lecture 1 nsf i-corps march 2012 bus model cust dev
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The Lean LaunchPad
Lecture 1: Business Models and Customer Development
Steve Blank
Jon Feiber
Jon Burke
Jerry Engel
#leanlaunchpad
Agenda
1. What we used to believe / What we now know
2. Business Models and Customer Development
3. Examples
4. Market Size
5. For tomorrow
Part 1
What We Used to Believe
What We Now Know
What We Used to Believe
Startups are a Smaller Version of a Large Company
What We Now Know
Startups Search Companies Execute
What We Used to Believe
Strategy
Start With an Operating Plan and Financial Model
All I Need to Do is Execute the Plan
All I Need to Do is Make the Forecast
All I Need to Do is Execute the Plan
What We Now Know
Strategy
No Business Plan survives first contact with customers
Planning comes before the plan
Business Models
Business Models
Business Model Hypotheses
Search
Strategy
Execution
Operating Plan +Financial Model
What We Used to Believe
Process
We Built Startups by Managing Processes
Product Management
+
Waterfall Engineering
Product Introduction Model
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
Tradition – Hire Marketing
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
Marketing
Tradition – Hire Sales
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Build Sales Organization
Marketing
Sales• Hire Sales VP• Hire 1st Sales Staff
Tradition – Hire Bus Development
Concept Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Hire Sales VP• Pick distribution Channel
• Build Sales Channel / Distribution
Marketing
Sales
• Hire First Bus Dev
• Do deals for FCSBusiness Development
Tradition – Hire Engineering
Concept Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Hire Sales VP• Pick distribution Channel
• Build Sales Channel / Distribution
Marketing
Sales
• Hire First Bus Dev
• Do deals for FCSBusiness Development
Engineering • Write MRD
• Waterfall • Q/A • Tech Pubs
Customer Problem: known
Product Features: known
Waterfall / Product ManagementExecution on Two “Knowns”
Requirements
Design
Implementation
Verification
Maintenance
Source: Eric Rieshttp://startuplessonslearned.blogspot.com
Customer Problem: known
Product Features: known
Waterfall / Product ManagementExecution on Two “Knowns”
Requirements
Design
Implementation
Verification
Maintenance
Source: Eric Rieshttp://startuplessonslearned.blogspot.com
What We Now Know
Strategy
More startups fail from a lack of customers than from a failure of product development
Customer Development
Business Model Hypotheses
Strategy
Process Customer &Agile Development
Operating Plan +Financial Model
Product Management& Waterfall
Development
Search Execution
What We Used to Believe
Organization
Hire and Build a Functional Organization
What We Now Know
Organization
Founders run a Customer Development Team
No sales, marketing and business development
Business Model Hypotheses
OrganizationCustomer
Development Team, Founder-driven
Customer Development,Agile Development
Operating Plan +Financial Model
Product ManagementAgile or Waterfall Development
Functional Organization by Department
Search Execution
Strategy
Process
What We Used to Believe
Education
Entrepreneurial Education was about execution
Entrepreneurial Education was about execution
What We Now Know
Education
Entrepreneurial Education begins with the Search for a
business model
Business Model Hypotheses
Strategy
Organization Customer DevelopmentTeam, Founder-driven
Process Customer Development,Agile Development
Education Business Model Design, Customer Development, Startup team building,
Entrepreneurial Finance, Agile Development, Customer Funnel:
Get/Keep/Grow Market
Operating Plan +Financial Model
Product ManagementAgile or Waterfall Development
Functional Organization by Department
Organizational Behavior, HR Mgmt, Accounting,
Modeling, Strategy, Operations, Leadership,
Marketing, Manufacturing
Search Execution
Now imagine these classes virtual and networked independent of location
Putting Search first is a radical change
It’s not just one more methodology
What We Used to Believe
Instructional Strategies
Cases and a Business Plan were good teaching tools
Cases and a Business Plan were good teaching tools
What We Now Know
Instructional Strategies
~100 GOOTB connections
Experiential Immersion
Team-based Simulations
53
Business Model Patterns Replace Cases
Nespresso machines
retail mailorder
Nespresso.com
callcenter
Nespresso
stores
households
business
1 x machinesales
repetitive pod sales
distribution channels
coffeeproduction
facilites
production B2C distribution brand
marketing
brandpatents
machine
manufacturer
production
B2C
distributionbrand
marketing
Nespresso club
brandbrand
Nespresso pods
Business Model Hypotheses
Strategy
OrganizationCustomer DevelopmentTeam, Founder-driven
Process Customer Development,Agile Development
Education Business Model Design, Customer Development, Startup team building,
Entrepreneurial Finance, Agile Development,
Marketing
Instructional Strategies
Experiential, constructivist, learner-centered,
inquiry-based
Search
Operating Plan +Financial Model
Product ManagementAgile or Waterfall Development
Functional Organization by Department
Organizational Behavior, HR Mgmt, Accounting,
Modeling, Strategy, Operations, Leadership,
Marketing, Manufacturing
Case, Lecture, Small Group, Mentorship
Execution
Business Model Hypotheses
Strategy
Organization Customer DevelopmentTeam, Founder-driven
Process Customer Development,Agile Development
Education Business Model Design, Customer Development, Startup team building,
Entrepreneurial Finance, Agile Development,
Marketing
Instructional Strategies
Experiential, constructivist, learner-centered,
inquiry-based
Search
This Class
Business Model Hypotheses
StrategyOperating Plan +Financial Model
OrganizationCustomer DevelopmentTeam, Founder-driven
Process Customer Development,Agile Development
Product ManagementAgile or Waterfall Development
Functional Organization by Department
Education Business Model Design, Customer Development, Startup team building,
Entrepreneurial Finance, Agile Development,
Marketing
Organizational Behavior, HR Mgmt, Accounting,
Modeling, Strategy, Operations, Leadership,
Marketing, Manufacturing
Instructional Strategies
Experiential, constructivist, learner-centered, inquiry-
based
Case, Lecture, Small Group, Mentorship
Search Execution
Part 2
Business Models and
Customer Development
What’s A Company?
