Lecture 1 intro bus model cust dev 120411

1. The Lean LaunchPad Lecture 1: Business Models and Customer Development Steve Blank Jon Feiber Ann Miura- Ko John Burke Jerry Engel Jim Hornthal Oren Jacob

2. This Session The teaching team Course objective(s ) Teaching team philosophy Our expectations of you

3. Teaching Team

4. Steve Blank, Jon Feiber , John Burke 8 startups in Silicon Valley Semiconductors Supercomputers Consumer electronics Video games Enterprise software Military intelligence sblank @stanford.edu @ sgblank www.steveblank.com Yale BS EE McKinsey and Co. Charles River Ventures Stanford Ph.D MS&E TA: E145, Mayfield Fellows, MS&E 273 V.C. @ Floodgate [email protected] @ annimaniac BS CS/Astro Physics U of Colorado VP Networking SUN V.C. @ MDV since 1991

5. Steve Blank , Jon Feiber , John Burke 8 startups - 32 years in Silicon Valley Semiconductors Supercomputers Consumer electronics Video games Enterprise software Military intelligence Teach: Stanford, Berkeley, Columbia Details at www.steveblank.com Yale BS EE McKinsey and Co. Charles River Ventures Stanford Ph.D MS&E V.C. @ Floodgate [email protected] @ annimaniac BS CS/ Astro Physics U of Colorado 50 th employee, VP Networking @ Sun V.C. @ MDV since 1991 [email protected]

6. Steve Blank , Jon Feiber , John Burke 8 startups - 32 years in Silicon Valley Semiconductors Supercomputers Consumer electronics Video games Enterprise software Military intelligence Teach: Stanford, Berkeley, Columbia Details at www.steveblank.com BS Mech Engineering U.C . Berkeley, BA Economics U.C . Santa Cruz, MBA Harvard Business School Founder BMI Software VC at ABS Ventures Co-founder True Ventures [email protected] @ andemca BS CS/ Astro Physics U of Colorado 50 th employee, VP Networking @ Su V.C. @ MDV since 1991 [email protected]

7. Alexander Osterwalder , Tina Seelig Ph.D . in Management Information Systems (MIS) University of Lausanne Founder, Business Model Foundry Author Business Model Generation Co-founder, The Constellation for AIDS competence (NGO) Ph.D . Neuroscience Stanford Med School Mgmt consultant Booz , Allen, Hamilton Multimedia producer at Compaq Computer Founder multimedia company BookBrowser . Exec Director Stanford Technology Ventures Program (STVP) , EpiCenter [email protected] @ tseelig

8. Oren Jacob , Jim Hornthal CEO, stealth startup EIR, August Capita lCTO, Pixar Director, Studio Tools, Pixar Technical Director, Finding Nemo CMEA Capital Triporati

9. Oren Jacob , Jim Hornthal CTO Pixar CMEA Capital Chairman Triporati

10. Teaching Assistant TA ’ s role : Class/lecture questions, Grading and attendance Bhavik Joshi Better Place (13th employee, first non-Israeli, non-Jewish, non ex-SAP, Asian employee) Berkeley/Columbia MBA class of 2008/09 Co-founder: Berkeley Stanford Cleantech Conference Series (since 2007) 2000 – 2007 Enterprise Software 1998 – 2000 Tata Motors India [email protected] http://about.me/bhavikjoshi

11. Alexander Osterwalder , Tina Seelig 8 startups - 32 years in Silicon Valley Semiconductors Supercomputers Consumer electronics Video games Enterprise software Military intelligence Teach: Stanford, Berkeley, Columbia Details at www.steveblank.com Ph.D . Neuroscience Stanford Med School Mgmt consultant Booz , Allen, Hamilton Multimedia producer at Compaq Computer Founder multimedia company BookBrowser . Exec Director Stanford Technology Ventures Program (STVP) , EpiCenter [email protected] @ tseelig

12. Stephanie Glass Course Assistant (CA ’ s) MS MS&E 2010 CA ’ s role : Class/lecture questions, Grading and attendance Thomas Haymore B.A. in Political Science Stanford Law ( ‘ 06) J.D. Stanford Law ( ‘ 12) [email protected]

13. Stephanie Glass Course Assistant (CA ’ s ) MS MS&E 2012 CA ’ s role : Class/lecture questions, Grading and attendance Thomas Haymore B.A. in Political Science Stanford Law ( ‘ 06) J.D. Stanford Law ( ‘ 12) [email protected] [email protected]

14. Mentors Mentors are people with real-world experience Mentors role is to: Help you “ Get you out of the building ” Share contacts Offer “ Real-world ” entrepreneurial advice Critical feedback You arrange your schedule for the mentors, not the other way around

15. Course Objective: Idea to a Business What does it take to go from idea to a business ? Business Model + Customer Development Hypotheses testing of the business model(s ) Get “out of the building”

16. Course Objective: Simulate A Startup? Create the pressures, uncertainty, and challenges of a real startup Our expectations are unreasonable , they require extraordinary effort We expect failures , iterations and Pivots Class is a “lab” - books/lectures are tools, not answers Fail fast, learn quick, push you outside your comfort zone

17. Teaching team philosophy This class is taught using the “Startup Culture” We’re tough, direct, fair - you need to be the same Startup culture has no hierarchy - in this class you are an entrepreneur - not a PI, lab mgr or center director We’re your biggest supporters – we want you to succeed Question us, challenge us, push us as hard as we push you We don’t pretend to be domain experts, we know you are smarter than we are

18. Getting Out of The Building This class is not about our lectures The class is not about your attendance The class is about the work you do outside the building It’s the difference between a vision and a hallucination

