Morning Sessions

James Wicksted , Ph.D. Department Head and Professor- Physics, Oklahoma State University Associate Director Oklahoma EPSCoR Oklahoma DOE EPSCoR Director

ENTREPRENEURIAL WORKSHOPS Entrepreneurship Purpose Co-sponsored with i2E, Inc. Geared toward entrepreneurial-minded college students Opportunity to learn about the commercialization process Topics: ranging from business plans to venture capital financing Successful entrepreneurs and business community members (patent attorneys, venture capitalists, etc.) were invited to interact with and share insights with participants Served as kick-off event for OK Governor’s Cup Business Plan Competitions Participants ~125-150 annually undergraduate students graduate students faculty

David Thomison, VP of Enterprise Services THE PROCESS, THE PLAN & THE PITFALLS INNOVATION TO ENTERPRISE

The business concept is developed The economic feasibility of the business is determined The business functions are established and a trial product is marketed A product is introduced and revenues are generated The business reaches break even and even profitability The business is well established in the target market Business Lifecycle Valley of Death Investigation Feasibility Development Introduction Growth Maturity

Definitions Investigation Feasibility Development Tangible object, tech or service offered for sale. Commercial activity where goods and services are sold. Commercial enterprise that produces a product/service to be sold to a market. Is the product unique? What problem does the product solve? Will the product make a profit? Does it solve a problem? Who will buy it? Will it make sufficient returns to justify investment? What will it cost to produce? What is the size of the market? Who is the management team? i2E Commercialization Model New product Positive Market Limited capital Limited expertise Incomplete team No product revenue Design prototype Initial BP developed Complete prototype Expenses incurred No product revenue Valley of Death Analysis of the business based on: Product, market, business, finance and execution MARKET BUSINESS PRODUCT Risk Profile

Risk Action Items Product Risk: Product may not be feasible or lacks unique qualities and cannot be protected. Define concept Confirm critical assumptions Survey state of the art Identify critical barriers Determine technology Market Risk: Limited understanding or knowledge of the market can cause a misrepresentation of the growth and size of the market. Conduct market overview & identify: Pricing structure Market barriers Risks Distribution channels Trends and competitors Business Risk: Great product or technology, but a new product or technology does not translate into a great business. Estimate profit potential Conduct self-enterprise and commercialization assessments Identify professional needs Identify capital needs Finance Risk: Proof-of-concept funding for product prototype is difficult to identify. Self fund Study the capital cycle Identify ten proof-of-concept sources Identify ten seed sources Execution: Management at this stage is typically the innovator. This lack of business skills can be difficult to overcome. Learn to manage people Identify ten advisors Study management practice Study company formation types INTRODUCTION GROWTH FEASIBILITY MATURITY DEVELOPMENT INVESTIGATION

Risk Action Items Product Risk: The company is focused on product innovation rather than business development. Intellectual property rights remain a concern. Develop working model Test technical features Assess preliminary production feasibility Conduct manufacturing assessment Assess safety & environmental features Finalize designs Market Risk: Unrealistic market study results can cause misallocation of scarce recourses. Final product design is dependent on successful outcome of market study. Identify and quantify: Market size Customers Volume Prices Distribution Competitors Business Risk: Exploring business formation and the plan still lacks expertise and business skills to commercialize. Formulate financial assumptions Develop pro forma Identify seed capital Form advisory team Finance Risk: Cash flow is a problem due to lack of revenues and early proof-of-concept funding is difficult to attract. Bootstrap Prepare investment strategy Prepare investment presentation Execution: The management team is incomplete; therefore, multiple responsibilities fall on a few individuals. Chicken and egg syndrome becomes evident as you need capital but capital won’t follow poor management teams. Multi-task Implement appropriate management structure Pursue opportunities INTRODUCTION GROWTH FEASIBILITY MATURITY DEVELOPMENT INVESTIGATION

