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