19. Our Expectations of You This is a full-contact, immersive class All of you will be full participants – here and remotely You will spend lots of time outside of your university You all will do all the work assigned (and it is a lot more than you probably realize) No “dine and dash” If you think you are not learning, or you all cannot commit the time, see your NSF program manager

20. Team Deliverables Each Week Lessons Learned presentation 5 minutes Updated Lean LaunchLab blog Hours of “ outside the building ” learning December Presentation 20 minute Lessons Learned Summary

21. What Will you Learn? Opportunity evaluation Search for a Business Model Customer Discovery and Validation Operating and decision making in chaos with insufficient data Ruthless pursuit of an objective by a team

22. The Course ‘ By the Numbers ’ 4 Instructors, 1 TA, 15+ Mentors, 8 Lectures 8 10-minute presentations per class 1 Final 20 minute presentation 2 Textbooks 10-15 hours of work a week outside the classroom

23. This Class is Hard You can’ t pass by attending the lectures Your grade is determined by the work you do outside the class There’ s a lot of it You are dependent on group success – communication is critical You don’t need to be friends you need to be partners

24. Class Logistics

25. Course Reading Business Model Generation Four Steps to the Epiphany www.steveblank.com

26. Class Schedule Eight (3 hour) Class Sessions: 1: Sept 1 st - Introduction, Business Models, Customer Development 2: Sept 2 nd – Value Proposition/Customer Segment 3: Sept 22 nd – Channels 4: Sept 23 rd - Demand Creation (Customer Relationships) 5: Oct 13 th – Revenue Model 6: Oct 14 th – Key Resources and Activities 7: Nov 11 th - Cost Structure 8: Nov 12 th – Fund Raising 9 & 10: Dec 1 st / 2 nd – Lessons Learned Presentations

27. Teams team size is 4 people You chose the roles (hint: no org chart) Present Weekly and for Final Weekly lessons learned Final is demo and summary Class is about discovery and fast iteration

28. Team Projects Any for-profit scalable startup If you are a domain expert, that ’ s your best bet (but not required) If you pick a web project, you have to build it (and there needs to be some novelty)

29. Team Deliverables - Presentation Each Week Lessons Learned presentation 10 minutes Updated business model canvas Update blog/wiki 10 ’ s of hours of “ outside the building ” progress Final Presentation 20 minute Lessons Learned Summary

30. Team Deliverables - Blog Each Week Business model canvas updates Interviews Photos/Videos A/B tests Strategy

31. Grading Individual - 15% Participation in class 15% Team - 85% 40% out-of-the-building progress as measured by blog write-ups each week. 20% weekly team “lesson learned” summaries 25% team final report Grade is on how much you learn

32. Grading Individual - 15% Participation in class 15% Team - 80% 40% out-of-the-building progress as measured by blog write-ups each week. 20% weekly team “ lesson learned ” summaries 25% team final report You ’ re graded on how much learn , not how much you sell

33. Office Hours With your team Before and after class Look at availability here Get on the calendar

34. Intellectual Property - Suggestions Make sure your project is OK with your company disclose to team what IP rights your company has to inventions You own what IP you brought to class with you No team member has claim to anything you brought Your team jointly owns any IP developed for the class If any of you decide to start a company based on the class, you own only what was developed and completed in the class You have no claim for work done before or after the class quarter If a subset of the team decides to start a company they do NOT “owe” anything to other team members for work done in and during the class All team members are free to start the same company, without permission of the others You are agreeing to this unless the team decides in writing to do something different

35. Class Disclosure/NDA’s Successful startups are not about the original idea It’s about learning, discovery and execution You will not be presenting your IP/technical details You get to see how previous teams solved problems by looking at their slides, notes and blogs Therefore: Your slides, notes and blogs will be public This is an open class. No non-disclosures

36. What’s A Company?

37. What’s A Company? A business organization which sells a product or service in exchange for revenue and profit

38. How Are Companies Organized?

39. How Are Companies Organized? Companies are organized around Business Models

40. What’s a Business Model?

41. What’s a Business Model? A business model describes all the parts of the company necessary to make money

42. What About My Technology?

43. 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”

44. What About My Technology? Customers don’t care about your technology They are trying to solve a problem

45. What’s A Startup?

46. What’s A Startup? A startup is a temporary organization designed to search for a repeatable and scalable business model

47. How to Build A Startup Idea Business Model Size Opportunity Customer Development

48. How to Build A Startup Idea Business Model(s ) Size of the Opportunity Customer Discovery Customer Validation

49. 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

50. How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation Web startups get the product in front of customers earlier Business Model(s ) Size of the Opportunity

51. How to Build A Startup Idea Size of the Opportunity Business Model(s) Customer Discovery Customer Validation Business Model(s ) Size of the Opportunity

52. buzz group

53. ? A business model describes all the parts of the company necessary to make money

54. ? what are those parts ? what parts is a business model composed of?

55. 56

56. ? ?