Risk Action Items Product Risk: Advancing the product from prototype to manufacturing or production environment requires new skill sets. No longer developing product revenue features. Develop prototype Identify materials and processes Conduct tests Implement development methods Market Risk: Field tests are not positive and / or competitors respond more rapidly than planned. Identify marketing team Define target market Select market channels Field test Business Risk: If choosing a business over licensing, an experienced professional management team will need to be identified. The business needs to enter a revenue mode as opposed to the R&D mode of the past. Decide venture or license Finalize intellectual property Identify management team Select organization structure Write business plan Finance Risk: Significant expenses and no product revenue realized. Prepare investment strategy Select investment types Target appropriate investors Execution: Lack of focus and risk of losing founder(s). Lack of flexibility in accepting new business controls. Develop organization processes Delegate responsibilities Develop strategic plans Track progress INTRODUCTION GROWTH FEASIBILITY MATURITY DEVELOPMENT INVESTIGATION

Validate the Unit Value in the market Approach stages in a sequential manner Integrate: Product, Market and Business Focus on performance milestones Achieve market validation ASAP Develop a profitable business model Guiding Principles

Utilize “top down” approach to revenues Underestimate “sales cycle” Insufficient “lead time” for capital acquisition No “contingency capital” Underestimate competitive “response” Inadequate “administrative staffing” Classic Mistakes

Identify Customer Problem Develop Innovative Solution Evaluate Customer Value Proposition Research Markets, Technology, Competitors Write Business Plan using guidelines Business Planning Process

Identify the Customer Problem Awareness of the Problem Level of Customer Pain Uniqueness of Innovative Solution Magnitude of Improvement Customer Barriers to Acceptability Deliverability Business Planning: The Beginning

“ We don’t know why we make these, so we’re hoping to find people Who don’t know why they buy them.”

Problem: 9% of emergency transported patients NEVER receive an intravenous catheter or IV due to poor blood vein accessibility Solution: Medical device that encompasses the arm or or leg, reduces blood circulation similar to a tourniquet, BUT then redirects the constricted blood to the surface area using pressure Identify Problem & Unique Solution

Company Sales Price $x COGS $x Gross Profit $x (Profitability, ROE) ___________________________________________________________ Customer Unit Value Proposition:Defined Customer Customer Value $x Sales Price $x Customer Benefit $x (Payback, NPV, ROI, Breakeven) Why do YOU want to deliver the product/service? Why will a CUSTOMER write you a check for the product/service?

Sales Price $25.00 COGS $ 5.00 Gross Profit $20.00 Gross Margin 80% Customer Value Proposition: Company

Increased Medical $85,000 Probability 3% Customer Value $ 2,550 Sales Price $ 25 Customer Value $ 2,525 Benefit Ratio 101x Unit Value Proposition: Customer

Idea or Business? “ We’re selling $100,000 shares in an idea we plan to have after raising enough capital to think about it.”

Search Internet/Publications/Associations TALK with Prospective Customers TALK with Potential Competitors TALK with Potential Capital Sources Business Plan: Research

Dedicate the plan to the business, not the innovation or product. Remember you are illustrating a solution to a problem. More importantly, explain how that solution generates revenue and profits for the business. Business Plan: Overview

“ And this is where the revenue comes out.”

Limit to a 2-3 page detachable document Key Points to Include: Problem and your solution Company overview and background Products and technology Market opportunity Competition Marketing strategy and execution Management team Source and use of funds Financial projections and exit strategy Executive Summary

Begin with the “Elevator Pitch” Business Model Corporate direction & vision Key Points to Include: Founding history Significant milestones achieved to date Customer value proposition discussion Company Overview and Background

Non-technical product description & functionality (integrate pictures, diagrams, & graphs) Focus on unique or competitive advantages Emphasize the benefit to the end-user Key Points to Include: Product/technology developmental status Product/technology development path & risks Product/technology barriers – IP status Customer adoption barriers/challenges Products & Technology

Identify the aggregate market size & growth rates Convey in-depth knowledge of market & trends Highlight customer interest in Product/Tech. Key Points to Include: Identify customers & purchase decision process Market communication strategies Product life cycle/recurring revenues Customer benefits Market Opportunity

Identify competitors & potential competitors Analyze competitor strengths & weaknesses Key Points to Include: Competitor product feature & price matrix/chart comparison Anticipate competitive responses to product introduction Competition

