can ___(big benefit)__ .
Second Sentence
It’s based on __(simple technology)___ that has the advantage of _(competitive advantage)_ that will allow us to ___(define market success)___ and generate __(5th year sales figure)__ in sales.
Last Sentence
We have accomplished __(milestone or two)___ and now we are looking for ___(raise)___ so that we can __(milestones from plan)__ .
First Sentence: Example
For ___(customers)___ with the problem of ___(problem)____ , we have ___(your idea)_ that can ___(big benefit)__ .
EZ-Vein: For nurses and emergency personnel that can’t find a vein for an IV, we have developed a patented, disposable device that redirects blood to engorge the vein and maybe save a life.
Second Sentence: Example
It’s based on __(technology)___ that has the advantage of _(advantage)_ that will allow us to ___(define market success)___ and generate __(5th year sales figure)__ in sales.
EZ-Vein: It’s based on a hand pump technology that can be used anywhere and will allow us to capture the ambulance and hospital market and generate $20 million a year in sales.
Last Sentence: Example
We have accomplished __(milestone or two)___ and now we are looking for ___(raise)___ so that we can __(milestones from plan)__ .
EZ-Vein: We have patented the idea and prototyped our first units and now we are seeking $400,000 to secure FDA approval, initiate committed field trials, and start generating revenue.
The Presentation
• 20 Minute Opportunity to Present Your Idea
• Pre-scheduled, with Q & A
Assumptions
• The Business Plan is Complete
• Pitch is to an Investor
• Investor may not have read BP
• There is a Q&A at the end
Ground Rules
• Remember, it’s a PITCH!
• High Points from Business Plan
• Be Enthusiastic, Be Interesting
• Describe Your OPPORTUNITY!
Ground Rules
• One Minute per Slide
• Four Bullet Points per Slide
• Four Words per Bullet Point
• Less is More – Keep focus on YOU
For Each Slide:
• What is the Point?
• Why should THEY care?
• Use $$’s, not ##’s
Outline - Your Idea
1. Title Slide
2. Problem
3. Your Solution
4. Business Model
Outline - Outside World
5. Market
6. Competition
7. Sales Approach
Outline - Execution
8. Management
9. Operations
10.Development Milestones
Outline - ROI
11. Financial Projections
12. Funding Issues
13. Exit Strategy
Outline - Evaluation
14. Status
15. Risk Assessment
16. Conclusion
Title
• Who are you?
• What do you do?
• Why are you here?
• Say Your Elevator Pitch
• Contact Information
Problem
• Clearly show the Problem
• Give Examples
• Make it REAL to the Investor
• What is the Pain in $$’s?
Your Solution
• ONE Compelling Solution
• Show Value ($) to ONE Customer
• Be Brief on Technology
• State your Intellectual Property
Business Model
• How Do You Make Money?
• What Do You Sell? To Whom?
• Where Does It Come From?
• Give Price/Cost/Frequency/Volume ($’s)
Market Demand
• Who is your Market?
• How Big is your Market? ($’s)
• Growth Rate?
• Major Trends
Competition
• List Major Competitors– Name and Size
• Group Minor Competitors
• Comparison Charts Are Often Good– Complete, Honest
Sales Approach
• What are the Market Segments?
• Which Segment Values You the Most?
• How do you reach them? – Acquisition Costs?– Sales Cycle
• Bottom’s Up Sales Forecast
Sales Forecast – Top Down
• Top Down- 1% of Market
• 1% of $1 Billion = $10 million
• Good for Setting Realistic Expectations
• Doesn’t Say How You Get There
Sales Forecast – Bottom Up
• Independent of Market Size• Begins with estimates
• Five sales calls/week• 10% close rate• $50,000 /sale• Calculates to $1,200,000 / salesperson
• Model can be verified/adjusted
Management Team
• List Major Team Members
• Include Only Relevant Information
• Major Open Positions and Prospects
• Why YOU and Your Team?
Operations
• How will you run the company?
• What do you do in-house?