What’s A Company?
A business organization which sells a product or service in exchange for revenue
and profit
What’s A Startup?
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A temporary organization designed to search
for a repeatable and scalable business model
A Startup aims to become a company
How Does Your Science Become Part of a Company?
Technology Commercialization
• IP Licensing (Patent, Process, etc.)
• Stand-alone Startup
How Are Companies Organized?
How Are Companies Organized?
Companies are organized around Business Models
What’s a Business Model?
Value Proposition
What Are You Building and For Who?
What About My Technology?
What About My Technology?
Your technology is one of the many critical pieces necessary to build a company.
It is part of the “Value Proposition”
What About My Technology?
Customers don’t care about your technology
They are trying to solve a problem
Customer Segments
Who Are They?
Why Would They Buy?
Channels
How does your Product Get to Customers?
Customer Relationships
How do you Get, Keep and Grow Customers?
Revenue Streams
How do you Make Money?
Key Resources
What are your most important Assets?
Key Partners
Who are your Partners and Suppliers?
Key Activities
What’s Most Important for the Business?
Cost Structure
What are the Costs and Expenses
images by JAM
CANVAS OVERLAYOFFER
CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMERSEGMENTS
REVENUE STREAMSCOST STRUCTURE
KEYACTIVITIES
KEYPARTNERS
KEYRESOURCES
But,Realize They’re Hypotheses
9 Guesses
Guess Guess
Guess
Guess
GuessGuess
Guess
GuessGuess
building block
building block
building block
building block
building block buildin
g block
building block
building block
building block
building block
building blockbuildin
g block
building block
building block
Business Model Canvas
Turning Hypotheses Into Facts
The Four Steps – The Startup Path
Customer Development
Customer Development
Test the Problem, Then the Solution
Hypotheses Testing and Insight
Customer Development
The Pivot
Customer Development is how you search for the model
CompanyBuilding
Customer Creation
Execution
Customer
Discovery
Customer
Validation
Pivot
Search
Customer Discovery
Web/Mobile Versus Physical
• Web/Mobile startups run faster
• Different process steps for web vs. physical
• Customer Relationships are radically different
Customer
Discovery
Customer
Validation
Pivot
Customer Discovery
Customer Validation
Customer Validation
Part 3
How Does this Really Work?
How Does This Really Work?
NSF Lean LaunchPad Class
10 Weeks From an Idea to a Business
Graphene Frontiers
48 COMPANIES70+ CONVERSATIONS
We are a nanotechnology materials company with a proprietary process for producing high quality, low cost, large area graphene films at commercial scale
Background: Graphene Applications“Wonder Material” Graphene
• Nano Material Subject of 2010 Nobel Prize in Physics • 2D Carbon: Strong, Flexible, Conductive, Transparent• Enables Next Generation Thin, Flexible Devices
Touch Screen, DisplaysFlexible Transparent
Electrodes
Thin, Flexible
Solar Cells
Problem: Lab Scale Not EnoughGraphene Production Must Scale Up to
Commercial Levels before Integration into Consumer Products Becomes a Reality…
Solution: Scalable Production ProcessOur Patent-Pending APCVD Graphene Production Process:•Operates at ambient pressure, reducing cost enabling flexible design•Industrial scale, continuous roll-to-roll production possible•Graphene sheet size limited only by CVD furnace dimensions•Same or better quality vis-à-vis LPCVD graphene•Graphene growth at 900-1000 °C, lower than other methods
Market: Size and GrowthNascent Graphene Market is Ready to Explode:Commercial Scale Production will be Catalyst
• Thin, Flexible Displays• Solar Thin Film• Touch Screens• Thermal Management for Electronics• Basic Materials and Research• Microscopy (TEM) Sample Supports
2012 2016
$52M
Market for GrapheneFilms/Sheets
Thermal Management$6.4B
Graphene Frontiers Process & Product Offering• GF APCVD Process will Accelerate Graphene Adoption Curve
Thin, Flexible Display$8.2B
Thin Film Solar$4.6B
Research/Mat’l/Other
$1.4B
GF TAM:$1.2B
Team: Graphene FrontiersEL: Zhengtang Luo, PhD – Chief Science Officer
10+ years experience in synthesis of carbon nanomaterials and product development for applications in the area of materials chemistry, chemical separation and electronic devices.
Mentor: Mike Patterson – CEO
Experienced entrepreneurial leader, manager, and trusted adviser to startups and Fortune 500 companies, providing expertise in growth strategy and international operations. Patterson is an Executive MBA candidate (Entrepreneurial Management, April 2012) at the Wharton School, University of Pennsylvania.
PI: A.T. Charlie Johnson, PhD – Founder, Scientific Advisory Board
Known internationally for his work in graphene electronics and carbon nanotube electronics. IP from his lab on DNA-carbon nanotube devices for use in an electronic nose system pursued by Nanosense. An author of over 130 peer-reviewed articles, Johnson holds two issued patents, with 18 other patents submitted.
