venture capital project for nasa technology

Entrepreneurial Finance Final Project Report

BU.233.730.85

NASA Technology: Lotus Dust Mitigation Coating

May 2016

Professor Jim Liew

Group 8

Baozheng (Michael) Ge

Weijia(Victoria) Liu

Ting-Chih (Ting) Wang

Qiurong (Sunny) Zheng

Jieqi Zhu

Entrepreneurial Finance Final Project Group Eight

NASA Technology: Lotus Dust Mitigation Coating 05/10/2016

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TABLE OF CONTENT

I. EXECUTIVE SUMMARY

II. BUSINESS DESCRIPTION

BUSINESS OPPORTUNITY

BUSINESS OVERVIEW

MISSION

III. PRODUCTS AND SERVICES

PRODUCTS

SERVICES

PACKAGING

INTELLECTUAL PROPERTY

IV. ORGANIZATIONAL STRUCTURE

V. MARKET POSITIONING

COMPETITIVE ANALYSIS

DIFFERENTIATION

VI. BUSINESS OPTIMIZATION

STRATEGY & TACTICS

VII. FINANCIAL FORECAST

ESTIMATED EARNINGS

BUSINESS MODEL ASSUMPTIONS

5-YEAR PROJECTIONS

VIII. APPENDICES



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I. Executive Summary

Our Start-up company, named Repello, aims to cooperate with NASA and apply Lotus Coating

Technology to more industries, especially Military and Transportation. With an approximately 0.5

million raising capital, our mission is to convert the Lotus Coating into protective surface of

automobiles, ships or airplanes that are normally exposed in a harsh environment.

Water-resistant, lightweight and durable as our coating product is, it derives several effective ways

for transportation protection, military use and construction use.

● For transportation, Lotus Coating helps large ships, speedy automobiles, flying aircraft

maintain effective anti-contamination and super-hydrophobic. Our product offers high

durability, dust-repellant and anti-corrosion layer protection.

● For military, coating helps get rid of dust and keeps soldier’s weapons, vehicles and marine

appliances clean and effective under any extreme circumstance.

Targeted at Transportation, Military and Construction industry, our addressable market is

estimated to have $1.45 billion at value due to high volume users worldwide, increasing demand

for cleanness and sustainable environmental development. To optimize company’s business model,

we outsource Marketing Division and hire experts to test the product, upgrade and develop more

advanced techniques.

Forecasted financial statements cover company’s solvency, liquidity and cost distribution. Our

rent, insurance and employees’ compensation are clearly listed and revenue is expected to grow at

modest rate. Profit will increase at? %percent.

After connecting with scientists, military leaders and estimate market volume, financial analysis,

we are confident about the feasibility of our business plan and future outlook.



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II. Business Description

Business Opportunity

No matter how things are going to change, cleanness is always one of the biggest concerns that

people brought to themselves. We cannot deny that all the human beings around the world are

consistently seeking some new ways to prevent themselves from being too hard to clean an object

as they have always been. Sometimes, it costs people a lot amount of time and money to do the

cleaning for certain stuff such as automobiles, airplanes, cruisers and even military equipment.

People always wonder whether there is a revolutionary way to get the cleaning process done in an

effortless manner for those stuff that is costly to be cleaned and undoubtedly, here the day comes.

Business Overview

Our company, named Repello, has come up with exciting idea about helping people save their time

and money to clean the objects like automobiles, airplanes, cruisers and military equipment. We

utilize the innovative material that is developed by NASA Goddard Space Flight Center to further

develop our own products. This kind of material is called Lotus Nano-Textured Coating modeled

after the self-cleaning, water-repellant lotus leaf. It disallows buildup of dust, dirt, water, and more

on surfaces. This coating, has been successfully tested on painted, aluminum, glass, silica, and

some composite surfaces, could aid in keeping medical assets clean. Since NASA developed this

material for NASA’s exploration program, Lotus coating could be applied to spacecraft radiators,

solar arrays, spacesuit material, visors, and any other type of lunar-exploration tool, is a very

promising technology that could keep the highly tenacious dust from adhering to spacesuits and

other critical spacecraft surfaces. Apparently, the coating can survive the harsh lunar environment

and minimize moon dust from accumulating on astronauts, their gear, and external

spacecraft/habitation surface.



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Mission

Our company’s main mission is to convert the Lotus coating into the protective surface of large-

scaled stuff that are usually exposed in a harsh environment in our daily lives. Things like

automobiles, airplanes, cruisers and military equipment are all in our target market. We aim to

provide our customers with a cost-effective and lightweight method for addressing the dust or

water problem that requires low maintenance.