• What do you outsource?
• How do you Leverage Capital?
Development Milestones
• 4 to 7 Significant Milestones– Table or Chart with Dates
• Layout of Operational Plan– Product Status– Sales– Funding Rounds– Break-Even
Sample Chart
2007 2008 2009Description Quarters 1 2 3 4 1 2 3 4 1 2 3 4Intellectual Property Protection
Production of Prototypes V1 &V2 V3 & V4
Prototype Testing V1 & V2 V3 & V4
$500 K Seed Round
Production Manufacturing
Marketing and Sales
Positive Cash Flow
Financial Projections – 5 Years
2009 2010 2011 2012 2013
REVENUE $36,000 $2,274,000 $7,224,000 $11,400,000 $15,720,000
TOTAL COST $8,820 $1,047,630 $3,347,880 $5,118,000 $6,941,400
GROSS PROFIT
$27,180 $1,226,370 $3,876,120 $6,282,000 $8,778,600
OPERATIONS $71,000 $294,700 $761,000 $1,649,950 $2,075,600
NET PROFIT ($43,820) $931,670 $3,115,120 $4,632,050 $6,703,000
Funding
• Offering XX Equity Shares for $YYY,000
• Use of Funds– 3 to 6 Lines – Big Picture– Should Match Development Milestones/Time– Details in Business Plan
• Additional Funding Required Later?
Exit Strategy
• What is Your Strategy?– Initial Public Offering– Acquisition
• Comparisons in Industry?– Names of Companies with their Multiples
• Name Acquirers and Give Reasons
• Show Investor the ROI
Status
• What have you accomplished?– Development– Sales– License Agreements– Intellectual Property
• How much have you spent?
Risk Assessment
• What are Your Unique Risks?– Competition, Adoption Rate, Key Customers?
• What are the Mitigation Strategies?
• Demonstrate Critical Thinking Ability
Conclusion
• List the Most Important Highlights
• Emphasize Potential of Opportunity
• Thank Them for Their Patience
• Q & A?
Preparing for the Pitch
• Prevent Technology Glitches– Check for Computer/Software Capabilities– Avoid Last Minute Changes– Avoid Movies, Internet Links, Etc.
• Practice, Practice, Practice
• Check Dress Code
During the Pitch
• Be Pleasant and Professional
• Listen CAREFULLY to Questions
• Be Open to Suggestions– Coachable
• Demonstrate that You’re a Good Partner
Rob Perry M.D.EZVein – Intravenous Access
July 10, 2009
Market Problem• Can’t Give an IV!
• 23-40% of initial IV insertions fail
• 9% of EMS patients are unable to receive an IV
• Life Threatening
SolutionEZVein• Hand Pump to Pressurize and Locate Vein
– Actively improves intravascular pressure– Does not require a pulse – Disposable
• Patent Pending
Prototype
Business Model• Outsource Manufacturing
– $5 Cost, $25 Sales Price
• Direct Sales Model– Statewide EMS (ambulance)– Corporate Hospitals
Market Demand• IV Applications $700 million/year
– 28 million IV /year
• 4.75% Annual Growth Rate
• Move to Disposable Products
U.S. Market Opportunity
Source: BCC Research
4.75% CAGR
Competition• EZ-IO
– Intraosseous Fluid Insertion– 379$ Per EZ-IO Use
• Tourniquet– Requires Blood Pressure
Target Market• EMS Ambulance Services
– Greatest Immediate Need– Response Time Pressure– Centralized Non-Bureaucratic Purchasing
• Hospitals– Corporate Ownership– Greatest Volumes
Sales Approach• Direct Sales Approach to Statewide
Organization/Major Metropolitan– Looking For Solution– Introduction to OK EMS Manager
• Founders Do Initial Sales– Hire Salesmen as Earnings Allow
Sales Forecast - EMS• 10,000 IV’s per 100,000 population
• 1,000 IV’s EMS
• Tulsa Metro 800,000> 8,000 IV/year– $200,000 /yr Tulsa– $600,000 /yr Oklahoma– $18 million /yr Texas