Sales distribution strategy: direct sales, value add resellers, mfg. reps., etc. Product/technology introduction milestones Pricing strategies Key Points to Include: Identify key “early adaptor” customers – first revenues plans Sales channel ramp up “ Bottom-up” development of unit sales & revenues Market Strategy & Execution

Highlight management team relevant industry & work experience and performance to date Identify & timeline all KEY future hires Current Board of Directors & planned changes Key Points to Include: Time sensitive “staffing plans” Compensation structure & stock option plans Critical outsourced consulting/professional services Management

Integrated “set” of Financial Projections for 3 to 5 years Use of Funds identified & associated milestones Summarize investment transaction details Key Points to Include: Unit Sales volumes consistent with Marketing section Highlight future unit pricing changes (if applicable) Revenue & gross margin by Segments Summarize key SG&A components Examine “burn-rate” versus current capital funding Condensed Income, Balance Sheet, and Cash Flow Source & Use of Funds: include “subsequent” funding requirements and uses to achieve financial breakeven Investment structure and valuation Exit Strategies Financial Section

Formatting/Organization Key Questions to be Answered Terms, Statements & Beliefs to Avoid Business Plan Scoring Sheet Business Plan Checklist

David Thomison, VP of Enterprise Services READY, SET, PITCH! Presenting your idea to the Investor. INNOVATION TO ENTERPRISE

The Goal Learn How to Convey Your Opportunity to the Investor Guide to the Oral Presentation for the Governor’s Cup Competition

Your Tools The Business Plan The Presentation Executive Summary The Elevator Pitch

Your Tools The Business Plan Hour The Presentation 20 Minutes Executive Summary 5 Minutes The Elevator Pitch 30 Seconds

Reverse The Order The Elevator Pitch Executive Summary The Presentation The Business Plan

The Elevator Pitch You just happen to get in the elevator with a well known investor. You have 30 seconds on the ride to state your idea. Hopefully, as the Investor steps out of the elevator, you hear, “Interesting, send me your Executive Summary.”

First Sentence For ___(customers)___ with the problem of ___(problem)____ , we have ___(your idea)_ that can ___(big benefit)__ .

Second Sentence It’s based on __(simple technology)___ that has the advantage of _(competitive advantage)_ that will allow us to ___(define market success)___ and generate __(5 th year sales figure)__ in sales.

Last Sentence We have accomplished __(milestone or two)___ and now we are looking for ___(raise)___ so that we can __(milestones from plan)__ .

First Sentence: Example For ___(customers)___ with the problem of ___(problem)____ , we have ___(your idea)_ that can ___(big benefit)__ . EZ-Vein: For nurses and emergency personnel that can’t find a vein for an IV, we have developed a patented, disposable device that redirects blood to engorge the vein and maybe save a life.

Second Sentence: Example It’s based on __(technology)___ that has the advantage of _(advantage)_ that will allow us to ___(define market success)___ and generate __(5 th year sales figure)__ in sales. EZ-Vein: It’s based on a hand pump technology that can be used anywhere and will allow us to capture the ambulance and hospital market and generate $20 million a year in sales.

Last Sentence: Example We have accomplished __(milestone or two)___ and now we are looking for ___(raise)___ so that we can __(milestones from plan)__ . EZ-Vein: We have patented the idea and prototyped our first units and now we are seeking $400,000 to secure FDA approval, initiate committed field trials, and start generating revenue.

The Presentation 20 Minute Opportunity to Present Your Idea Pre-scheduled, with Q & A

Assumptions The Business Plan is Complete Pitch is to an Investor Investor may not have read BP There is a Q&A at the end

Ground Rules Remember, it’s a PITCH! High Points from Business Plan Be Enthusiastic, Be Interesting Describe Your OPPORTUNITY!

Ground Rules One Minute per Slide Four Bullet Points per Slide Four Words per Bullet Point Less is More – Keep focus on YOU

For Each Slide: What is the Point? Why should THEY care? Use $$’s, not ##’s

Outline - Your Idea Title Slide Problem Your Solution Business Model

Outline - Outside World Market Competition Sales Approach

Outline - Execution Management Operations Development Milestones

Outline - ROI Financial Projections Funding Issues Exit Strategy

Outline - Evaluation Status Risk Assessment Conclusion

Title Who are you? What do you do? Why are you here? Say Your Elevator Pitch Contact Information

Problem Clearly show the Problem Give Examples Make it REAL to the Investor What is the Pain in $$’s?

