E145 Winter 10 Session 09 Partnerships - Stanford...

•  Market Size •  Positioning •  Sales and Marketing •  Distribution Channels •  OAP Examples •  Alex Rampell – CEO Trial Pay •  WebTV Case •  Partnerships

Users

Customers

Purchase & Distributio

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Demand Creation

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Product

Resources

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3rd Party Integration

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Total Available Market

Total Available Market, Served Available Market, Target Market

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Target Market SAM = how many can I reach

with my sales channel

TAM = how big is the universe

Target Market (for a startup) = who will be the most likely buyers

Total Available Market

Segmentation Show Me the Money

7

Served Available Market

Target Market

•  Geographic •  Demographic •  Psychographic variables •  Behavioral variables •  Channel •  etc…

What Am I Selling (and to Who?)

Positioning

Positioning Happens Before Demand Creation

Demand Creation

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How Do I Get People to Buy?

Demand Creation

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Demand Creation on the Web

You Pay For These

(SEM)

These are Free (SEO)

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Paying Customers

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Demand Creation

Acquisition

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How much do you have to spend here

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Leads

Paying Customers

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First Sales Call

Demonstration

Feasibility

Proposal

Purchase Order

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Demonstration

Feasibility

Proposal

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Acquisition

Paying Customers

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Registered

Log in

First Conversation

5 Conversations

Paid Once

Subscription

Activation

Retention

Revenue

AARRR: Web Marketing Metrics

Website.com

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Retention

Revenue

Where do People Buy my Product?

Sales Channels

H"6'-"?.2,$&5(4$$)>6&="A9&45&&

Your Company

Your Customers

System Integrators

Direct Sales Force

Value-Added Resellers (VARs)

Dealers

Distributors

Retail/Mass Merchants/Online

OEMs

Idea to Opportunity Examples

Example 3D Metrology

2D CD metrology will not meet industry needs

Opportunity

Sidewall height and angle critical for 3D chips

3D CD Metrology Market in 2010 $2 Billion (TAM) *

NanoPrecision

$500M(SAM)

Electron Column

Detector

Primary E-Beam

Wafer

Current CD-SEM

* Adapted from VLSI Research

Computational 3D SEM

Our Solution

Hardware(Context) Software/Firmware (Core competence)

Computational methods for nano-scale 3D reconstruction

Patents Pending • 3D Reconstruction • Calibration Targets

CTO’s Research at Stanford with Prof. Fabian Pease

New 3D SEM

Electron Column Detector Primary E-Beam

Wafer

A B

Current 2D SEM

OEM Image Processing Engine to SEM manufacturers

Business Model

Customer

User

NanoPrecision Image Engine

3D SEM Solution

$500K $2M

Support subcontract for Image engine is $50K/year for 4 years

Example Cleantech Fuel Cell

TU"

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Business Model

Advertising Agency

Magazines Newspaper Billboards Posters

Print Ads

Customer Marketing

SMS Gateway Carriers

IT Infrastructure Internet

Users

Direct sales

Example Implantable Medical Device

Obstructive Sleep Apnea A prevalent disorder with growing visibility

A sleeping disorder resulting in repeated cessation of breathing

8 Million adults in the U.S. have severe OSA

MedTech Insight February 2004

Moderate30%

Severe28%

Mild42%

Total OSA 28.6 Million

Implantable Neural Stimulation Solution IP protected, Class III stimulation system implanted in outpatient setting

Hypoglossal nerve

Implantable Pulse Generator

IP protected by several US patents

Muscles in throat and tongue are activated

Continuously open airway using feedback control

Flat Interface Electrode to sense and stimulate hypoglossal nerve to keep airway open

Durand et al., IEEE Transactions on Biomedical Engineering

“If your device is as effective as CPAP, it will become a top-choice for many patients”

Jed Black, MD, Director, Stanford Sleep Disorders Clinic

8 Million

Severe OSA

686,000

Treated

Untreated

7.4 Million

Target Customer Current treatment ineffective

Option #1: CPAP Continuous Positive

Airway Pressure

Therapeutic treatment of OSA growing at

CAGR of 17% Frost & Sullivan

Option #2: Surgery Uvulopalatopharyngoplasty Maxillomandibular Advancement Tonsillectomy

8 Million

Severe OSA

686,000

Treated

Untreated

7.4 Million

412,000

Treatment Effective 60%

274,000

Treatment Ineffective

40%

Target Customer

Initial Target Customer Current treatment ineffective

Market opportunity overview Projected revenue of $800M and neural stimulation market growing

$ $ $ $

$

$

Rev

enue

Time

$5 Billion Target Market

274,000

Initial Market Size

+ $20,000 Implant

Company Launch

Year 6 $50 M Year 11

$800 M 15% Market

Life

Sty

le

Impr

ovem

ent

Effectiveness

Severe OSA Competitive Landscape Current treatments fail to develop complete solution