Sales Forecast – All IV• 10,000 IV’s per 100,000 population
• 80,000 IV’s in Tulsa– $2 million/yr Tulsa– $6 million/yr Oklahoma– $180 million/yr Texas
Management• CEO- Founder Rob Perry M.D
• Outsourced Consultants– Paladin Medical– Global Device Solutions
• Strong Board of Directors
• Hire CEO, CFO, Sales VP with Revenue
Operations - Status• Created Working Prototype
– Preliminary Testing Effective– OK and CA Officials Interested– Outsourcing Manufacturing
Development Timeline• Month 1-4
– Apply for FDA 510k– Initiate Manufacturing
• Month 5-6– Perform Clinical Trials in OK, CA– Hire Commercialization Assistant, Website Design
• Month 7-9– Hire VP Sales/Marketing, – Sales Campaign and Test Trials– Seed Capital Round
• Month 10-year 2– Hire CEO, Hire 2 Sales Associates, Hire CFO
Financial Projections
Finances
Year 1 Year 2 Year 3 Year 4 Year 5
Revenues $270,000 $2,900,000 $9,300,000 $14,400,000 $19,200,000
COGS $70,000 $650,000 $1,800,000 $2,587,500 $3,300,000
Gross Profit $200,000 $2,250,000 $7,500,000 $11,812,500 $15,900,000
Gross Profit % 74% 78% 81% 82% 83%
Development $266,000 $130,000 $98,000 $120,000 $122,000
Sales & Marketing $32,000 $281,000 $866,000 $1,300,000 $1,960,000
General & Administrative $233,820 $1,016,394 $2,165,728 $2,929,353 $3,876,564
EBITDA ($331,820) $822,606 $4,370,272 $7,463,147 $9,941,436
Operating Profit % -123% 28% 47% 52% 52%
Funding• $400,000 in Funding
– $400,000 Equity Funding for 25% Ownership• $1.2 million Pre-Money Valuation
• Use of Funds– Clinical Trials $180,000– Regulatory Requirements $80,000– Sales, General, Administrative $140,000
Exit Strategy• Acquisition by Major Supplier
– Glaxo– Bendix– Crito
• Multiples of 6X to 8X EBITDA
Risks• Regulatory- FDA 510k approval• Legal - Risk of Patents • Financial- Running out of money with unforeseen
delay• Market -Adoption rate is slower than expected• Managerial- Difficulty finding CEO or other
personnel
Conclusion
• Patented Technology• Large Market Potential• Large Gross Margins• Direct Sales Have Large Volume Deals• Disposable Product
– Recurring Revenue Model
Questions?
NetworkingLunch
Return 1:00 pm
COLLEGIATE BUSINESS PLAN COMPETITIONS
Entrepreneurship
Competition sponsored by Donald W. Reynolds Foundation with partners including EPSCoR & i2E
Encouraged students to develop and implement businesses
Promoted commercialization of innovations, ideas & products developed at Oklahoma colleges & universities
8 businesses launched by winners
One winner received $80K SBIR grant (USDA)
i2E COMMERCIALIZATION VOUCHERS
Entrepreneurship
EPSCoR provided $1K vouchers to researchers for commercialization assessment of inventions by i2E
Nationally recognized proprietary model for assisting entrepreneurs
Accessed through university tech transfer offices
~90 technologies assessed~ 7 resulted in new start-up companies~25 resulted in commercial development~10 potential licensing opportunities~18 show potential commercial and/or licensing
opportunities with additional research & development
Cellulosic BioenergyPotential for Oklahoma
• Governor’s Biofuels Coalition– 25% of energy needs through biofuels by
2025 {25x’25 Alliance}
• In Oklahoma by 2025*– 2.4 billion gallons of biofuels per year– 43.3 billion KWh of electricity– 134,000 new jobs– $13 billion in economic activity
* Dr. Ernie Shea, 25x25’ Project Coordinator
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