What’s Most Important for the Business?

NSF I-Corps The Lean LaunchPad Lecture 8: Resources, Activities & Costs
Version 6/13/12

What’s Most Important for the Business?
Key Activities What’s Most Important for the Business?

What’s Are Your Most Important Assets?
Key Resources What’s Are Your Most Important Assets?

What are the Costs and Expenses
Cost Structure What are the Costs and Expenses

Key Resources

Four Critical Resources
Physical Financial Human Intellectual

Physical Resources company facilities product/services
office space, company location product/services supply of silicon wafers or iron ore, or thousands of feet of warehouse space? Many physical goods are capital intensive

Financial Resources Friends and Family Crowdfunding Angels
Venture Capital Corporate partners Others: SBA or SBIR grants Lease-lines Factoring Vendor-financing

Human Resources qualified employees
mentors, teachers, coaches, advisors

Mentors, Teachers, Coaches
Mentors, teachers, coaches advance your personal career If you want to learn a specific subject find a teacher If you want to hone specific skills or reach an exact goal hire a coach If you want to get smarter and better over your career find someone who cares about you enough to be a mentor

Advisors Advisors are people you need to help advance your company’s success Founders fail when they believe their visions are facts Listening to experienced advice can help you sort through whether your vision is a hallucination Getting an advisory board (by expanding your circle of accumulated wisdom past their investors) is so important that it’s an explicit step in the Customer Development process

Qualified Employees/Culture
Are the difference between a good idea that never went anywhere and a billion dollar firm

MBA295F Customer Development in the High-Tech Enterprise Spring 2007

Executive Traits by Stage

Intellectual Property

Trademark protects branding & marks
Trademark gives you the right to prevent others from using “confusingly similar” marks and logos Trademark protection lasts as long as you use the mark The more you use the mark, the stronger your protection Trademark registration is optional, but has significant advantages if approved Country by country

Copyright protects creative works of authorship
Copyright gives right to prevent others from copying, distributing or making derivatives of your work Protects “expressions” of ideas but does not protect the underlying ideas (Way) more than just technology: songs, books, movies, photos, etc. Copyright protection lasts practically forever Copyright does not prevent independent development Registration is optional, but is required to sue for infringement

Trade Secrets Information that is kept secret and has economic value to the business Coke recipe, customer lists, product road maps. No registration required Can last for as long as you take reasonable steps to keep confidential

Contract Protection agreed to by contract No registration process
You have whatever protection is defined in the contract (e.g., NDA gives you certain rights to protection of your confidential information) The protection lasts for the time period defined in the contract

Patents A government granted monopoly Invention must be non-obvious
prevents others from making, using or selling your invention Even if the other’s infringement was innocent or accidental Invention must be non-obvious Protection lasts typically for years Application and examination is required Typical cost for application and exam is $10-30k Typical time for application and exam is 1-4 years Must file in U.S. within one year of sale, offer for sale, public disclosure or public use Provisional application alternative

What Can be Patented? But not these . . .
Just about anything . . . Circuits, hardware Software, applied algorithms Formulas, designs User interfaces Applications, systems Business processes (sometimes) But not these . . . Scientific principles Pure mathematical algorithms And, pending Supreme Court Case raises concerns regarding patentability of “methods” inventions

Costs Metrics that Matter

Search vs. Execution Metrics
Existing companies execute plans Startups search for them Income Statement, Balance Sheet, etc are execution documents You first need to derive the metrics that matter Search vs. Execution Metrics

Metrics That Matter • Value proposition: product cost, mkt size/share, competition? • Customer Relationships: customer acquisition costs, conversion rates, lifetime value? • Market Type: revenue curves • Operating Costs: basic operating costs of the business? • Channel: Channel margin, promotion, shelf-space charges? Revenue Streams: average selling price, # of customers/year, achievable revenue? • Burn Rate: per month? When will the company run out of cash?