57. Business Model Canvas

58. to describe, challenge, design, and invent business models more systematically

59. building blocks 9

60. CUSTOMER SEGMENTS images by JAM

61. VALUE PROPOSITIONS images by JAM

62. CHANNELS images by JAM

63. CUSTOMER RELATIONSHIPS images by JAM

64. REVENUE STREAMS images by JAM

65. KEY RESOURCES images by JAM

66. KEY ACTIVITIES images by JAM

67. KEY PARTNERS images by JAM

68. COST STRUCTURE images by JAM

69. images by JAM customer segments key partners cost structure revenue streams channels customer relationships key activities key resources value proposition

70. images by JAM customer segments key partners cost structure revenue streams channels customer relationships key activities key resources value proposition

71. images by JAM

72. CANVAS OVERLAY images by JAM OFFER CHANNELS CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS REVENUE STREAMS COST STRUCTURE KEY ACTIVITIES KEY PARTNERS KEY RESOURCES

73. images by JAM CANVAS OVERLAY OFFER CHANNELS CUSTOMER RELATIONSHIPS CUSTOMER SEGMENTS REVENUE STREAMS COST STRUCTURE KEY ACTIVITIES KEY PARTNERS KEY RESOURCES

74. Business Model Canvas building block building block building block building block building block building block building block building block building block building block building block building block building block building block

75. 79 illustration

76. ? why should some of the smartest scientists in the world waste their time thinking about a business model for coffee?

77. ! not just because most scientists drink a lot of coffee. we can learn a lot from innovative business models across industries

78. how much did the cost of home coffee consumption change for Swiss households over the last couple of years?

79. 600% to 800% more

80. Nespresso changed the business (model) for espresso

81. RESULTS

82. one of the fastest-growing businesses in the Nestlé group

83. average growth of 30% p.a. since 2000

84. over 3 billion CHF annual revenue with 1 product line (3.2 bio USD)

85. 91 buzz group

86. ? Discuss and describe how you would design a business model around Nespresso ’ s invention

87. 94 ? ? ? ? ? ? ? ? ?

88. 95 Nespresso machines retail mail order Nespresso . com call center Nespresso stores households business 1 x machine sales repetitive pod sales distribution channels coffee production facilites production B2C distribution brand marketing brand patents machine manufacturer production B2C distribution brand marketing Nespresso club brand brand Nespresso pods

89. but Nespresso almost failed in 1987 due to a nonperforming business model

90. 97 Nespresso system offices joint venture with manufacturer machine manufacturer

91. ? what is the most powerful about using a shared language, such as the Business Model Canvas?

92. buzz group

93. 105 ? ? ? ? ? ? ? ? ?

94. possible alternatives

95. 107 r adiation -free detection of breast cancer hospitals

96. 108 p roprietary IP medical device manufacturers

97. 109 ? ? ? ? ? ? ? ? ?

98. But, Realize They’re Hypotheses

99. 9 Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess

100. How Does This Really Work? Stanford Lean LaunchPad Class 8 Weeks From an Idea to a Business

101. MammOptics Final project presentation for E 245 Winter 2011

102. MammOptics Initial Idea Breast cancer Leading cause of cancer in women 190,000 diagnosis every year US 41,000 deaths every year US Increasing diagnosis rates Mammography 15%-25% false negatives rate 25% false positives rate Requires X-ray radiation Low resolution Novel technology based on RF-modulated optical spectroscopy MammOptics Earlier detection Non- radiative Non-invasive

103. MammOptics Technology Comparison Risk Invasiveness Resolution False Pos. False Neg. Device Cost Time Required MammOptics Mammography High High .6 cm 25% 30% 20-50k 20 min. MRI Medium Medium .1 cm 70% 5% 1000k 45 min. Ultra-Sound Very Low Very Low >.6 cm >30% >40% 5-15k 20 min. I.I.T.Y.I.W.H.T.K.Y

104. MammOptics Business Model Canvas 1 of 4 Radiation-free Earlier detection Non-invasive Pioneering radiologists in hospitals Direct sales to hospitals Strong clinical data Training Maintenance Product Development Clinical trials Operating Costs Capital equipment sales and disposable item Product Development IP Clinical trials FDA IP Leading doctors Technical Expertise Hospitals Leading doctors 3 rd party manufacturers Distributors

105. MammOptics Business Model Canvas 1 of 4 Radiation-free Earlier detection Non-invasive Pioneering radiologists in hospitals Direct sales to hospitals Strong clinical data Training Maintenance Product Development Clinical trials Operating Costs Capital equipment sales and disposable item Product Development IP Clinical trials FDA IP Leading doctors Technical Expertise Hospitals Leading doctors 3 rd party manufacturers Distributors Initial guess Initial guess Initial guess Initial guess MammOptics Business Model Canvas 1 of 4 Test: Customer segment Value proposition

106. Finding the right customer From radiologists to gynecologists

107. MammOptics Excursions into hospitals Leading doctors Patients Hospital Managers Technicians Debra Ikeda Jason Davies Jafi Alissa Lipson Sunita Pal 6 women >40 8 women <40 Alicia X-ray mammography Paul Billings Holly V. Gautier

108. MammOptics Hospital purchasing decision tree

109. MammOptics Hospital purchasing decision tree Hospitals Complex purchasing decision tree. Several saboteours

110. MammOptics Private practice purchasing decision tree

111. MammOptics Private practice purchasing decision tree Private practice Faster adoption rate Attractive value proposition ✔

112. Pioneering Doctors Hospitals OB/ GYNs PCPs Direct Sales to doctors Strong clinical data Training Maintenance Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item Product Development IP Clinical trials FDA IP Leading doctors Technical Expertise Hospitals (Capital Spending Committee) Leading doctors 3 rd party manufacturers Distributors Research Hospitals Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 2 of 4

113. Pioneering Doctors Hospitals OB/ GYNs PCPs Direct Sales to doctors Strong clinical data Training Maintenance Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item Product Development IP Clinical trials FDA IP Leading doctors Technical Expertise Hospitals (Capital Spending Committee) Leading doctors 3 rd party manufacturers Distributors Research Hospitals Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 2 of 4 How do we get to our customer? Need sensitivity and specificity

