true ventures 072011

Welcome to Customer Development

Stanford - School of Engineering

U.C. Berkeley - Haas School Of Business

www.steveblank.comTwitter: sgblank

Slides at: slideshare.net/sblank

Steve Blank

I Write a Blog www.steveblank.com

I Drew This

CustomerDiscovery

CustomerValidation

Company Building

Customer Creation

Pivot

I Called It:

Customer Development

CustomerDiscovery

CustomerValidation

Company Building

Customer Creation

Pivot

This Talk is Based On• Business Model Generation• Four Steps to the Epiphany

• Lean Startup

ScalableStartup

Large Company

- Business Model found- i.e. Product/Market fit- Repeatable sales model- Managers hired

What’s A Startup?

A Startup is a temporary organization used to search for a repeatable and scalable business model

Search Execute

ScalableStartup

Large CompanyTransition

- Founders depart- Professional Mgmt- Process- Beginning of scale

The Memo You Never GetThe Transition – Founders Leave

BuildSearch Execute

ScalableStartup


Business Model found by founders- customer needs/product features found i.e. Product/Market fit- Repeatable sales model- Managers hired

The Search for the Business Model

Startups Search and Pivot

ScalableStartup


- Business Model found- Product/Market fit- Repeatable sales model- Managers hired

- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 people

The Search for the Business Model The Execution of the Business Model

Startups Search, Companies Execute

ScalableStartup

LargeCompanyTransition

Traditional Accounting- Balance Sheet- Cash Flow Statement- Income Statement

The Execution of the Business Model

Metrics Versus Accounting

ScalableStartup


Startup Metrics- Customer Acquisition Cost- Viral coefficient- Customer Lifetime Value- Average Selling Price/Order Size- Monthly burn rate- etc.

Traditional Accounting- Balance Sheet- Cash Flow Statement- Income Statement


Metrics Versus Accounting

ScalableStartup


Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan


Customer Validation Versus Sales

ScalableStartup


Customer Validation- Early Adopters- Pricing/Feature unstable- Not yet repeatable- “One-off’s”

Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan


Customer Validation Versus Sales

ScalableStartup



Engineering Versus Agile Development

Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs

ScalableStartup


Agile Development- Continuous Deployment- Continuous Learning- Self Organizing Teams- Minimum Feature Set- Pivots


Engineering Versus Agile Development

Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs

ScalableStartup


Business Plan- describes “knowns”- features- customers/markets- business model


Startups Model, Companies Plan

ScalableStartup


- Business Model- describes “unknowns”- customer needs- feature set- business model- found by iteration

The Search for the Business Model

Startups Model, Companies Plan


- Plan describes “knowns”- Known features for line extensions- Known customers/markets- Known business model

How Do Startups Search For A Business Model?

• The Search is Customer Development• The Implementation is Agile Development• The Sum is the Lean Startup

I Have a Vision

I Know What Needs to Be Done

Lets Launch a New Product!

Five Ways Founders Fail

#1 I Know Who The Customer Is

#2I Know Exactly the Product They Need

#3I Know the Problem They Have

#4We Can Fix It After We Ship It All

#5All I Need to Do is Execute the Plan

Product Introduction Model

Concept/Seed

Round

Product Dev.

Alpha/Beta Test

Launch/1st Ship

Product Introduction Model

Concept/Seed

Round

Product Dev.

Alpha/Beta Test

Launch/1st Ship

The Leading Cause of Startup Death

Product Introduction Model:Two Implicit Assumptions

Customer Problem: known

Product Features: known

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




• 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




• Hire Sales VP• Pick distribution

Channel

• Build Sales Channel / Distribution

Marketing

Sales

• Hire First Bus Dev

• Do deals for FCS

Business Development

Tradition – Hire Engineering

Concept Product Dev.

Alpha/Beta Test

Launch/1st Ship




• Hire Sales VP• Pick distribution

Channel

• Build Sales Channel / Distribution

Marketing

Sales

• Hire First Bus Dev

• Do deals for FCS

Business Development

Engineering • Write MRD

• Waterfall

• Q/A • Tech Pubs

No Business Plan survives first contact with customers

Startups Are Not Smaller Versions of Large Companies


Large Companies Execute Known Business Models


Startups Search for Unknown Business Models

So Search for a Business Model

The Business Model:

Any company can be described in 9 building blocks

CUSTOMER SEGMENTS

which customers and users are you serving? which jobs do they really want to get done?

VALUE PROPOSITIONS

what are you offering them? what is that getting done for them? do they care?

CHANNELS

how does each customer segment want to be reached? through which interaction points?

CUSTOMER RELATIONSHIPS

what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?

REVENUE STREAMS

what are customers really willing to pay for? how? are you generating transactional or recurring

revenues?