LOW

HIGH

LOW HIGH

Airways Medical

The only treatment that restores normal body function

CPAP

UPPP Tonsillectomy

Surgery Oral Devices

Example UAV Software

The Market Opportunity Unmanned Aerial Vehicles: High endurance robots for dangerous missions

Reconnaissance | Search & Rescue | Fighting Wildfires | Aerial Mapping | Border Patrol

A Potential Six Billion Dollar Market:

With the right blend of autonomy

Moiré Inc., US UAV Market Forecast, Feb. 2005*

Annual Market Value*

$4B

$5B

$6B

$7B

2007 2011 2015

Incentive for entry: •  Already make the airframes

Pros: Ample Resources Cons: No Agility

Incentive for entry: •  Provide total software solution

Pros: Aircraft Control Cons: Limited Resources

Competitive Landscape

UAV Systems UAV Autopilots

What are the barriers to entry?

Barriers to entry:

•  High Switching Costs

•  Patentable Software IP

•  Economies of Scale

UAV Autonomous Software

Potential Partners

Potential Customers

Target Market: 30% of SAM

$1.1B

$650M

$200M

2013 Market Opportunity

Market Landscape What is our slice?

Source: Moiré Inc., US UAV Market Forecast, Feb. 2005

12%

88%

2%

98%

2007 US UAV Market: $4B

2013 US UAV Market: $6B

•  Defense CAGR: 20%

•  Civil/Private CAGR: 22%

Defense Civil / Private

TAM: All UAV sftwr 40% of UAV cost

SAM: Value of Autonomy sftwr 60% of TAM

Shared Ground & Onboard

Our Ground Station Software

Our Onboard Software

Our Solution

Terrain Avoidance

Air Traffic Interaction

Collision Avoidance Sensors and Offline Data

World Representation

Smart Mission Management Health Management

Modular, adaptable software in a unified framework

February 2, 2010 Practical Autonomy - VC Pitch 52

Business Model

•  We use a B2B model to sell directly to our customers

Who are the customers and how do we fit in their value chain?

Our company provides software and services to the UAV industry

Our Customers: UAV Systems Integrator

Profit, SG&A, R&D Cost of Goods (Software, Hardware)

Customer Discounts

Practical Autonomy

En

d U

ser

Support Services (55%) UAV Cost (45%)

Software (40%)

Airframe

(20%)

Payload (40%)

Relative Cost per Aircraft

130

620

3,150

21,300

$80M $20M $1M $10K

Ultra Light (0-10lbs)

Medium (100-1000lbs)

Light (10-100lbs)

Heavy (>1000lbs)

10

– y

ear

Cu

mu

lati

ve U

S

Pro

du

ctio

n Sales Strategy What is the market structure?

We target our customers by weight class

1st

3rd

2nd

4th

Our Company

Reference: Ted Levitt, Bill Davidow

Our Company

Platforms

Support

Manufacturing

Installation & Training

Connectivity

Channel

Reference: Ted Levitt, Bill Davidow

Our Company

Platforms

Support Installation & Training

Connectivity

Channel

Reference: Ted Levitt, Bill Davidow

1. Which Pieces Do We Do

2. Which Do Our Partners Do?

3. When?

Manufacturing

1.  Which operational pieces of your corporate pie are outside your initial core competency?

2.  Which of these are readily available from 3rd parties?

3.  Which would save time/time-to-market, money? 4.  Which would provide the same or better service if

done with a partner?

1.  What’s in it for your partner? 2.  Manufacturing partners want you to carry the risk 3.  Channel partners rarely create demand 4.  Channel partners don’t create new markets

Expected Length of the Relationship Commitment And Exclusivity Short Unknown Long

Shallow/ Usually Polygamous

Hooking Up Playing the field

Platonic Friendship

Expected Length of the Relationship Commitment And Exclusivity Short Unknown Long

Shallow/ Usually Polygamous

Hooking Up Playing the field

Platonic Friendship

Deeper/Often Polygamous

Puppy Love

Going Steady

Living Together

Expected Length of the Relationship Commitment And Exclusivity Short Unknown Long

Shallow/ Usually Polygamous

Hooking Up Playing the field

Platonic Friendship

Deeper/Often Polygamous

Puppy Love

Going Steady

Living Together

Deepest/Usually Monogamous

Romeo & Juliet Engagement Marriage

Expected Length of the Relationship Commitment And Exclusivity Short Unknown Long

Shallow/ Usually Polygamous

Single Transaction

(not a partnership)

Renewable VAR Agreement

5-Year Sourcing Contract

Expected Length of the Relationship Commitment And Exclusivity Short Unknown Long

Shallow/ Usually Polygamous

Single Transaction

(not a partnership)