114. Getting to our customer The world of direct sales and medical marketing

115. MammOptics Interviews Breast Cancer Advocacy Groups OB/GYNs FDA/Clinical Trials Medical Sales Be Bright Pink Jennifer Glover Dr. Cindy Woo Dr. Jags Powers Dr. Aaron Shuvkan Katrina Bell Tanay Dudhela Jed Hwang Phyllis Whitely Carl Simpson

116. MammOptics Marketing

117. Access to ACOG by former member Strong influence on doctors via ACOG Standard of Care Strongly influenced by KOLs MammOptics Marketing

118. Researchers conducting important clinical trials Researchers with numerous publications Outsourced survey research Researchers with strong peer recommendations MammOptics Marketing

119. Focus on prominent journals Need two big publications Choose KOL as Principal Investigators (PI) MammOptics Marketing

120. Effective method for educating doctors Doctors required to attend workshops Workshop must be approved by ACOG Taught by objective medical experts MammOptics Marketing

121. ACOG Annual Clinical Meeting Miami Breast Cancer Conference Opportunity for feedback from doctors MammOptics Marketing

122. Trusted information source for patients Critical opinion leader for technology adoption Access to media outlets MammOptics Marketing

123. Individual Doctors Purchasing Administrators High value medical products (e.g. cardiovascular stents) Commodity medical products (e.g. latex gloves) Doctor education Direct feedback from doctors Very expensive No doctor education No customer feedback Inexpensive Direct Sales Distributors MammOptics Channel Strategies and Costs Individual Doctors Purchasing Administrators

124. Channel Strategies and Costs MammOptics 5 dedicated sales people $150,000 each/year Hire nurses or technicians with established relationships Early adopter feedback Continue with core group of sales people Use women’s healthcare equipment distributor Already established network of customers Sales strategy 1 Sales strategy 2

125. MammOptics Pricing Strategy Equipment Lease model Per-use model Consumable Cost of the device Service per year Per-use fee Consumable $50,000 $3,000 $5,000 $10,000 $5,000 $50 $25,000 $20

126. MammOptics Pricing Strategy Equipment Lease model Per-use model Consumable Cost of the device Service per year Per-use fee Consumable $50,000 $3,000 $5,000 $10,000 $5,000 $50 $25,000 $20 Approved by customers and investors

127. ACOG ACS Doctor specialty committee Hospital Administration Technician Radiologist Mammography MammOptics Customer Workflow Current market Insurance

128. ACOG ACS Doctor specialty committee Hospital Administration Technician Radiologist Mammography MammOptics Customer Workflow Current market But what would happen if we replace mammography? Insurance

129. ACOG ACS Doctor specialty committee Hospital Administration Technician Radiologist Mammography MammOptics Customer Workflow Breast Radiologists Technicians Hospitals Loss of jobs Loss of jobs Eliminates loss leader Puts emphasis on biopsies Insurance

130. ACOG ACS Doctor specialty committee Hospital Administration Technician Radiologist Mammography MammOptics Customer Workflow Insurance

131. ACOG ACS Doctor specialty committee Hospital Administration Technician Radiologist Mammography MammOptics Customer Workflow Insurance Same cost as mammography ($140) Reduced number of biopsies ($1000) ACOG/ACS Improved healthcare (mammography weak technique) Insurance

132. ACOG ACS Doctor specialty committee Hospital Administration Technician Insurance Radiologist Mammography MammOptics Customer Workflow

133. Insurance Doctor specialty committee Hospital Administration Technician Radiologist Mammography MammOptics Customer Workflow ACOG ACS MammOptics Patient PCP OB/GYN

134. Insurance Doctor specialty committee Hospital Administration Technician Radiologist Mammography MammOptics Customer Workflow ACOG ACS MammOptics Patient PCP OB/GYN Hospital Administration Technician Radiologist Mammography MammOptics Patient PCP OB/GYN PCP OB/GYNs Increased revenue More complete patient care Patient Improved healthcare Comfort MammOptics Revenue

135. ACOG ACS Doctor specialty committee Hospital Administration Technician Insurance Radiologist Mammography MammOptics Customer Workflow MammOptics Patient PCP OB/GYN

136. OB/GYNs PCPs Direct Sales to hospitals Distributor Strong clinical data Training Maintenance Conferences CME courses Product Development Clinical trials Operating Costs Marketing Costs Capital Equipment Sales and disposable item Per use fees Product Development IP Clinical trials FDA Publishing IP Leading doctors Technical Expertise Leading doctors Key Opinion Leaders 3 rd party manufacturers Distributors Breast Cancer Foundations ACOG ACS Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 3 of 4

137. OB/GYNs PCPs Direct Sales to hospitals Distributor Strong clinical data Training Maintenance Conferences CME courses Product Development Clinical trials Operating Costs Marketing Costs Capital Equipment Sales and disposable item Per use fees Product Development IP Clinical trials FDA ReimbursementPublishing IP Leading doctors Technical Expertise Leading doctors Key Opinion Leaders 3 rd party manufacturers Distributors Breast Cancer Foundations ACOG ACS Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 3 of 4 Learned how to reach the customer How do we build a company based on this?