KEY RESOURCES

which resources underpin your business model? which assets are essential?

48

KEY ACTIVITIES

which activities do you need to perform well in your business model? what is crucial?

KEY PARTNERS

which partners and suppliers leverage your model?

who do you need to rely on?

COST STRUCTURE

what is the resulting cost structure? which key elements drive your costs?

51images by JAM

customer segments

key partners

cost structure

revenue streams

channels

customer relationships

key activities

key resources

value proposition

sketch out your business model

sketch out your business models

But,Realize They’re Hypotheses

9 Guesses

Guess Guess

Guess

Guess

GuessGuess

Guess

GuessGuess


Get Out of the BuildingThe founders

^

Customer DevelopmentThe Search For the Business Model

CompanyBuilding

Customer

Discovery

Customer

Validation

Customer Creation

Pivot

• Stop selling, start listening• Test your hypotheses• Continuous Discovery• Done by founders

Customer Discovery

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation

Test Hypotheses:• Product• Market Type• Competition

Turning Hypotheses to Facts

Test Hypotheses:• Problem• Customer• User• Payer

Test Hypotheses:• Channel


Test Hypotheses:• Demand

Creation


Test Hypotheses:• Product• Market Type• Competitive

Test Hypotheses:• Pricing Model / Pricing

Test Hypotheses:• Size of Opportunity/Market• Validate Business Model

Test Hypotheses:• Channel• (Customer)• (Problem)


Test Hypotheses:• Demand

Creation


Test Hypotheses:• Product• Market Type• Competitive

Test Hypotheses:• Pricing Model / Pricing

Test Hypotheses:• Size of Opportunity/Market• Validate Business Model

Test Hypotheses:• Channel• (Customer)• (Problem) Customer

Development Team

Agile Development

The Minimum Viable Product (MVP)

• Smallest feature set that gets you the most …

- orders, learning, feedback, failure…

The Pivot

• The heart of Customer Development

• Iteration without crisis

• Fast, agile and opportunistic

Pivot Cycle Time Matters

• Speed of cycle minimizes cash needs

• Minimum feature set speeds up cycle time

• Near instantaneous customer feedback drives feature set

The Pivot

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

The Pivot

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

OB/GYNsPCPs

Direct Sales to hospitalsDistributor

Strong clinical dataTrainingMaintenanceConferencesCME courses

Product DevelopmentClinical trialsOperating CostsMarketing Costs

Capital Equipment Sales and disposable itemPer use fees

Product DevelopmentIPClinical trialsFDAPublishing

IP Leading doctorsTechnical Expertise

Leading doctorsKey Opinion Leaders3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACS

Doctors:Earlier detectionPriceAccuracy

Patients:Radiation FreeNon-Invasive

How Does This Really Work?

Stanford Lean LaunchPad Class

How Does This Really Work?

Stanford Lean LaunchPad Class

8 Weeks From an Idea to a Business

Pivot ExampleRobotic Weeding

Talked 75 Customers in 8 Weeks

Our initial plan

Confidential

20 interviews, 6 site visits…We got OUR Boots dirty

WeedingVisited two farms in Salinas Valley to better understand problem

Interviewed:• Bolthouse Farms, Large Agri-Industry in Bakersfield• White Farms, Large Peanut farmer in Georgia• REFCO Farms, large grower in Salinas Valley• Rincon Farms, large grower in Salinas Valley• Small Organic Corn/Soy grower in Nebraska• Heirloom Organics, small owner/operator, Santa Cruz Mts• Two small organic farmers at farmers market• Ag Services of Salinas, Fertilizer applicator

MowingInterviewed:• Golf: Stanford Golf course • Parks: Stanford Grounds Supervisor, head of maintenance and

lead operator (has crew of 6)• Toro dealer (large mower manufacturer) • User of back-yard mowing system• Maintenance Services for City of Los Altos• Colony Landscaping (Mowing service for stadiums)

Business Plan Autonomous Vehicles for Mowing & Weeding

We reduce operating cost- Labor reduction- Better utilization of assets (eg mow or weed at nights)- Improved performance (less rework, food safety)

Mowing- Owners of public or commercially used green spaces (e.g. golf courses)- Landscaping service provider

Weeding- Farmers with manual weeding operations

Dealers sell, installs and supports customer

Co. trains dealers, supports dealers

- Mowing Dealers- Ag Dealers

- Innovation- Customer Education- Dealer training

Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment

- Dealers (Mowing and Ag)- Vehicle OEMs (John Deere, Toro, Jacobsen, etc)

- Research labs

Asset saleOur revenue stream derives from selling the equipment

Engineers on Autonomous vehicles, GPS, path-planning

Found weeding in organic crops is HUGE problem; 50 - 75% of costs

Crews of 100s-1000

Back-breaking task

(Ilegal) labor harder to get

1-5 weedings per year/field

$250-3,500 per acre and increasing

Food contamination risk

Decision to make – mowing vs weeding

Application If ROI is < 1 yr they will

buy

Labor costs significant?