Recap
• Graphene technology will change the world...
• …but not until it is available in commercial volumes
• We believe that APCVD is the best path to industrial scale
• Whoever meets this challenge will be first mover in a fast
growing market with multi-billion dollar potential
• We are the right team with the right technology to do it
What’s Next: Strategy and Roadmap
4” Scale-Up
Process Licensing
Roll-to-Roll Mfg.
Industrial Scale
TEM Grids
Materials Business
12” x 12” Sheet
Production
Intellectual PropertyThin, Flexible Displays
Application R&DTeam
Perfect
Continuous Process
“World Leader in
CVD Graphene
Innovation”Scale-Up Sheet Size
Increase Area Increase Throughput New Applications
1H 2012 2012 2013+
Commercial Roll-to-Roll Design & Prototype
ApplicationDevelopmentPhase
Product/Revenue
Milestone
Activity
What’s Next: Secure Partnerships + Investment
Active Customer Conversations
Manufacturing Partners
Distribution Partners
?Seed Investment
Needed
$1.5 MM
Here’s What We Thought:– Graphene can be used for just about anything– All of the big manufacturers are just waiting for our
product– The market for graphene will explode in 2012– We will become the world’s largest graphene
manufacturer
Enter I-Corps: Beginning Hypotheses
So Here’s What We Did…
• Research to identify target companies: Build the list
– Web, industry/research reports, personal network,
“Who else should we talk to?”
• Calls to personal/professional/alumni network: “Do you
know anyone…?”
• Intros, warm calls, cold calls, cold calls, more calls
So Here’s What We Did…
• Google AdWords Campaign + Survey Monkey
– 3 days, 8,555 Impressions, 34 people clicking through to our site, ZERO
contacts/closes. Retrospect: What were we trying to learn???
• Serendipity: Casual conversation turns to Graphene Frontiers at alumni event:
“That’s terrific! You know, I work at DuPont. Here’s my card… send me your deck and let me know how I can help.”
–Tom Connelly, Chief Innovation Officer, DuPont
So Here’s What We Did…
• 48 Companies Engaged, 70+ Conversations: – Lockheed Martin, GrafTech, Inventables, alphaMOS, FirstNano, Pannam Imaging,
FujiFilm, Solutia, Dontech, Tramonto Circuits, Adamant Technologies, Intel, XG Sciences, Graphene Technologies, Densitron, Hotatouch, Touch International, Magic Touch, NJY Technology, Pangea Ventures, Display Search, Dow, DuPont, 3M, Corning, BASF, WL Gore, Morgan AM&T, Plextronics, SPI Supplies, New Metals and Chemicals, G.E., Innovalight, Siemens, Nelson-Miller, Essilor USA, Nexans, E-ink, Gamma Dynamics, Plastic Logic, Cabot Corporation, Thin Diamond, Knighthawk Engineering, Kopietz Consulting, DISPLAX, NineSigma, Evaporated Coatings, LiquaVista
• 80 LLL Posts, 61 Comments/Responses– 79% comments positive or factual, 21% “Constructive”
So Here’s What We Learned…
• Atmospheric pressure production is key value-add– Not “high-quality”, not single-layer
• Many big companies are on the sidelines doing limited
product dev, waiting for a proven production method
• We need to focus on scaling up (bigger & faster)
• We need a partner to break into consumer electronics
• Cost matters, but not as much as we thought
So Here’s What We Learned…
• TEM grids are viable, near term but small market
– Will rely on distribution partner
• Displays will be next big thing
– Focus on flexible/foldable thin displays
– May require partnership with OEMs or sub-contractors
• Extensive product characterization is next step
– Transparency, haze, sheet resistance for displays (3M, Dow, DuPont)
– Minimize layers and contamination for TEM (SPI, Halcyon)
Process• Low Cost• Higher Quality• Large Area• “Industrializable”• Flexible Mfg
Material• Thermal Conduct.• Elect. Conduct• Strength• “Semiconductor”• Flexible• Transparent
• Defense• MEMS• Chem/Bio Detect.• Researchers• Optoelectronics• Transparent
Conduct. (Touch)• Solar Cell Electrodes• Thermal Mgmt• Supercapacitor• Battery• TEM support• Polymer/Composite• CVD Equip Mfg
• Distributor• Direct Sales• Online• License• Partner/JV• Bundle
• Warranty• Service/Maint.
Agree• Joint Marketing• Branding
• R & D• Scale up system design• Graphene production• IP creation/licensing• Internal application
development
• Material Sales• License/Royalty• Equipment Sales• Consulting• Maintenance• Design
• Add’l IP• Applications• SBIR• Angel• VC• Ben Franklin
• IP* (Patent/License)• Team/Expertise• Credibility/Rep• CVD Equipment• Inputs (gas/foil)• Lab space• Website• Design/Engineering
• Earlyvangelists• (Customer/Partner)• Equipment Mfg• Universities• Downstream
fabrication companies
• Suppliers
• Team• Lab space• Capital equipment
The Business Model Canvas
Process• Low Cost• Higher Quality• Large Area• “Industrializable”• Flexible Mfg
Material• Thermal Conduct.• Elect. Conduct• Strength• “Semiconductor”• Flexible• Transparent
• Defense• MEMS• Chem/Bio Sensor• Researchers• Optoelectronics• Transparent
Conduct. (Touch)• Solar Cell
Electrodes• Thermal Mgmt• Supercapacitor• Battery• TEM support• Polymer/Compos.• CVD Equip Mfg
• Distributor• Direct Sales• Online• License• Partner/JV• Bundle
• Warranty• Service/Maint.