138. Building the company The backstage of a medical device company

139. MammOptics Interviews FDA Clinical Trials Manufacturing Venture Capitalists Reimbursement Stanford Statistics Steve Axelrod Marga Ortigas-Wedekind Nick Mourlas Don Archambault Shannon Bergstedt Ali Habib Dana Mead Bill Starling Doctors/Sales Dr. Aron Shuftan Jed Hwang Michael J. Nohr

140. Manufacturing MammOptics Partners Choose manufacturing facility close to home

141. Manufacturing Reimbursement MammOptics Partners Difficult to get coverage for new product. Manufacturing MammOptics Partners

142. Reimbursement Partners MammOptics Insurances CPT Codes $75-$150

143. MammOptics Partners Manufacturing FDA Clinical Trials Reimbursement 510K vs. PMA Largest cost Biggest financial risk

144. Clinical Trials 12/4/2009 Stage 1 Pilot trials 50 patients $600K MammOptics 6 months Feasibility Comparison with mammography

145. Clinical Trials 12/4/2009 MammOptics 6 months 15 months Stage 1 Pilot trials Stage 2 Interim trials 500 patients $7.2M Prove superior safety-efficacy & sensitivity

146. Clinical Trials 12/4/2009 MammOptics 6 months 15 months Stage 1 Pilot trials Stage 2 Interim trials 24 months Stage 3 FDA pivotal trials 1500 patients $20.5M FDA class II, 510(K) w/ trials Focus on superiority & economic end-points

147. Clinical Trials 12/4/2009 MammOptics 6 months 15 months Stage 1 Pilot trials Stage 2 Interim trials Stage 3 FDA pivotal trials Stage 4 Post-market studies 2000 patients $26.8M Specific Cat III CPT/ACP Codes Market traction 24 months 24 months

148. Clinical Trials 12/4/2009 MammOptics 6 months 15 months Stage 1 Pilot trials Stage 2 Interim trials Stage 3 FDA pivotal trials $600K $7.2M $20.5M $26.8M Stage 4 Post-market studies 24 months 24 months

149. MammOptics Partners MammOptics Partners Manufacturing FDA Clinical Trials Reimbursement Financial timeline Funding

150. $10M $15M 2012 Series A $3.5 MM Cash Reserve Clinical Milestones $5M Initialize Design Milestones Regulatory/ IP Milestones Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 Series B $9 MM System 2017 Q1 Q2 Q1 Q2 Q3 Q4 2018 Q3 Launch Series C $30.5 MM $30M $20M Regulatory / Clinical Series D $35 MM M&A / IPO $50 MM $40M 163 12/4/2009 Proof of Concept Pilot Studies IC and Processing Patents Marketable Product Provisional Patent Beta-Version Testing Application and System Patents IRB / IDE Clinical Results Second Release Initial Product Launch Specific Codes (Cat. I CPT / APC) Non-Specific Codes 1 st Release Test 2 nd Release Test Publication Post-Market Clinical Studies Beta Prototype US Interim Trials FDA – Class II – 510 (k) with Clinical Trials Publication Financial / Operations Timeline Cat III CPT US Pivotal Clinical Trials Laboratory Prototype Technology Licensing MammOptics MammOptics Financial timeline

151. $10M $15M 2012 Cash Reserve Clinical Milestones $5M Initialize Design Milestones Regulatory/ IP Milestones Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 Q1 Q2 Q1 Q2 Q3 Q4 2018 Q3 $30M $20M $40M 164 12/4/2009 Proof of Concept Provisional Patent Financial / Operations Timeline Technology Licensing MammOptics MammOptics

152. $10M $15M 2012 Series A $3.5 MM Cash Reserve Clinical Milestones $5M Initialize Design Milestones Regulatory/ IP Milestones Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 System 2017 Q1 Q2 Q1 Q2 Q3 Q4 2018 Q3 $30M $20M $40M 165 12/4/2009 Proof of Concept Provisional Patent Beta-Version Testing Laboratory Prototype Beta Prototype Technology Licensing Financial / Operations Timeline Pilot Studies MammOptics MammOptics

153. $10M $15M 2012 Series A $3.5 MM Cash Reserve Clinical Milestones $5M Design Milestones Regulatory/ IP Milestones Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 Series B $9 MM System 2017 Q1 Q2 Q1 Q2 Q3 Q4 2018 Q3 $30M $20M $40M 166 12/4/2009 IC and Processing Patents Marketable Product Beta-Version Testing Application and System Patents IRB / IDE Beta Prototype Financial / Operations Timeline Pilot Studies Regulatory / Clinical Laboratory Prototype MammOptics MammOptics

154. $10M $15M 2012 Cash Reserve Clinical Milestones $5M Design Milestones Regulatory/ IP Milestones Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 Series B $9 MM System 2017 Q1 Q2 Q1 Q2 Q3 Q4 2018 Q3 Series C $30.5 MM $30M $20M Regulatory / Clinical $40M 167 IC and Processing Patents Application and System Patents IRB / IDE Cat III CPT Second Release 1 st Release Test US Interim Trials US Pivotal Clinical Trials Publication Financial / Operations Timeline Pilot Studies MammOptics MammOptics

155. $10M $15M 2012 Cash Reserve Clinical Milestones $5M Design Milestones Regulatory/ IP Milestones Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 Q1 Q2 Q1 Q2 Q3 Q4 2018 Q3 Launch Series C $30.5 MM $30M $20M Regulatory / Clinical Series D $35 MM $40M 168 12/4/2009 Clinical Results Second Release Initial Product Launch Non-Specific Codes 2 nd Release Test Publication US Interim Trials FDA – Class II – 510 (k) with Clinical Trials Publication Financial / Operations Timeline US Pivotal Clinical Trials MammOptics MammOptics

156. $10M $15M 2012 Cash Reserve Clinical Milestones $5M Design Milestones Regulatory/ IP Milestones Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 Q1 Q2 Q1 Q2 Q3 Q4 2018 Q3 Launch $30M $20M Regulatory / Clinical Series D $35 MM M&A / IPO $50 MM $40M 12/4/2009 Clinical Results Initial Product Launch Specific Codes (Cat. I CPT / APC) Non-Specific Codes Publication Post-Market Clinical Studies FDA – Class II – 510 (k) with Clinical Trials Financial / Operations Timeline MammOptics MammOptics