Autonomous would solve

problem?

TAM

Mowing of large fields

Yes.Professionally

run organizations

Yes Yes Adjusted up toxxx

Weeding in Agriculture

Agri Industry: YES!

Large Growers: Yes

Small Growers: No

YES! for organic crops

They are spending $500/ac!

Not necessarily

Key need is weed vs. crop differentiation

TAM increased to $2.6 B (Total

organic)

Target Market (organic

specialty) 162 M/yr

18%/yr growth

Autonomous vehicles WEEDING

We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns

- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables

Dealers sell, installs and supports customer

Co. trains dealers, supports dealers

- Ag Dealers- Ag Service providers


Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment

- Ag Dealers- Ag Service providers

- Research labs

Asset saleOur revenue stream derives from selling the equipment

Engineers on Machine VisionTwo problems:- Identification- Elimination

1 Week – 1 CarrotBot

Confidential

CARROTBOT

Machine Vision data collection platform Monochrome & Color

Cameras Laser-line sweep

(depth measurement)

Encoders (position/velocity)

Onboard data acquisition & power

CarrotBot 1.0

The Business Plan Canvas Updated

• Research Labs

• Equipment Manufacturers

• Distribution Network

• Service Providers

• Technology Design

• Marketing• Demo and

customer feedback

• Cost Reduction

• Remove labor force pains

• Eliminate bio-waste hazards

• IP – Patents• Video

Classifier Files

• Robust Technology

• Farming conventions.

• Demo, demo, and demo!!

• Proximity is paramount

• Organic Farmers

• Weeding Service Providers

• Conventional Farmers

• Dealers• Direct Service• Indirect

Service• … then

Dealers• Asset Sale• Direct Service

with equipment rental

• … then Asset Sale

Value-Driven

Visit Highlights

Above: Organic Carrots, 7wks. Top right: Conventional carrotsBottom Right: Very weedy. Will require multiple passes of hand weeding

Visit Highlights

Carrot vs. WeedsDue to small root systems, carrots have no chance against

weeds

Visit Highlights

Organic Broccoli, closely cultivated. Weeds close to plants are hand-picked

Visit Highlights

State of the Art in Weeding Technology for Organic Crops

Customer Hypothesis

Hypothesis Confirmed• Growers interested in own

equipment • Industrial (10,000s of acres) • Large (1,000s of acres)• Willing to pay $100k for one

unit

• Smaller growers (100s of acres) usually subcontract the labor services or rent equipment

• All purchases through local dealers• Customer service is essential

Pre-Test

Post-Test

Customer Map #1 – Industrial Growers

Example: Bolthouse Farms – Large Industrial Carrot Producer – 8K acres/yr

• Equipment Operator

• Director, Ag Technology

• Justin Grove, interviewed

• VP, Growing Operations

• CFO, CEO (Jeff Dunn)

• Local Farm Mgr• Cliff Kirkpatrick, visited

Equipment Operator

Cliff, Farm Mgr

Customer Map #2 – Service Providers

Example: Ag Services – Service Provider, Salinas Valley

• Equipment Operator

• Service Mgr

• ?? (service mgr’s boss)

Me (left), Marty (middle, Service Mgr), Doug (right, Grower)

• Grower


• Research Labs

• Equipment Manufacturers





customer feedback

• Cost Reduction




Classifier Files





• Mid/Large Organic Farmers

• Agricultural corporations


• Mid/Large Conventional Farmers

• Direct Service• Indirect

Service• … then

Dealers

• Direct Service with equipment rental

• ($1,500/d; 120d/yr )• Low density:

$1,500/d• High density:

$6,000/d

Value-Driven

World Ag Expo interviews:the need is real and wide spread

• 10+ interviews at show– Everyone confirmed the need– Robocrop, UK based, crude

competitor sells for $171 K

• Revenue Stream– Mid to small growers prefer a

service– Large growers prefer to buy, but

OK with service until technology is proven

– Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability)

Confidential


• Research Labs

• Equipment Manufacturer



• 2 or 3 Key Farms



customer feedback

• Cost Reduction




Classifier Files





• Mid/Large Organic Farmers

• Agricultural corporations


• Mid/Large Conventional Farmers

• Direct Service• Indirect

Service• … then

Dealers

• Direct Service with equipment rental

• Low density: $1,500/d

• High density: $6,000/d

Value-Driven• R&D• Bill of Materials• Training &

Service• Sales

Autonomous weeding - Final

We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns

- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables

Direct- Provide high quality service at competitive price

Direct - Alliance with service providers- Eventually sell through dealers


Costs for service provisionCOGS seek a 50-60% Gross MarginHeavy R&D investment

- Ag Service providers

- Research Institutes (eg UC Davis, Laser Zentrum Hannover)