Resource, Activities Example
Robotic Agriculture Resource, Activities Example

We’ve hit our first milestones
Mar 2013 First unit Jun 2011 Dec 2011 Jun 2012 Technology Track Post-processed Image recognition Real-time image recognition First unit Prototype Customer Discovery Track Select 1st target crop Testing agreement with top producer Customer trial and customer order Finance Track Series A Friends and family round Applied for grants Seed Round $125 K F&F $800 K Seed $3-5 M Series A Confidential

Resource, Activities & Cost Example
Medical Device Resource, Activities & Cost Example

Financial / Operations Timeline
MammOptics MammOptics Financial / Operations Timeline 2012 2013 2014 2015 2016 2017 2018 M&A / IPO $50 MM Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $40M Series D $35 MM Series C $30.5 MM $30M Cash Reserve $20M Series B $9 MM $15M Series A $3.5 MM $10M $5M Financial timeline Initialize System Regulatory / Clinical Launch Proof of Concept Marketable Product Beta Prototype Second Release Design Milestones 1st Release Test 2nd Release Test Laboratory Prototype Beta-Version Testing RAMIN Publication Publication Clinical Results Post-Market Clinical Studies Pilot Studies Clinical Milestones US Interim Trials US Pivotal Clinical Trials Non-Specific Codes Provisional Patent IRB / IDE Cat III CPT FDA – Class II – 510 (k) with Clinical Trials Specific Codes (Cat. I CPT / APC) Regulatory/ IP Milestones IC and Processing Patents Application and System Patents Initial Product Launch Technology Licensing 34 12/4/2009 34 34

Regulatory/ IP Milestones
MammOptics MammOptics Financial / Operations Timeline 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $40M $30M $20M Cash Reserve $15M $10M $5M Initialize Proof of Concept Design Milestones RAMIN Clinical Milestones Provisional Patent Regulatory/ IP Milestones Technology Licensing 35 12/4/2009 35 35

Regulatory/ IP Milestones
MammOptics MammOptics Financial / Operations Timeline 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $40M $30M $20M Cash Reserve $15M Series A $3.5 MM $10M $5M Initialize System Proof of Concept Beta Prototype Design Milestones Laboratory Prototype Beta-Version Testing RAMIN Pilot Studies Clinical Milestones Provisional Patent Regulatory/ IP Milestones Technology Licensing 36 12/4/2009 36 36

MammOptics MammOptics Financial / Operations Timeline 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $40M $30M $20M Cash Reserve Series B $9 MM $15M Series A $3.5 MM $10M $5M System Regulatory / Clinical Marketable Product Beta Prototype Design Milestones Laboratory Prototype Beta-Version Testing RAMIN Pilot Studies Clinical Milestones IRB / IDE Regulatory/ IP Milestones IC and Processing Patents Application and System Patents 37 12/4/2009 37 37

MammOptics MammOptics Financial / Operations Timeline 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $40M Series C $30.5 MM $30M $20M Cash Reserve Series B $9 MM $15M $10M $5M System Regulatory / Clinical Second Release Design Milestones 1st Release Test RAMIN Publication Pilot Studies Clinical Milestones US Interim Trials US Pivotal Clinical Trials IRB / IDE Cat III CPT Regulatory/ IP Milestones IC and Processing Patents Application and System Patents 38 38 38

MammOptics MammOptics Financial / Operations Timeline 2012 2013 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $40M Series D $35 MM Series C $30.5 MM $30M $20M Cash Reserve $15M $10M $5M Regulatory / Clinical Launch Second Release Design Milestones 2nd Release Test RAMIN Publication Publication Clinical Results Clinical Milestones US Interim Trials US Pivotal Clinical Trials Non-Specific Codes FDA – Class II – 510 (k) with Clinical Trials Regulatory/ IP Milestones Initial Product Launch 39 12/4/2009 39 39

MammOptics MammOptics Financial / Operations Timeline 2012 2013 2014 2015 2016 2017 2018 M&A / IPO $50 MM Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $40M Series D $35 MM $30M $20M Cash Reserve $15M $10M $5M Regulatory / Clinical Launch Design Milestones RAMIN Publication Clinical Results Post-Market Clinical Studies Clinical Milestones Non-Specific Codes FDA – Class II – 510 (k) with Clinical Trials Specific Codes (Cat. I CPT / APC) Regulatory/ IP Milestones Initial Product Launch 12/4/2009 40 40