157. $10M $15M 2012 Series A $3.5 MM Cash Reserve Clinical Milestones $5M Initialize Design Milestones Regulatory/ IP Milestones Q1 Q2 Q3 Q4 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 Series B $9 MM System 2017 Q1 Q2 Q1 Q2 Q3 Q4 2018 Q3 Launch Series C $30.5 MM $30M $20M Regulatory / Clinical Series D $35 MM M&A / IPO $50 MM $40M 170 12/4/2009 Proof of Concept Pilot Studies IC and Processing Patents Marketable Product Provisional Patent Beta-Version Testing Application and System Patents IRB / IDE Clinical Results Second Release Initial Product Launch Specific Codes (Cat. I CPT / APC) Non-Specific Codes 1 st Release Test 2 nd Release Test Publication Post-Market Clinical Studies Beta Prototype US Interim Trials FDA – Class II – 510 (k) with Clinical Trials Publication Financial / Operations Timeline Cat III CPT US Pivotal Clinical Trials Laboratory Prototype Technology Licensing MammOptics MammOptics

158. Radiation-free Earlier detection Non invasive Pioneering Doctors Hospitals Direct Sales to hospitals Strong clinical data Training Maintenance Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item Product Development IP Clinical trials FDA IP Leading doctors Technical Expertise Hospitals Leading doctors 3 rd party manufacturers Distributors MammOptics Business Model Canvas 1

159. Radiation-free Earlier detection Non invasive Pioneering Doctors Hospitals Direct Sales to hospitals Strong clinical data Training Maintenance Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item Product Development IP Clinical trials FDA IP Leading doctors Technical Expertise Hospitals Leading doctors 3 rd party manufacturers Distributors Research Hospitals MammOptics Business Model Canvas 2

160. Pioneering Doctors Hospitals Direct Sales to hospitals Strong clinical data Training Maintenance Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item Product Development IP Clinical trials FDA IP Leading doctors Technical Expertise Hospitals ( Capital Spending Committee) Leading doctors 3 rd party manufacturers Distributors Research Hospitals Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 3

161. Pioneering Doctors Hospitals OB/ GYNs PCPs Direct Sales to hospitals Strong clinical data Training Maintenance Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item Product Development IP Clinical trials FDA IP Leading doctors Technical Expertise Hospitals (Capital Spending Committee) Leading doctors 3 rd party manufacturers Distributors Research Hospitals Breast Cancer Foundations Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 4

162. OB/GYNs PCPs Direct Sales to hospitals Distributor Strong clinical data Training Maintenance Conferences CME courses Product Development Clinical trials Operating Costs Marketing Costs Capital Equipment Sales and disposable item Product Development IP Clinical trials FDA ReimbursementPublishing IP Leading doctors Technical Expertise Leading doctors Key Opinion Leaders 3 rd party manufacturers Distributors Breast Cancer Foundations ACOG ACS Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 5

163. OB/GYNs PCPs Direct Sales to hospitals Distributor Strong clinical data Training Maintenance Conferences CME courses Product Development Clinical trials Operating Costs Marketing Costs Capital Equipment Sales and disposable item Per use fees Product Development IP Clinical trials FDA Reimbursement Publishing IP Leading doctors Technical Expertise KOLs 3 rd party manufacturers Distributors Breast Cancer Foundations ACOG ACS Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 6

164. OB/GYNs PCPs Direct Sales to hospitals Distributor Strong clinical data Training Maintenance Conferences CME courses Product Development Clinical trials Operating Costs Marketing Costs Per use fees Product Development IP Clinical trials FDA Reimbursement Publishing IP Leading doctors Technical Expertise KOLs 3 rd party manufacturers Distributors Breast Cancer Foundations ACOG ACS Clinical trial designer Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 7

165. OB/GYNs PCPs Direct Sales to hospitals Distributor Strong clinical data Training Maintenance Conferences CME courses Product Development Clinical trials Operating Costs Marketing Costs Per use fees Product Development IP Clinical trials FDA Reimbursement Publishing IP Leading doctors Technical Expertise KOLs 3 rd party manufacturers (local) Breast Cancer Foundations ACOG ACS Clinical trial designer Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 8

166. OB/GYNs PCPs Direct Sales to hospitals Distributor Strong clinical data Training Maintenance Conferences CME courses Product Development Clinical trials Operating Costs Marketing Costs Per use fees Product Development IP Clinical trials FDA Reimbursement Publishing IP Leading doctors Technical Expertise KOLs 3 rd party manufacturers (local) Breast Cancer Foundations ACOG ACS Clinical trial designer Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive MammOptics Business Model Canvas 9

167. Customer Development Get Out of the Building and Search for the Business Model The founders ^

168. The Customer Development Process Customer Discovery Customer Validation Customer Creation Company Building Pivot

169. The Minimum Viable Product (MVP) Smallest feature set that gets you the most … - orders, learning, feedback, failure… Customer Discovery Customer Validation Customer Creation Company Building Pivot

170. A Pivot is the change of one or more Business Model Canvas Components

171. The Pivot The heart of Customer Development Iteration without crisis Fast, agile and opportunistic Customer Discovery Customer Validation Customer Creation Company Building Pivot

172. Pivot Cycle Time Matters Speed of cycle minimizes cash needs Minimum feature set speeds up cycle time Near instantaneous customer feedback drives feature set Customer Discovery Customer Validation Customer Creation Company Building Pivot