Agree• Joint Marketing• Branding• Education
• R & D• Scale up system
design• Graphene product.• IP creation/
licensing• Internal app. dev.
• Material Sales• License/Royalty• Equipment Sales• Consulting
• Maintenance• Design• Add’l IP• Applications
• IP* (Patent/License)• Team/Expertise• Credibility/Rep• CVD Equipment• Inputs (gas/foil)• Lab space• Website• Design/Engineering
• Lead Customer• Equipment Mfg• Universities• Downstream
fabrication companies
• Suppliers
• Team• Lab space• Capital equipment• Direct Sales/Travel
The Business Model Canvas
Low Cost Thermal Mgmt Solutions
Direct Sales
Scale up
Material Sales
IP
Equipment Mfg
Direct Sales/Travel
Transparent Conduct. (Touch)
Chem/Bio Sensor
Education
Service/Maint.
License
Higher Quality
Large Area
“Industrializable”
License/RoyaltyCapital equipment
Lab space
Personnel
CVD Equipment
Facilities/Lab
Customization
Production
Universities
Downstream fabrication companies
The Business Model Canvas
Low Cost Thermal Mgmt Solutions
Direct Sales
Scale up
Material Sales
IP
Equipment Mfg
Direct Sales/Travel
Transparent Conduct. (Touch)
Chem/Bio Sensor
Education
Service/Maint.
License
Higher Quality
Large Area
“Industrializable”
License/RoyaltyCapital equipment
Lab space
Personnel
CVD Equipment
Facilities/Lab
Customization
Production
Universities
Downstream fabrication companies
The Business Model Canvas
Low Cost Thermal Mgmt Solutions
Direct Sales
Scale up
Material Sales
IP
Equipment Mfg
Direct Sales/Travel
Transparent Conduct. (Touch)
Chem/Bio Sensor
Education
Service/Maint.
License
Higher Quality
Large Area
“Industrializable”
License/RoyaltyCapital equipment
Lab space
Personnel
CVD Equipment
Facilities/Lab
Customization
Production
Universities
Downstream fabrication companies
Intermediate product
Graphene Frontiers Business Model Canvas – PRIOR VERSION (10.18)
Low Cost Thermal Mgmt Solutions
Direct Sales
Scale up
Material Sales
IP
Equipment Mfg
Direct Sales/Travel
Transparent Conduct. (Touch)
Chem/Bio Sensor
Education
Service/Maint.
License
Higher Quality
Large Area
“Industrializable”
License/RoyaltyCapital equipment
Lab space
Personnel
CVD Equipment
Facilities/Lab
Customization
Production
Universities
Downstream fabrication companies
Intermediate product
Membrane switches
Replace ITO
Collaborative R & D
This Week:Split, then Pivot
Graphene Frontiers Business Model Canvas “A”
IP
Higher Quality
“Clean”
Atomically Thin and Robust
Revenue Sharingw/Distributor
“Free” (Selling Byproduct)
CVD Equipment
Facilities/Lab
Research Groups
TEM Equipment Mfg.
Trade ShowsElectron Microscopists
Academic PapersTransfer Process Optimization
Graphene Frontiers Business Model Canvas “B”
Low Cost
Scale up
IP
Equipment Mfg
Direct Sales/Travel
Flexible Transparent Conductor
Education
Service/Maint.
License
Higher Quality
Large Area
“Industrializable”
License/RoyaltyCapital Equipment
Lab space
Personnel
CVD Equipment
Facilities/Lab
Customization
Universities
Downstream Fabrication Companies
Intermediate product
Collaborative R & D
Foldable / Bendable
Graphene Frontiers Business Model Canvas “B”
Low Cost
Scale up
IP
Equipment Mfg
Direct Sales/Travel
Flexible Transparent Conductor
Education
Service/Maint.