Your Solution ONE Compelling Solution Show Value ($) to ONE Customer Be Brief on Technology State your Intellectual Property

Business Model How Do You Make Money? What Do You Sell? To Whom? Where Does It Come From? Give Price/Cost/Frequency/Volume ($’s)

Market Demand Who is your Market? How Big is your Market? ($’s) Growth Rate? Major Trends

Competition List Major Competitors Name and Size Group Minor Competitors Comparison Charts Are Often Good Complete, Honest

Sales Approach What are the Market Segments? Which Segment Values You the Most? How do you reach them? Acquisition Costs? Sales Cycle Bottom’s Up Sales Forecast

Sales Forecast – Top Down Top Down- 1% of Market 1% of $1 Billion = $10 million Good for Setting Realistic Expectations Doesn’t Say How You Get There

Sales Forecast – Bottom Up Independent of Market Size Begins with estimates Five sales calls/week 10% close rate $50,000 /sale Calculates to $1,200,000 / salesperson Model can be verified/adjusted

Management Team List Major Team Members Include Only Relevant Information Major Open Positions and Prospects Why YOU and Your Team?

Operations How will you run the company? What do you do in-house? What do you outsource? How do you Leverage Capital?

Development Milestones 4 to 7 Significant Milestones Table or Chart with Dates Layout of Operational Plan Product Status Sales Funding Rounds Break-Even

Financial Projections – 5 Years 2009 2010 2011 2012 2013 REVENUE $36,000 $2,274,000 $7,224,000 $11,400,000 $15,720,000 TOTAL COST $8,820 $1,047,630 $3,347,880 $5,118,000 $6,941,400 GROSS PROFIT $27,180 $1,226,370 $3,876,120 $6,282,000 $8,778,600 OPERATIONS $71,000 $294,700 $761,000 $1,649,950 $2,075,600 NET PROFIT ($43,820) $931,670 $3,115,120 $4,632,050 $6,703,000

Funding Offering XX Equity Shares for $YYY,000 Use of Funds 3 to 6 Lines – Big Picture Should Match Development Milestones/Time Details in Business Plan Additional Funding Required Later?

Exit Strategy What is Your Strategy? Initial Public Offering Acquisition Comparisons in Industry? Names of Companies with their Multiples Name Acquirers and Give Reasons Show Investor the ROI

Status What have you accomplished? Development Sales License Agreements Intellectual Property How much have you spent?

Risk Assessment What are Your Unique Risks? Competition, Adoption Rate, Key Customers? What are the Mitigation Strategies? Demonstrate Critical Thinking Ability

Conclusion List the Most Important Highlights Emphasize Potential of Opportunity Thank Them for Their Patience Q & A?

Preparing for the Pitch Prevent Technology Glitches Check for Computer/Software Capabilities Avoid Last Minute Changes Avoid Movies, Internet Links, Etc. Practice, Practice, Practice Check Dress Code

During the Pitch Be Pleasant and Professional Listen CAREFULLY to Questions Be Open to Suggestions Coachable Demonstrate that You’re a Good Partner

Rob Perry M.D. EZVein – Intravenous Access July 10, 2009

Market Problem Can’t Give an IV! 23-40% of initial IV insertions fail 9% of EMS patients are unable to receive an IV Life Threatening

Solution EZVein Hand Pump to Pressurize and Locate Vein Actively improves intravascular pressure Does not require a pulse Disposable Patent Pending

Business Model Outsource Manufacturing $5 Cost, $25 Sales Price Direct Sales Model Statewide EMS (ambulance) Corporate Hospitals

Market Demand IV Applications $700 million/year 28 million IV /year 4.75% Annual Growth Rate Move to Disposable Products

U.S. Market Opportunity Source: BCC Research 4.75% CAGR

Competition EZ-IO Intraosseous Fluid Insertion 379$ Per EZ-IO Use Tourniquet Requires Blood Pressure

Target Market EMS Ambulance Services Greatest Immediate Need Response Time Pressure Centralized Non-Bureaucratic Purchasing Hospitals Corporate Ownership Greatest Volumes