MammOptics MammOptics Financial / Operations Timeline 2012 2013 2014 2015 2016 2017 2018 M&A / IPO $50 MM Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 $40M Series D $35 MM Series C $30.5 MM $30M $20M Cash Reserve Series B $9 MM $15M Series A $3.5 MM $10M $5M Initialize System Regulatory / Clinical Launch Proof of Concept Marketable Product Beta Prototype Second Release Design Milestones 1st Release Test Laboratory Prototype Beta-Version Testing 2nd Release Test RAMIN Publication Publication Pilot Studies Clinical Results Post-Market Clinical Studies Clinical Milestones US Interim Trials US Pivotal Clinical Trials Non-Specific Codes Provisional Patent IRB / IDE Cat III CPT FDA – Class II – 510 (k) with Clinical Trials Specific Codes (Cat. I CPT / APC) Regulatory/ IP Milestones IC and Processing Patents Application and System Patents Initial Product Launch Technology Licensing 41 12/4/2009 41 41

Resource, Activities & Cost Example
Apple Resource, Activities & Cost Example

DISTRIBUTION CHANNELS
Product User Digital Hub Digital Lifestyle Digital Platform KEY RESOURCES VALUE PROPOSITON DISTRIBUTION CHANNELS CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS REVENUE STREAMS COST STRUCTURE ACTIVITIES PARTNER NETWORK Invest in R&D solutions for differentiated customers - professional & consumer High-end mass market software developers online store brand - Apple, PowerMac, iMac component makers, shipping & logistic suppliers build whole devices both h/w & s/w differentiated markets Computers, software & services audio-visual content producers & record labels iPod, iTunes software & content agreements purchase & mgmt of digital music, audio, video increase switching costs iTunes store control the supply chain increased investment in R&D iPod, music & related products Integrated phone, games & apps across devices reduce cost of sales increase switching costs - integration optimize supply chain content agreements - games & apps iTunes through wi-fi access app & game developers & cellular operators app & game developers iPhone, apps & related services book publishers & developers of digital content content agreements with book publishers all digital devices linked through software platform increased switching costs - shared information iTunes bookstore iPad, apps, books & related services

Product User KEY RESOURCES VALUE PROPOSITON DISTRIBUTION CHANNELS CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS REVENUE STREAMS COST STRUCTURE ACTIVITIES PARTNER NETWORK component makers build whole devices both h/w & s/w solutions for differentiated customers - professional & consumer differentiated markets High-end mass market Shipping & logistic suppliers software developers software developers brand - Apple, PowerMac, iMac Wholesalers, retailers, re-sellers innovative designers online store IP & patents & agreements Computers, software & services Invest in R&D

Product User Digital Hub KEY RESOURCES VALUE PROPOSITON DISTRIBUTION CHANNELS CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS REVENUE STREAMS COST STRUCTURE ACTIVITIES PARTNER NETWORK control buying experience control the supply chain audio-visual content producers purchase & mgmt of digital music, audio, video increase switching costs record labels integration of information across devices iPod, iTunes software & content agreements iTunes store retail stores chain of owned stores increased investment in R&D iPod, music & related products

Product User Digital Hub Digital Lifestyle KEY RESOURCES VALUE PROPOSITON DISTRIBUTION CHANNELS CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS REVENUE STREAMS COST STRUCTURE ACTIVITIES PARTNER NETWORK games & apps across devices specialized services in retail stores optimize supply chain app & game developers increase switching costs - integration easy access & purchase through iTunes cellular network operators app & game developers iPhone integrated phone iTunes through wi-fi access content agreements extended to games & apps reduce cost of sales iPhone, apps & related services

Product User Digital Hub Digital Lifestyle Digital Platform KEY RESOURCES VALUE PROPOSITON DISTRIBUTION CHANNELS CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS REVENUE STREAMS COST STRUCTURE ACTIVITIES PARTNER NETWORK control customer experience in resellers’ stores Premium re-sellers all digital devices linked through software platform increased switching costs - shared information book publishers book publishers iPad & related services premium resellers 3rd party developers of digital content developers of digital content content agreements with book publishers iTunes bookstore iPad, apps, books & related services

What’s Most Important for the Business?

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