License
Higher Quality
Large Area
“Industrializable”
License/RoyaltyCapital Equipment
Lab space
Personnel
CVD Equipment
Facilities/Lab
Customization
Universities
Downstream Fabrication Companies
Intermediate product
Collaborative R & D
Foldable / Bendable
PHOTOCATALYSTS for WATER REMEDIATION
(nanocatalysts)
(c) copyright 2011
• Commercialize visible light activated nanocatalysts (Nanogrids™)
• Nanotechnology removes hydrocarbons from polluted water
• Turns wastewater from fracking operations into drinkable water
• New product in a niche (multibillion $) market
• Talked to 70 people- dealers, distributors, customers)
• Surveyed another 30 customers
Initial Idea & Market Opportunity Estimate
• Our invented nanogrids™(c) technology offers inexpensive, extremely fast and efficient hydrocarbon decomposition
• It has potential uses in oil decomposition/ environmental remediation
• Focus on Gulf Oil Spill clean- up efforts
(c) copyright 2011
Total available market for environmental nanotechnologies
2010: $6.1b2014: $21.8b (projected)
Served Available Market environmental remediation
40% of total market
Target Market$8b
Ref: F. Boehm, Nanotechnology in Environmental Applications, BCC Research, 2006; NOAA, Gulf Spill Restoration, 2011
Team Members
PI: Perena Gouma, tenured Associate Professor, Dept of Materials Science & Engineering, SUNY Stony Brook; Director of Center for Nanomaterials & Sensor Development; Fulbright Scholar and NSF grantee since 2002. Has published over 100 research articles on ceramic nanomaterials and their functional applications; she holds 4 US patents
Lead: Jusang Lee, doctoral candidate in the PI’s research group; he has published research-based and review papers; he is a co-inventor along with the PI of the nanogrids™ technology
Mentor: Clive Clayton, founder Director of the SPIR program at SUNY; Leading Professor in Materials Science & Engineering, SUNY Stony Brook; Fellow of the Electrochemical Society; serving on advisory board of BASF’s Rensselaer NY Ecology Center
•Industrial nano-manufacturing providers
•Suppliers of precursor material
•IP protection• R&D capability•Brand•Expertise
•IP validation•Building a brand•Pilot studies•Marketing•Distribution
•New product (replaces toxic surfactants)•Green Photochemistry• Fully decomposes oil•No energy cost to use•Speed of deployment•Recoverable•Customization•Risk reduction•Convenience/usability
•Expanding their services•Continuous/long term•As-needed leasing
•Water remediation companies•Coast Guard•Shipping industry•Refineries•Oil service industry•EPA•Federal groups on remediation•Individual /home use (e.g. pool cleaning)
•Direct sales and/or leasing•Partner distribution channels
•Shipping
•Marketing
•Sale of nanogrids™ © per square foot•Per use charge (leased)• First to market; premium revenues•Licensing other IP
(c) copyright 2011
Business Model Canvas Version 1
Photocatalysts
Company Contact Person Lessons Learned
Dow Chemical Ventures Steve Hahn To focus on water cleaning systems; efficiency of catalyst is the key feature
Oceanside Water Pollution Control Plant, SF, CA)
Alexandre Miot To focus on petroleum-based contamination; skimming
Eastern Environmental Solutions, Inc (LI, NY)
Deb Engelhardt, Louis Bascelli, Joseph Napoli
Current practices: spill tech pads; Regen Ox (oxidizer)
Miller Environmental (LI, NY) Dave Reardon Got suggestions for pilot studies; projects cost vary a lot
DEC (region 1, NY) Karen Gomez State environmental regulations; contractors
Eco-Test Babylon (LI, NY) Thomas Powell Water quality testing procedures and EPA standards
GES Edward Savarese Current practice: pump and treat; geologists org. contact
David Tonjes DT&S-SBU; consultant
Customer is the Env. Engineer
WRS environmental; Environtrac (LI, NY)
Front desk personnel
Talked to their R&D people
So, Here’s What We Did TESTED THE CUSTOMER SEGMENTS HYPOTHESIS
Business Model Canvas Version 2
•Industrial nano-manufacturing providers
•Suppliers of precursor material •IP protection
• R&D capability•Brand•Expertise
•IP validation•Building a brand•Pilot studies•Marketing•Distribution
•New product •Green• Decomposes oil•No energy cost to use•Recoverable•Customization•Risk reduction
•Expanding their services•Continuous/long term
•Water remediation companies•Coast Guard•Shipping industry•Refineries•Oil service industry•EPA•Federal groups on remediation•Individual /home use (e.g. pool cleaning)
•Partner distribution channels
•Marketing•Sale of nanogrids™ © per square foot• First to market; premium revenues•Licensing other IP
•Speed of deployment
•As-needed leasing
•Direct sales and/or leasing
•Remediation of petroleum-based oil-polluted water
•Per use charge (leased)
•Shipping
•R&D costs
Photocatalysts
Here’s What We Found Target Market: Petroleum-Oil Polluted Water Remediation
• Industry is excited about innovative products/solutions
• Problems are diverse; Common pollutants: gasoline, fuels
• Makes no sense to directly sell and ship our products
• Need to identify distributors and partner with them
• No Leasing
• Our competitive advantage could be that we offer fast remediation solutions
•Industrial nano-manufacturing providers
•IP validation
•Partner/other distribution channels
(c) copyright 2011
•Suppliers of precursor material
•Building a brand•Pilot Studies
•Distribution
• New Product
•Green
• Decomposes oil
•No energy cost to use•Fast Remediation
•Recoverable
•Customization
•Risk reduction•Convenience/usability
•IP protection
•R&D capability•Brand
•Expertise
•Marketing
•Distributors
•Dealers/Partners
•Marketing
•R&D costs
•Expanding their services
•Continuous/long term
•Sale of nanogrids™ © per square foot
• First to market; premium revenues•Licensing other IP
•Remediation of Petroleum-based oil polluted water
Business Model Canvas Version 3
Photocatalysts
So, Here’s What We Did
Talked to Dealers of Environmental Remediation Products
Approached Key Distributors
Talked to Remediation Specialists in Numerous Remediation Companies
We Went on a Field Study to Eyewitness the Challenges Associated with Remediating Underground Oil Spills
ECS Environmental Compliance (MA)
AECOM (MA)
Kerfoot Technologies, Inc (MA)
EnviroTrac (LI, NY)
BKW Environmental (TX/PA)
Advanced EnvironmentalSolutions (MA)
ASSESSED THE MARKET TYPE
So, Here’s What We Found
• Remediation treatments of petroleum-oil contaminated water almost leave residual hydrocarbon contamination levels that prevent the disposal of the remediated water to the environment
• Our nanocatalysts can be used to fully remediate hydrocarbons and to provide clean water
• However, is there a sizeable market for our technology?
• What is it?
• Does the size of the opportunity make it worth pursuing it further?