173. 186 Source: http:// giffconstable.com /

174. The Customer Development Process Customer Discovery Customer Discovery Customer Validation Customer Creation Company Building Bus Model Canvas Extract Hypotheses Test Problem Test Solution Pivot or Proceed

175. The Customer Development Process Customer Validation Customer Discovery Customer Validation Customer Creation Company Building Get Ready to Sell Sell, Sell, Sell Positioning Pivot or Proceed

176. Blog Your Progress

177. How? Customer Development The Process Narrative Interviews Surveys Videos Prototypes Business Model Canvas Scorekeeping Real-time Feedback Physical Reality Checks Skype Face-to-face

178. We Made Students Blog Their Progress It Changed Everything

179. Interview

180. Photos Videos

181. Surveys

182. Interview & Photos

183. Competitive Analysis

184. Key Findings

185. A/B Test Results

186. Key Question

187. Strategy

188. Business Model Canvas as the Scorecard

189. Market Type Four Types of Markets

190. Type of Market Changes Everything Market Market Size Cost of Entry Launch Type Competitive Barriers Positioning Sales Sales Model Margins Sales Cycle Chasm Width Clone Market Existing Market Resegmented Market New Market Finance Ongoing Capital Time to Profitability Customers Needs Adoption

191. Definitions: Four Types of Markets Clone Market Copy of a U.S. business model Existing Market Faster/Better = High end Resegmented Market Niche = marketing/branding driven Cheaper = low end New Market Cheaper/good enough, creates a new class of product/customer Innovative/never existed before Clone Market Existing Market Resegmented Market New Market

192. Size of Opportunity

193. Market/Opportunity Analysis How Big is It?: Market/Opportunity Analysis Identify a Customer and Market Need Size the Market Competitors Growth Potential

194. 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

195. 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 Total Available Market

196. 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 Total Available Market Target Market Served Available Market

197. 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

198. 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

199. Sweet Sensors Yu Xiang and Yi Lu, Nature Chem. 3, 697-703 (2011). Glucose Monitor: Widely available Cheap Quantitative information $10 billion market However, it can detect only one target: glucose and at very high concentrations We have developed a novel technology to use any glucose monitor without modifications to detect a wide range of non-glucose targets at very low concentrations (such as diseases (e.g., TB), heavy metal ions (e.g., Pb, Hg), organic toxins, bacteria, viruses and cancers)

200. Examples

201. Market size 300 million patients worldwide Required HbA1C testing every 60-90 days Available in-home HbA1C tests today are $100/10 tests Assuming $1 per test , TAM = $1.2 billion Assuming 50% people have the access to a HbA1c test, SAM = $600 million Assuming we can capture 20% of SAM (high-end diabetics and early adopters), Target market = $120 million Total available market = $1.2 billion Serviceable  Available Market = $600 million Target market = $120 million

202. Market Size Growing market Aging population Living Style & Diets Chronic disease Driving factors Healthcare costs Reimbursement Healthcare labor shortage Total Available market 170M (US & EU5 ) $ 25B Target market 3.5M (Resistant Hypertension) $500M

203. Diabetics Sweet Sensors Yi Lu, Tian Lan Neil Kane Chris Sorensen Business Model Canvas Clinicians (in rural area) Triage nurses Pre-diabetics Product supports Patient network/community Retailers (Walgreen ) Online vendors (Amazon) Direct sales Disposable test kit (used repeatedly on a regular basis) At home Convenient Less exposure to infectious diseases in the hospital Cheaper More frequent Better indicator of health (diabetic management) Conferences Product R&D QC Marketing IP Personnel Glucose monitor manufacturers Kit manufacturers Reagent suppliers Reagents Manufacture Licensing FDA certification ?

204. Diabetics Sweet Sensors Yi Lu, Tian Lan Neil Kane Chris Sorensen Action Plan Clinicians (in rural area) Triage nurses Pre-diabetics Product supports Patient network/community Retailers (Walgreen ) Online vendors (Amazon) Direct sales Disposable test kit (used repeatedly on a regular basis) At home Convenient Less exposure to infectious diseases in the hospital Cheaper More frequent Better indicator of health (diabetic management) Conferences Product R&D QC Marketing IP Personnel Glucose monitor manufacturers Kit manufacturers Reagent suppliers Reagents Manufacture Licensing FDA certification ?

205. General methodology for adding fluorine to lead compounds of interest The Business Model Canvas Accessibility (RCY) Purity Speed PET/SPECT Multiplatform Sensitivity (nca) Specific compounds IP PoP data Regulatory plan Understanding of the regulatory process Contract cGMP precursor manufacture Salary, Rents Clinical trials SOPs for precursors and drugs Recruit clinical sites In vivo animal studies Develop regulatory plan for pre IND meeting ID cGMP CRO Fund-raising cGMP manufacturer Radiopharmacies Nuclear Medicine and Radiology departments Technical Assistance (Image Atlas) FDA regulatory support Radiopharmacies Equipment producers Prescribing physicians Radiologist who perform studies Sales of intermediates Technology license Product license (royalty) Direct sales of precursor R&D and clinical studies presented in journals and meetings Drug developers Pharmaceutical development companies IP PoP data Radiologists Technical assistance

206. General methodology for adding fluorine to lead compounds of interest The Business Model Canvas Accessibility (RCY) Purity Speed PET/SPECT Multiplatform Sensitivity (nca) Specific compounds IP PoP data Regulatory plan Understanding of the regulatory process Contract cGMP precursor manufacture Salary, Rents Clinical trials SOPs for precursors and drugs Recruit clinical sites In vivo animal studies Develop regulatory plan for pre IND meeting ID cGMP CRO Fund-raising cGMP manufacturer Radiopharmacies Nuclear Medicine and Radiology departments Technical Assistance (Image Atlas) FDA regulatory support Radiopharmacies Equipment producers Prescribing physicians Radiologist who perform studies Sales of intermediates Technology license Product license (royalty) Drug developers Pharmaceutical development companies IP PoP data Radiologists Technical assistance Direct sales of precursor R&D and clinical studies presented in journals and meetings Sales of precursor through global finished pharmaceutical distributor