Sales Approach Direct Sales Approach to Statewide Organization/Major Metropolitan Looking For Solution Introduction to OK EMS Manager Founders Do Initial Sales Hire Salesmen as Earnings Allow

Sales Forecast - EMS 10,000 IV’s per 100,000 population 1,000 IV’s EMS Tulsa Metro 800,000> 8,000 IV/year $200,000 /yr Tulsa $600,000 /yr Oklahoma $18 million /yr Texas

Sales Forecast – All IV 10,000 IV’s per 100,000 population 80,000 IV’s in Tulsa $2 million/yr Tulsa $6 million/yr Oklahoma $180 million/yr Texas

Management CEO- Founder Rob Perry M.D Outsourced Consultants Paladin Medical Global Device Solutions Strong Board of Directors Hire CEO, CFO, Sales VP with Revenue

Operations - Status Created Working Prototype Preliminary Testing Effective OK and CA Officials Interested Outsourcing Manufacturing

Development Timeline Month 1-4 Apply for FDA 510k Initiate Manufacturing Month 5-6 Perform Clinical Trials in OK, CA Hire Commercialization Assistant, Website Design Month 7-9 Hire VP Sales/Marketing, Sales Campaign and Test Trials Seed Capital Round Month 10-year 2 Hire CEO, Hire 2 Sales Associates, Hire CFO

Finances Financial Projections Year 1 Year 2 Year 3 Year 4 Year 5 Revenues $270,000 $2,900,000 $9,300,000 $14,400,000 $19,200,000 COGS $70,000 $650,000 $1,800,000 $2,587,500 $3,300,000 Gross Profit $200,000 $2,250,000 $7,500,000 $11,812,500 $15,900,000 Gross Profit % 74% 78% 81% 82% 83% Development $266,000 $130,000 $98,000 $120,000 $122,000 Sales & Marketing $32,000 $281,000 $866,000 $1,300,000 $1,960,000 General & Administrative $233,820 $1,016,394 $2,165,728 $2,929,353 $3,876,564 EBITDA ($331,820) $822,606 $4,370,272 $7,463,147 $9,941,436 Operating Profit % -123% 28% 47% 52% 52%

Funding $400,000 in Funding $400,000 Equity Funding for 25% Ownership $1.2 million Pre-Money Valuation Use of Funds Clinical Trials $180,000 Regulatory Requirements $80,000 Sales, General, Administrative $140,000

Exit Strategy Acquisition by Major Supplier Glaxo Bendix Crito Multiples of 6X to 8X EBITDA

Risks Regulatory- FDA 510k approval Legal - Risk of Patents Financial- Running out of money with unforeseen delay Market -Adoption rate is slower than expected Managerial- Difficulty finding CEO or other personnel

Conclusion Patented Technology Large Market Potential Large Gross Margins Direct Sales Have Large Volume Deals Disposable Product Recurring Revenue Model

Networking Lunch Return 1:00 pm

COLLEGIATE BUSINESS PLAN COMPETITIONS Entrepreneurship Competition sponsored by Donald W. Reynolds Foundation with partners including EPSCoR & i2E Encouraged students to develop and implement businesses Promoted commercialization of innovations, ideas & products developed at Oklahoma colleges & universities 8 businesses launched by winners One winner received $80K SBIR grant (USDA)

i2E COMMERCIALIZATION VOUCHERS Entrepreneurship EPSCoR provided $1K vouchers to researchers for commercialization assessment of inventions by i2E Nationally recognized proprietary model for assisting entrepreneurs Accessed through university tech transfer offices ~ 90 technologies assessed ~ 7 resulted in new start-up companies ~25 resulted in commercial development ~10 potential licensing opportunities ~18 show potential commercial and/or licensing opportunities with additional research & development

Cellulosic Bioenergy Potential for Oklahoma Governor’s Biofuels Coalition 25% of energy needs through biofuels by 2025 {25x’25 Alliance} In Oklahoma by 2025* 2.4 billion gallons of biofuels per year 43.3 billion KWh of electricity 134,000 new jobs $13 billion in economic activity * Dr. Ernie Shea, 25x25’ Project Coordinator

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