New Product for Niche Segment of Existing Market
•Industrial nano-manufacturing providers
•IP validation
(c) copyright 2011
•Suppliers of precursor material
•Building a brand •Pilot Studies
• New Product•Green
• Decomposes oil
•No energy cost to use
•Fast Remediation
•Recoverable
•Customization•Risk
reduction•Convenience/usability
•IP protection
•R&D capability•Brand
•Expertise
•Marketing
•Distributors
•Dealers/Partners
•Marketing
•R&D costs
•Expanding their services
•Continuous/long term
•Sale of nanogrids™ © per square foot
• First to market; premium revenues
•Licensing other IP
•Remediation of Petroleum-based oil polluted water
•Manufacturing costs
Business Model Canvas Version 4
Photocatalysts
• Came up with different Packaging Options for our product
• Contacted 30 Potential Customers about our product
• Tried to Recruit Members for IAB
• Calculated the Cost of In-House Manufacturing
• Produced a Revenue Model for Our Company
So, Here’s What We Did
•Rolls of fabric-like material
• Blankets
• Pads /mats
Packaging options
Packaging Options & Cost of Manufacturing
Our Product* Estimated Cost Existing Product in Market
Rolls of fabric-like material (Sold per square foot)
$10 U*** Oil Absorbent $ 20
Blankets (3x2 .5 feet) $50 P***Oil-Only Weighted Absorbent Blanket $ 112
Pads mat for small spill (15" x 18“)
$30 B*** INDUSTRIES Buff Oil Absorb Pads$ 51
So, Here’s What We Found
* Our product description: • new nanotechnology that collects & decomposes oil in water, in-situ
• It can hold oil up to 20 times its weight, floats in water, and uses sunlight to break down hydrocarbons into eco friendly products
Industry likes our product and pricing
Industry Expert/Customer Testimonials
“I feel your purchase prices are too high for the mass of the remediation market. For a massive spill of 100,000 gallons or more, the cost would compare unfavorable with skimming and transporting for reclamation.
For small spills your product is in competition with the cost of conventional absorbents plus landfill disposal. In this case, your $10 per sq. foot compares with $10-16 per ton landfill disposal.” Dan Gray, Hepaco Inc., Tucker, GA.
“I think that the pricing is right on, I think it shouldn’t be very difficult to sell the fabric, especially since its eco-friendly.Would these then, in theory, be able to be thrown in the trash along with MSW?Here on LI most of our garbage is burned, what type of off gasses are produced when these are incinerated?Also, would this product work on water/ocean/river spills?”James Cressy, Project Manager, Impact Environmental
•IP validation
(c) copyright 2011
•Suppliers of precursor material
•Building a brand •Pilot Studies
• New Product•Green
• Decomposes oil
•No energy cost to use
•Fast Remediation
•Recoverable
•Customizationn•Risk reduction
•Convenience/usability
•IP protection
•R&D capability
•Brand
•Expertise
•Marketing
•Distributors
•Dealers/Partners
•Marketing
•R&D costs
•Expanding their services
•Continuous/long term
•Sale of nanogrids™ © per square foot
• First to market; premium revenues
•Licensing other IP
•Remediation of Petroleum-based oil polluted water
•Manufacturing costs
•Remediation of ”Produced Water”
•Water desalinationcompanies
Business Model Canvas Version 5
Photocatalysts
Added Key Customer Segment
“Produced water”: Discharged in off-shore oil-producing areas
Fracking creates large amounts of wastewater
Current energy exploration and extraction in US creates 15-20 billion barrels of produced water / year
Worldwide, estimates top 50 billion barrels
Energy companies pay between $3 – $12 to dispose of each barrel of produced water
Produced water is usually treated to remove most free oil
Need to treat the remaining amount of soluble and volatile petroleum hydrocarbons
BTEX average concentration remaining about 5mg/L Allowable limit of BTEX in drinking water 5mg/L
WHAT IS BTEX? BTEX is the abbreviation used for four compounds found in petroleum products. The compounds are benzene, toluene, ethylbenzene, and xylenes.
Produced Water
So, Here’s What We Found
Nanogrids™ ©
Reducing benzene contamination by 1000 times!
Turning Wastewater into Drinking Water
From 3.5 ppm
To 2.4 ppb
What is the Problem We Solve?