Renewable VAR Agreement

5-Year Sourcing Contract

Deeper/Often Polygamous

Cooperative Advertising

R&D Partnership

Joint Venture

Expected Length of the Relationship Commitment And Exclusivity Short Unknown Long

Shallow/ Usually Polygamous

Single Transaction

(not a partnership)

Renewable VAR Agreement

5-Year Sourcing Contract

Deeper/Often Polygamous

Cooperative Advertising

R&D Partnership

Joint Venture

Deepest/Usually Monogamous

1 year exclusive license

Renewable Exclusive Terms

Merger/ Acquisition (not a partnership)

Expected Length of the Relationship Commitment And Exclusivity Short Unknown Long

•  Innovators •  Early Adopters •  Early Majority •  Late Majority •  Laggards

Moore (2002), Crossing the Chasm,.

•  Between any two groups there is a gap

•  The disassociation between the two groups is the difficulty any group will have accepting a new product if its presented in the same manner as it was to the group to its immediate left

Moore (2002), Crossing the Chasm,.

•  The first people to adopt technology –  The gatekeepers for technology – Moore believes they’re key to any high-tech marketing effort

•  Great feedback early in the design cycle –  Supporter who will influence buyers –  In large companies buys one of anything –  In small companies “designated techie” in IT – Want to try it just to see if it works

Moore (2002), Crossing the Chasm,.

•  Highly motivated and driven by a dream •  Want a fundamental breakthrough

–  Value not from technology but from the strategic leap

•  The least price-sensitive of any segment –  Can provide up front money for additional development –  Can alert the business community to advances –  Will serve as visible references

•  Like project orientation - want to start with a pilot •  Represent an opportunity early in a life cycle to generate a

burst of revenue and gain visibility –  Gives high-tech companies their first big break

Moore (2002), Crossing the Chasm,.

•  Dollars are in the hands of the pragmatists •  Wants to make a incremental, measurable, predictable

progress –  Hard to win over, but loyal once won - enforces standardization –  They care about the company they are buying from, the quality of

the products, the “Whole Product”

•  Interested in knowing what others in their industry think –  References and relationships are important

•  They like competition, reasonably price sensitive •  Selling to pragmatists takes time

Moore (2002), Crossing the Chasm,.

Moore (2002), Crossing the Chasm,.

Do you need partnerships here?

Or here?

Core

Type of Relationship Source: McKinsey

• Proprietary

Contract-based Self Defined

Open Innovation

Core

Type of Relationship

Lead User

Source: McKinsey

•

• Proprietary

Users involved in innovation process Users benefit from solutions

Contract-based Self Defined

Open Innovation

Crowd Sourcing

Core

Type of Relationship

Lead User

Mass Innovation

Source: McKinsey

• •

• Proprietary

Users involved in innovation process Users benefit from solutions

Companies use platform to connect to users

Contract-based Self Defined

Open Innovation

Crowd Sourcing

Core

Type of Relationship

Lead User

Mob Source

Mass Innovation

Source: McKinsey

•

• •

• Proprietary

Users involved in innovation process Users benefit from solutions

Companies use platform to connect to users

Contract-based Self Defined

Enthusiasts linked to each other

Open Innovation

Crowd Sourcing

Open Source

Core

Type of Relationship

Lead User

Mob Source

Mass Innovation

Source: McKinsey

•

• •

•

• Proprietary

Users involved in innovation process Users benefit from solutions

Companies use platform to connect to users

Enthusiasts collaborate on products

Contract-based Self Defined

Enthusiasts linked to each other

Open Innovation

Crowd Sourcing

Open Source

Core

Type of Relationship

Lead User

Mob Source

Mass Innovation

Source: McKinsey

•

• •

•

• Proprietary

Users involved in innovation process Users benefit from solutions

Companies use platform to connect to users

IP Partially Owned by Co.

Enthusiasts collaborate on products

Contract-based Self Defined

IP Owned by Co.

IP Owned by Co.

IP Owned by Community

Enthusiasts linked to each other

•  Swing for the fences on your 1st release •  Assume you know your customers •  Get world-class partners •  Assume financing is available for great ideas •  Sell out ASAP

This is the traditional VC Model It is not the only one.

•  WebTV assumed you get it right on the 1st try •  VC’s want/need these kinds of home runs •  It is a very fast cash burn •  Live fast, die young •  But you might be happy with lower risk models

Other VC’s are looking at Lean Startup Models

1995 1996 1997 1998 1999

Founded:

June: 1st Sony contact

Sept: 1st funding

March: Sony says “No”

Sept: Sony & Phillips introduce WebTv 12,000 customers $20/month

April: 35,000 customers

Announced sale to Microsoft

August: Microsoft sale closes $18/share

Sept: 150,000 customers

Dec: Microsoft expands WebTV

Jan: Echostar Deal