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Resources, Activities, and Costs Lean Launchpad: Digital Health
UCSF Entrepreneurship Center!November 12, 2013
Abhas Gupta, MD!Mohr Davidow Ventures!
@abhasguptamd
Partnerships and Operations!Revenue and Costs
What are the most important assets required to make the business model work?!
What are the costs to operate the business model?!
What are the most important metrics for the business?
This Week
This Week
This Week
Key Resources
Company location, office space, products/services,
data (virtual)
Friends & family, angels, grants, institutional venture, corporate
partners, debt financing
Intellectual Resources
Physical Resources Financing
Human Resources
Trademarks, copyrights, trade secrets, contracts, patents
Qualified employees, mentors, coaches, teachers, advisory board
Physical products/supplies and patents are often less relevant in digital health
BIG IDEA: Risks, Milestones, & Capital
Seed <$2MM from friends/family, angels, micro
VCs, grants!!
Searching for product/market fit
Investors provide venture capital to create “enterprise value” and reduce risks
Series A $3-7MM from institutional VCs,
corporate partners!!
Supporting initial customer base
Series B $5-15MM from
institutional VCs, growth equity, and corporate!
!Scaling customers
and products
Value Creation Milestones
Product / Technology
Revenue and Costs
Customer Traction
Revenue Sources!!
Revenue (monthly/annual) & forward
projections!!
COGS & margin
1st vs. 10th customer per segment!
!Repeatable sales
process!!
MUVs, % MoM Growth rate
Alpha, beta versions!!
Value-relevant functions!
!Health-economic, ROI, and outcomes data
These factors among others (team, opportunity, etc.) help define a company’s value and risk profile
How Much To Raise?
It takes time to fundraise and even the best laid plans… so leave yourself a cushion!
Identify Key Milestones
Calculate Funding Needs
Project Time and Costs
Leave yourself a 6+ month cushion!
!Balance cost of
capital with security
2014% 2015%
Q1% Q2% Q3% Q4% Q1% Q2%
Milestones) %% %% %% %% %% %%
Alpha%Version% %% %%
Beta%Version% %% %% %%
First%10%customers% %% %% %%
Headcount) %% %% %% %% %% %%
Execu=ve%Leadership% $50K% $50K% $50K% $50K% $125K% $125K%
Engineering/Development% $75K% $75K% $75K% $150K% $150K% $200K%
Sales,%Customer%Service,%etc.% K% K% K% K% $25K% $25K%
Other)Expenses) %% %% %% %% %% %%
Rent,%U=li=es,%Etc.% $10K% $10K% $10K% $10K% $10K% $10K%
Equipment% $10K% $10K% $10K% $10K% $50K% $50K%
Total)Opera6ng)Expenses) %% %% %% %% %% %%
OpEx% $145K% $145K% $145K% $220K% $360K% $410K%
Fixed & Variable Costs
Important Costs Metrics: Burn Rate = R-C = Negative Monthly Cash Flow!
Runway = Cash Balance / Burn Rate!Cash Out Date = Today + Runway
Fixed Costs (Don’t change with volume)
Variable Costs (Tied to volume)
Salaries, leases, insurance, utilities,
hosting, etc.
Examples Insight
Product materials/delivery costs, shipping,
hosting usage, etc.
Fixed > variable costs for virtual goods/
services
Calculate unit costs by dividing total variable
costs by volume
BIG IDEA: Value-Driven vs. Cost-Driven
Erecting barriers to competition and leveraging technology to reduce costs help keep companies profitable over the long term
Aggressively manage costs (via outsourcing, automation, supplier leverage, etc.); highly competitive
Focused on delivering on customer needs/expectations and establishing brand; non-competitive environment
Cost-Driven
Value-DrivenProduct Life Cycle
Value-Driven Cost-Driven
Key Metrics andBeing Data-Driven
Comprehensive Collection of Metrics
!Identifying meaningful
metrics (“The metrics that matter”): actionable metrics
> vanity metrics!!
What’s often meaningful is the ratio of metrics (i.e.,
LTV/CAC)!!
Recognize that what’s relevant changes with time !
Importance ofMetrics-Driven Culture
BIG IDEA: One Metric That Matters
Shared widely to focus your company
Tie it to the most important question you have
Clearly define what success and failure mean
Inspire a culture of experimentation
? ??
?
??
??
?
OMTM
For Next Week
Identify the Metrics that Matter (+OMTM) and Resources Needed
What are you going to do next?
Diagram the Finance and Ops
Timeline
Rationale Define Success
Resources Needed
Metric A
Metric B
…
2014% 2015%
Q1% Q2% Q3% Q4% Q1% Q2%
Milestones) %% %% %% %% %% %%
Alpha%Version% %% %%
Beta%Version% %% %% %%
First%10%customers% %% %% %%
Headcount) %% %% %% %% %% %%
Execu=ve%Leadership% $50K% $50K% $50K% $50K% $125K% $125K%
Engineering/Development% $75K% $75K% $75K% $150K% $150K% $200K%
Sales,%Customer%Service,%etc.% K% K% K% K% $25K% $25K%
Other)Expenses) %% %% %% %% %% %%
Rent,%U=li=es,%Etc.% $10K% $10K% $10K% $10K% $10K% $10K%
Equipment% $10K% $10K% $10K% $10K% $50K% $50K%
Total)Opera6ng)Expenses) %% %% %% %% %% %%
OpEx% $145K% $145K% $145K% $220K% $360K% $410K%
a) Is entrepreneurship for you? b) Is your idea worth
pursuing? c) What will you do next?
Resources, Activities, and Costs Lean Launchpad: Digital Health
UCSF Entrepreneurship Center!November 12, 2013
Abhas Gupta, MD!Mohr Davidow Ventures!
@abhasguptamd