• Our product can contain the volatile petroleum hydrocarbons (e.g. benzene) and subsequently decompose them either in-situ or off-site
• It can be used as the final remediation step in the “produced water” clean up
• It can, in principle, turn “produced water” from wastewater to drinkable water while treating on-site
• New legislation expected to cancel the Energy Industry’s exception from the Clean Water Act, thus favoring “new, self-contained, on-site water treatment”
• The current market for treating produced water is estimated to exceed $4.3 billion for next 5 years
•IP validation
•Partner/other distribution channels
•Suppliers of precursor material
•Building a brand •Pilot Studies
•Distribution
• New Product
•Green
• Decomposes oil
•No energy cost to use
•Fast Remediation
•Recoverable
•Customizationn•Risk reduction
•Convenience/usability
•IP protection
•R&D capability
•Brand
•Expertise
•Marketing
•Distributors
•Dealers/Partners
•Marketing
•R&D costs
•Expanding their services
•Continuous/long term
•Sale of nanogrids™ © per square foot
• First to market; premium revenues
•Licensing other IP
•Remediation of Petroleum-based oil polluted water
•Manufacturing costs
•Remediation of ”Produced Water”•Water
desalinationcompanies
• Filtration
Business Model Canvas Version 6
Photocatalysts
Market Size Diagram
GlobalNanocatalyst Market
$6bBy 2015
World Water Treatment Market $48.1b
Filtration /Water Purification Market $8.5b
Target Market
http://www.strategyr.com/Nanocatalysts_Market_Report.asp; World Water Treatment Products to 2015 - Demand and Sales Forecasts, Market Share, Market Size, Market Leaders; thttp://www.wateronline.com/article.mvc/Report-World-Water-Wastewater-Treatment-Marke-0001
Distribution Channel Diagram
Distributors
Dealers/Potential Partners
Customers
Purchasing
Individual
Products
Filtration Industry/Integrated Solutions
Revenue model diagram
Year 1 Year 2 Year 3 Year 40
10
20
30
40
50
60
($M
)
First year revenues:20 SME of $100,000 sales/year= $2M2 LC of $1M /year =$2Mfirst year revenues : $4M
Second year revenues:75% retention of SME15 SME of $150,000 sales/year= $2.25M2 LC: $5M sales/yearsecond year revenues $7,25M
Third year revenues:maintain the domestic levels with existing customers but expand international sales to $3.5MThis will set us over $10M
Fourth year revenues:Add new line of products for existing market; expand into adjacent markets(off-site remediation; water purification; etc)Revenues to reach $50M
What’s Next
The PI and Lead are forming a company (C-corp)
The mentor will maintain advisory role
Ongoing negotiations for exclusive licensing of IP in progress
Seek seed funding from investors, VCs, SBIR, SUNY’s economic development office, NYSERDA
Explore interactions with Pall and Siemens Water Technologies on developing integrated solutions/licensing IP
Explore opportunities for women-owned businesses
Disseminate core principles learned into the University’s incubator program through mentor’s efforts
Stony Brook University Office of Technology Licensing and Industry Relations
The Office of Technology Licensing and Industry Relations (OTLIR) is an entity of the Research Foundation for State University of New York, which manages the intellectual property for esteemed SUNY faculty members and acts a liaison for academic-industry interactions.
Exclusive License General Terms: Clearly defined field of use Diligence milestones for compliance and assurance of
commercialization Up-front payment Patent cost reimbursement Financial milestone payments based on product sales and
commercial milestones Sublicensing and Assignment terms Limitations on liability including insurance and indemnification
163
Arka Solutions
Arka will make modular, low cost, enhanced heat pipe-based cooling solutions, first for
LED lighting, and subsequently for electronics cooling and HVAC applications
Total Customers Contacted: 86RIT NSF ICORPS Dec 14 2011
RIT NSF ICORPS Dec 14 2011 164
Initial Business Concept
Global lighting industry - $100B
LED lighting - $6B, CAGR>40%
Enhanced cooling allows• Higher lumen output• Higher light quality• Better reliability
LED Replacement Lamps
~500 million sockets * $15/lamp =
~$750M
Team Members
Entrepreneurial co-Lead
Kirthana KripashMBA (Candidate), RIT
Entrepreneurial co-Lead
Ankit KalaniMS Engineering (Candidate) RIT
Principal Investigator
Dr. Satish KandlikarGleason Professor
Mech. Engg., RIT
Mentor
Dr. Suresh SunderrajanPresident, NNCrystal Corp.
Kandlikar and RIT Team – NSF I-Corps
Business Canvas 1
Kandlikar and RIT Team – NSF I-Corps
Here is what we did.
Customers Key PartnersChannels
Kandlikar and RIT Team – NSF I-Corps
“We are willing to wait 5 to 7 years
for the price to fall before we adopt
this technology on a wide scale. ”
“If you bring us a modular thermal system that provides better cooling at lower cost, we would definitely want to explore this technology.
MARKET FLOW – Iteration 1
Arka provides replacement lamps
What we learnt“New Product”
Customers
• Cost: The customer is unwilling to buy the product at current prices
• Loyalty: The final consumer is highly dependent on Gatekeepers (suppliers) for guidance in product choice
Distribution and Supply
• We lack expertise in Lamp/Luminaire production
• OEMs were interested in incorporating our enhanced thermal module in their product
We had to pivot! Kandlikar and RIT Team – NSF I-Corps
Business Canvas 2
MARKET FLOW – Iteration 2
Arka provides Thermal Modules
Here is what we did.
Customers Key PartnersEnvironment
We would like to enter into a partnership to develop heat pipe based products.
Heat Exchanger
Manufacturer
What we learnt. “New Business Model”
• Our competencies lay primarily in the heat pipe industry
• The most encouragement came from a heat exchanger manufacturer who is looking to expand his product line.
• Our Business Model iterated; we will now focus on heat pipe based solutions in diverse applications.
Kandlikar and RIT Team – NSF I-Corps
RIT NSF ICORPS Dec 14 2011 174
Prototype Results
• Arka prototype runs 15 C cooler, allowing more LED placement per lamp
• Prototype delivers 100 % more lumens for the same form factor • ~30% lower cost/unit for similar lumen output• The weight of Par38 is 65 percent lower, and the manufacturing cost
is $4.50 (current module costs about $2.20)
Commercial PAR 38 Arka Prototype
52 °C (max) 37 °C (max)
Business Canvas 3
MARKET FLOW – Iteration 3
Heat Exchanger Manufacturer
Design Sources and
Technical Experts
Status Update and Next Steps
• Negotiations with Heat Exchanger Manufacturer (HEM) ongoing.
• Arka provides::IP, heat transfer expertise, design • HEM provides: Manufacturing, distribution and
sales channels• Arka will be proactive in exploring other market
opportunities.– Additional revenue/cost models will be explored
using the methodology of this class
Kandlikar and RIT Team – NSF I-Corps
Here is what we learnt.