207. Critical Success Factors Validation of the need By talking to diabetic patients, clinician and nurses Validation of the customer segmentation By talking to glucose monitor and kit manufactures Evidence of market accessibility By talking to glucose monitor and kit distributors

208. Strategic Roadmap Validate single product in an initial market Build a brand Product expansion Maintain focus Manage upside

209. Backup

210. Customer Discovery Bus Model Canvas Extract Hypotheses Test Problem Test Solution Pivot or Proceed

211. Customer Discovery - Physical Bus Model Canvas Extract Hypotheses Test Problem Test Solution Pivot or Proceed TAM/SAM Product MVP Customers Channel Market Type Customer Relationships: Get/Keep/Grow Key Resources Partners Pricing

212. Customer Discovery - Web Bus Model Canvas Extract Hypotheses Test Problem Test Solution Pivot or Proceed TAM/SAM Low Fidelity MVP Customers/ Source Channel Market Type Customer Relationships: Acquire/Activate Traffic Partners Pricing

213. Customer Discovery - Physical Bus Model Canvas Extract Hypotheses Test Problem Test Solution Pivot or Proceed TAM/SAM Low Fidelity MVP Customers Channel Market Type Cust Relationships Traffic Partners Pricing Customer Contacts Problem Understanding Customer Understanding Market Knowledge

214. Customer Discovery - Web Bus Model Canvas Extract Hypotheses Test Problem Test Solution Pivot or Proceed TAM/SAM Low Fidelity MVP Customers Channel Market Type Cust Relationships Traffic Partners Pricing Customer Engagement Test Low Fidelity MVP Customer Understanding Traffic & Competitive Analysis

215. Customer Discovery - Physical Bus Model Canvas Extract Hypotheses Test Problem Test Solution Pivot or Proceed TAM/SAM Low Fidelity MVP Customers Channel Market Type Cust Relationships Traffic Partners Pricing Update Bus Model Create Prototype/Prod Presentation Test Solution with Customer Update Business Model 1 st Advisory Board Members

216. Customer Discovery - Web Bus Model Canvas Extract Hypotheses Test Problem Test Solution Pivot or Proceed TAM/SAM Low Fidelity MVP Customers Channel Market Type Cust Relationships Traffic Partners Pricing Customer Engagement Test Low Fidelity MVP Customer Understanding Traffic & Competitive Analysis Update Bus Model Test High Fidelity MVP Measure Customer Behavior Update Business Model 1 st Advisory Board Members

217. Customer Discovery – Web/Physical Bus Model Canvas Extract Hypotheses Test Problem Test Solution Pivot or Proceed Verify the: Value Prop Cust Segment Cust Relationships Channel Revenue Model Pivot or Proceed TAM/SAM Low Fidelity MVP Customers Channel Market Type Cust Relationships Traffic Partners Pricing Customer Engagement Test Low Fidelity MVP Customer Understanding Traffic & Competitive Analysis

218. Customer Validation - Web Get Ready to Sell Sell, Sell, Sell Positioning Pivot or Proceed Pivot

219. Customer Validation - Physical Get Ready to Sell Sell, Sell, Sell Positioning Pivot or Proceed Craft Positioning Develop Sales Materials Hire “Sales Closer” Sales Channel Action Plan Refine the Sales Roadmap Formalize advisory board

220. Customer Validation - Web Get Ready to Sell Sell, Sell, Sell Positioning Pivot or Proceed Craft Positioning Acquire/Activate Plans and Tools Build High Fidelity MVP Build Metrics Toolset Hire data analytics chief Formalize advisory board

221. Customer Validation - Physical Get Ready to Sell Sell, Sell, Sell Positioning Pivot or Proceed Craft Positioning Acquire/Activate Plans Build High Fidelity MVP Build Metrics Toolset Hire data analytics chief Formalize advisory board Find Earlyvangelists Test Sell – Out of the Building Refine Sales Roadmap Test Sell Channel Partners

222. Customer Validation - Web Get Ready to Sell Sell, Sell, Sell Positioning Pivot or Proceed Craft Positioning Acquire/Activate Plans Build High Fidelity MVP Build Metrics Toolset Hire data analytics chief Formalize advisory board Prepare Optimization Plans & Tools Out of the building Activation Test Measure and Optimize Results Test Sell Traffic Partners

223. Customer Validation - Physical/Web Get Ready to Sell Sell, Sell, Sell Positioning Pivot or Proceed Craft Positioning Acquire/Activate Plans Build High Fidelity MVP Build Metrics Toolset Hire data analytics chief Formalize advisory board Prepare Optimization Plans Out of the building Activation Test Measure and Optimize Results Test Sell Traffic Partners Company Positioning Product Positioning Validate Positioning

224. Customer Validation - Physical/Web Get Ready to Sell Sell, Sell, Sell Positioning Pivot or Proceed Craft Positioning Acquire/Activate Plans Build High Fidelity MVP Build Metrics Toolset Hire data analytics chief Formalize advisory board Prepare Optimization Plans Out of the building Activation Test Measure and Optimize Results Test Sell Traffic Partners Assemble Data Validate Business Model Validate Financial Model Pivot or Proceed