III. Products and Services

Products

Industry: Military and Defense

Repello provides powerful technology solutions to improve the protection for the soldiers. Our

lotus coating technology maintain effective anti-contamination and super-hydrophobic even under

extreme environments the soldiers might face during their missions. Our technology provides high

durability and stability against vacuum and radiation, which are never available from other existing

technology. The durability of coating enlarges its flexibility to apply to different military service,

including Army, Navy, and Air Force. Our coating helps prevent the soldiers’ devices and

equipment from dust, liquid and humidity. Our low cost and long lasting coating help the military

reduce repair and maintenance cost and enhance readiness by avoiding malfunction of military

vehicles, aircrafts and vessels.

● Marine

Salt water corrosion is the main damage for vessels traveling in the ocean. Our resistant and

durable coating provides better water repellency and reduce salt water corrosion. For

submarine, the visibility is critical to the Navy. The glass coated by our technology prevents

dust and salt sticking to the glass, enhancing the visibility under the water. Moreover, the



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coating makes the vessels easier to clean, which is more environmentally-friendly by reducing

the use of chemical cleaners.

● Vehicles

The super-hydrophobic coating technology repel the water, mud, dust and debris from

periscope, windshield, and viewports of military vehicles, maintaining the clarity even in the

rain or driving on the muddy road. In addition to these features, the transmittance of our

coating also reduces the light reflecting and glint from windshields.

● Aircraft

The visibility of the aircrafts is the key factor influencing the performance of the air force. The

basis mission for the air force is to land the aircraft on a moving aircraft in the middle of the

ocean, where is usually in a storm. Under constraints of high speed and the requirement of the

stealth, fighter jets do not possess windshield wipers to help maintain the clarity of aircraft

canopies. Our transparent and durable super-hydrophobic coating is the ideal solution to repel

the water and dust from aircraft canopies in the severe weather.

Industry: Automotive/ Performance Racing

Repello’s second product line is in performance racing. Racing often makes automobiles to

withstand extreme conditions, this is quite similar to what lotus coating was invented for - extreme

space conditions. Its durability is very promising. When lotus coating is applied to sports cars, it

will withstand hot gas released from the engines. Also when on the road, it will repel water, dust

from blocking the view of the racer.



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Services

Industry: Military and Defense

Our worker will go to the military base camp where all the military ships, vehicles and aircrafts are

located once the appointments are made. Our workers will ensure the coating is applied properly.

With the high confidentiality of the military, the lotus coating can also be bought straight from our

manufacturer and be applied at their own cost.

Industry: Performance racing

We plan to distribute our products to various auto customization factories, and incorporate lotus

coating to major racing car brands such as Ferrari, Bugatti, Porsche, McLaren etc.

Packaging

Our lotus coating is sold in barrels which is easy to be distributed because customers can buy the

barrels and apply on their own or make a request to be applied by our professional workers.

Intellectual Property

We will purchase the patent of lotus coating from NASA at a cost of $10,000 annually and

continue to renew the patent. This way we are able to use this technology however we want.



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IV. Organizational Structure

V. Market Positioning

Competitive Analysis

The global nano coatings market demand was valued at US$1.45 billion and with a healthy 24.7%

CAGR during the forecast period, the market will grow more than three times its worth in 2012.

North America is the major region for nanocoatings market. The nano coatings market is

segmented into five types: anti-fingerprint, anti-microbial, easy-to-clean & anti-fouling, self-

cleaning and other. It is expected to show high growth owing to evolving environmental protection

regulations and standards to boost future growth of nanocoatings.



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Self-Cleaning is the major type of nanocoatings accounting for around 25% of the market in 2013,

followed by Easy-to-clean & Anti-fouling nanocoatings. Self-cleaning held the major share in the

nanocoatings value market in 2013 and would remain the largest shareholder till 2019. The easy-

to-clean & anti-fouling nanocoatings held the second largest share for the nanocoatings market

value, and projected to grow with a healthy CAGR, from 2014-2019.

Differentiation

Nano coating is not a new technology. However, under this situation, our product still has its

advantages.

First of all, our products are positioned as high technology and high valued market lines. Nano

coating is already widely used in low technology line such as wall paintings which are not our

target market.

Our target customers are in the high end of the industry. NASA technology keeps our products as

durable and stable. Our products can endure hostile environment since this product is investigated

in the astronautics requirements. Different from existing products, our products can keep

automotives’ glasses clean for a long time. We are able to serve automotives and other products

which have some concerns in high pressure and high temperature.

VI. Business Optimization

Efficiency gains are measured by the relationship between earnings and costs. Lower costs and

higher profit can always add value to the firm, which means company realizes gains in efficiency.