• The Process:– Iterations occur organically when you respond to
market and consumer needs. – Explore unconventional opportunities, be OPEN,
and be aware that potential partners may be sitting next to you in a plane. I probably met my future prototyping partner on my way to Stanford.
• The Market:– Understand your customers, channels and partners– It’s about money – customer’s, partner’s and yours
– respect that without forgetting your core values. Kandlikar and RIT Team – NSF I-Corps
Thank You!
For the vision of the NSF team, and the
Valuable Guidance from Steve Blank
and the awesome Teaching Team at Stanford!
Appendix
Final Note to Educators
• Most Valuable Game Changers – Your Students!– Recognize the innovative potential of your student– Guide them to pursue commercialization: from their mom’s
gardening business to successful technological products– Motivate your students – Be ENABLERS. You can shine on your
own, but you can “nucleate” many more stars.
Final Note to Students• Most Valuable Assets – Your Ideas and Your Drive
– Dream of Possibilities– And then make them HAPPEN – you will know how by simply
GETTING STARTED
Kandlikar and RIT Team – NSF I-Corps
Pass/Fail Parameters in Oct ‘11
Competitive Players
LED Lamp
• Samsung• Cree• Philips• BriteLight• Sylvania
Thermal Module
• Nuventix• Thermacore
Design Firm
• Lytron• Enertron• Heat-Pipes• Transterm• Thermosys
Dr. Kandlikar – Key Takeaways
– Show innovativeness– Integration of Student education on commercialization– Hope to get NSF implementation grant for RIT curriculum– Hope to be NSF face on commercialization initiative– Create a start-up and be successful (really start a heat pipe
company)
Ankit Kalani – Key Takeaways• What I hoped to learn.
– To be involved in a grant based project from start to finish– Understanding the needs and requirement of product
development ( from research lab to an actual product)• What I learnt.
– What entrepreneurship really means – How to talk and listen to ‘actual’ customers– Understanding requirements for a start-up not just product
development– Presentation improvement skills– Planning and working to meet deadlines– Being flexible and responsive to feedback
Kirthana Kripash – Key Takeaways
• What I hoped to learn:– How to understand and facilitate the technology commercialization
process– How to work with technical teams– Student and University based technology commercialization and
resources– If academic training in entrepreneurship translates in the real world.
• What I learnt:– Working with a idea at the nascent stage while incorporating customer
feedback allows room for easier growth and modification– Concepts and Theories do not convert easily to product features.
Prototyping from paper to product takes time, effort and an ability to improvise.
Business Canvas
Week 1 - 9
Business Canvas -
Business Canvas -
Business Canvas -
Business Canvas -
Business Canvas -
Business Canvas -
Business Canvas -
Business Canvas -
How to Build A Startup
IdeaBusiness ModelSize Opportunity
Customer Development
How to Build A Startup
Idea Business Model(s)
Size of the Opportunity
Customer Discovery
Customer Validation
How to Build A Startup
Idea Size of the Opportunity
Business Model(s)
Customer Discovery
Customer Validation
Theory Practice
Business Model(s)
Size of the Opportunity
How to Build A Startup
Idea Size of the Opportunity
Business Model(s)
Customer Discovery
Customer Validation
Business Model(s)
Size of the Opportunity
How to Build A Startup
Idea Size of the Opportunity
Business Model(s)
Customer Discovery
Customer Validation
Business Model(s)
Size of the Opportunity
• First test the problem• Next test the solution
How to Build A Startup
Idea Size of the Opportunity
Business Model(s)
Customer Discovery
Customer Validation
Business Model(s)
Size of the Opportunity
More in the Best Practices Workshop
Tonight – 7pm
Part 4
How Big is This Opportunity?
Market/Opportunity Analysis
How Big is It?: Market/Opportunity Analysis– Identify a Customer and Market Need– Size the Market– Competitors– Growth Potential
How Big is the Pie?Total Available Market
Total Available Market
• How many people would want/need
the product?
• How large is the market be (in $’s) if they all bought?
• How many units would that be?
How Do I Find Out?
• Industry Analysts – Gartner, Forrester
• Wall Street Analysts – Goldman, Morgan
How Big is My Slice?Served Available Market
• How many people need/can use product?
• How many people have the money to buy the product
• How large would the market be (in $’s) if they all bought?
• How many units would that be?
How Do I Find Out?• Talk to potential customers
Served Available
Market
TotalAvailableMarket
How Much Can I Eat?Target Market
• Who am I going to sell to in year 1, 2 & 3?
• How many customers is that?
• How large is the market be (in $’s) if they all bought?
• How many units would that be?
How Do I Find Out?• Talk to potential customers
• Identify and talk to channel partners
• Identify and talk to competitors
TotalAvailableMarket Target
Market
ServedAvailableMarket
Market Size: Summary
• Market Size Questions:– How big can this market be? – How much of it can we get?– Market growth rate– Market structure (Mature or in flux?)
• Most important: Talk to Customers and Sales Channel• Next important: Market size by competitive approximation
– Wall Street analyst reports are great• And : Market research firms Like Forester, Gartner
Team Deliverable by Tomorrow
• Hypotheses for each part of business model• Test for each of the hypotheses
– What constitutes a pass/fail signal for the test (e.g. at what point would you say your hypotheses wasn’t even close to correct?
• Plan to get out of the building to test the hypotheses
• Summarized in a 5 Minute PowerPoint Presentation– Business Model Canvas– Market Size– Getting out of the building plan
Don’t Over Think Your Hypotheses
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