Our company could optimize business process and lower costs by improving management,

technical processes and financial analysis. The details are as followed:



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● Cost Reduction

Since our company is extending business and is using NASA’s technology, so Marketing

Division could use Outsourcing Team. Some non-core functions could also be divided into

different sections in order to save costs.

● Improved Efficiency and Productivity

We can conduct cross-functional training because in-depth technology knowledge is important

for every employee. Besides, Financial DuPont Analysis could clearly judge company’s

liquidity, solvency, earnings and valuation. The company could use some leverage to expand

business. An internal systematic controller could be developed and the system better connects

with NASA if there is any problem happens to the product. Driven by improved throughout

and accuracy in every chain, company should make the system quick, efficient and integrated.

● Better Management Assessment

Dozens of qualified experts in technology, manufacture and management are needed to help

monitor, evaluate, and identify ways to get efficiency gains. For a start-up business, three core

leaders are necessary and they evaluate the main stream of business by generating innovative

ideas, managing operational process and analyzing financial status. Product consultants and

technical supports should have a combined average ten years in the industry.

Strategy & Tactics

● Goals

With a focus on Transportation, Military, and Construction Industry, the company aims to

make all kinds of appropriate devices resist water, dust and oil, improving their durability and

cleanness. Connected with NASA technology, new research and development on

Nanotechnology could equip modern society with necessary appliances and scientific evidence.



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● Objectives

Based on Nano technology improvement, objective of the company is to dig into more

advanced technology on Nano and apply it in more industries if possible. In addition,

expanding business in foreign countries that are in need of environmental protection, medical

cleaning and military improvement.

● Solutions and Strategies

Our company is dedicated to offering various solutions in different industry, based on specific

features and tailored needs. The main strategies are as followed:

1. Lower Costs

Because it is an existing technology and higher production costs will hinder business

expansion, so the company should minimize costs in developing, selling, distributing and

marketing. Outsourcing is a wise decision and the main focus is to update technology.

2. Product Variety

The Nanotechnology could be extended to many industries including construction, Military

and electronic applications. By extending, the company could find the limits of the product

and improve technology to cater people’s needs.

VII. Financial Forecast

Business Model Assumptions

Revenues and Expenses

Since the Department of Defense has cost $20 billion a year to coating against corrosion on US

military weapon, we assume our sales in the first year to be $2,970,000, nearly 0.01% of total cost

of the Department of Defense. We also expect our sales to grow at 20% in the next five years. The



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largest amount of expenses are employees’ payroll, the rental of equipment, and the utilities. We

plan to hire 10 full-time employees and 10 part-time employees, which cost us totaling $572,000

annually. The rental of equipment and utilities expenses are both $120,000 per year.

Profitability

The gross margin of our products is assumed to be about 45% since our target market is high-class

and the coating technology provides additional value to the customers. The overall operating

expenses is approximate to be 20% of sales, which would be even lower when our business

expands and reach the economies of scale. In the fifth year, total operating expense would decrease

to 15% of sales. The tax rate during next five years is assumed to be 20%. The net income of the

first year would be a loss of $141,402, but we expect to breakeven in the third year.

5-Year Projections

According to our estimation, Repello’s total required funds is going to be approximately $478,000

which includes $365,000 in total fixed asset and $113,000 in total operating capital. Moreover,

from the projection of our first five year net income, we have net income of ($141402) during the

first year and for the following four years, we have consecutively earned positive net income and it

has remarkable increases for every following year. We estimate that we are going to reach our

breakeven point during year 3 which is pretty short period of time. However, our five year free

cash flow has fluctuated a lot where we reached our maximum value at year 3 and then there is a

declining trend for the following two years. This is due to the significant increase in current asset

during last two years. Finally, our enterprise value is estimated to be $1,173,966 with a WACC of

8% and long-term FCF growth rate of 3% and we believe that this value would continue to grow

because the value of total addressable market is deemed to be very large and we are going to

constantly develop and refine our products to penetrate into the market as deeply as possible.



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VIII. Appendices

Figure 1: SEM images of Lotus Leaf

Figure 2: Testing image of Passive Lotus Coating Technology



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Figure 3 Start up expense in year 1

Figure 4 Product line and cost of goods



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Figure 5 Sales forecast of year 1 (monthly)



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Figure 5 Balance sheet year 1 to 3



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Year 1 Year 2 Year 3 Year 4 Year 5

Net income before tax

(141402) 52279 294977 503331 847884

Income tax 0 16416 64693 110909 143345

Net income / (loss)

(141402) 35863 230284 392421 704539

Figure 6 Income statement Summary

venture capital project for nasa technology

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