- 3-4 key farms

Service provision- Charge by the acre with modifier according to weed density - Eventually move to asset sale

Engineers on Machine VisionTwo problems:- Identification- Elimination

MammOpticsFinal project presentation for E 245 Winter 2011

Project OverviewInitial industry guesses and customer hypothesis

MammOpticsInitial Idea

Breast cancer

Leading cause of cancer in women190,000 diagnosis every year US41,000 deaths every year USIncreasing diagnosis rates

Mammography

15%-25% false negatives rate25% false positives rateRequires X-ray radiationLow resolution

Novel technology based on RF-modulated optical spectroscopy

MammOptics

- Earlier detection

- Non-radiative- Non-invasive

MammOpticsTechnology Comparison

RiskInvasiveness

Resolution

False Pos.

False Neg.

Device Cost

Time Require

d

MammOptics Very Low Very Low <.1 cm <15% 5% 15-20k 10 min.

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

MammOpticsBusiness Model Canvas 1 of 4

Radiation-freeEarlier detectionNon-invasive

Pioneering radiologists inhospitals

Direct sales to hospitals

Strong clinical dataTrainingMaintenance

Product DevelopmentClinical trialsOperating Costs Capital equipment

sales and disposable item

Product DevelopmentIPClinical trialsFDA


HospitalsLeading doctors3rd party manufacturersDistributors


Radiation-freeEarlier detectionNon-invasive

Pioneering radiologists inhospitals

Direct sales to hospitals


Product DevelopmentClinical trialsOperating Costs Capital equipment

sales and disposable item




Initi

al guess

Initi

al guess

Initi

al guess

Initi

al guess


Test:Customer segment

Value proposition

Finding the right customerFrom radiologists to gynecologists

MammOpticsExcursions into hospitals

Leading doctors

Patients

Hospital Managers

Technicians

Debra Ikeda Jason Davies

Jafi Alissa LipsonSunita Pal

6 women >40 8 women <40

Alicia X-ray mammography

Paul BillingsHolly V. Gautier

MammOpticsHospital purchasing decision tree


Hospitals

Complex purchasing decision

tree. Several saboteours

MammOpticsPrivate practice purchasing decision tree


Private practice

Faster adoption rate

Attractive value proposition✔

Pioneering DoctorsHospitalsOB/GYNsPCPs

Direct Sales to doctors


Product DevelopmentClinical trialsOperating Costs

Capital Equipment Sales and disposable item



Hospitals (Capital Spending Committee)Leading doctors3rd party manufacturersDistributorsResearch Hospitals





Direct Sales to doctors










How do we get to our customer?

Need sensitivity and specificity

Getting to our customerThe world of direct sales and medical marketing

MammOpticsInterviews

Breast Cancer Advocacy Groups

OB/GYNs

FDA/Clinical Trials

Medical Sales

Be Bright PinkJennifer Glover

Dr. Cindy WooDr. Jags Powers

Dr. Aaron Shuvkan

Katrina BellTanay Dudhela

Jed Hwang

Phyllis WhitelyCarl Simpson

MammOpticsMarketing

Access to ACOG by former member

Strong influence on doctors via ACOG Standard of Care

Strongly influenced by

KOLs

MammOpticsMarketing

Researchers conducting

important clinical trials

Researchers with numerous

publications

Outsourced survey research

Researchers with strong peer

recommendations

MammOpticsMarketing

Focus on prominent journals Need two big

publications

Choose KOL as Principal Investigators

(PI)

MammOpticsMarketing

Effective method for educating

doctors

Doctors required to attend

workshops

Workshop must be approved by ACOG

Taught by objective medical

experts

MammOpticsMarketing

ACOG Annual Clinical

Meeting

Miami Breast Cancer Conference

Opportunity for feedback from

doctors

MammOpticsMarketing

Trusted information source for patients

Critical opinion leader for

technology adoption

Access to media outlets

MammOpticsMarketing

IndividualDoctors

Purchasing Administrato

rs

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

MammOpticsChannel Strategies and Costs

Individual Doctors

Purchasing Administrato

rs

Channel Strategies and CostsMammOptics

5 dedicated sales people$150,000 each/year

Hire nurses or technicianswith establishedrelationships

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

MammOpticsPricing Strategy

Equipment Lease model

Per-use model

Consumable

Cost of the device

Service per year

Per-use fee

Consumable

$50,000

$3,000

0

0

$5,000

$10,000

0

0

$5,000

0

$50

0

$25,000

0

0

$20

MammOpticsPricing Strategy

Equipment Lease model

Per-use model

Consumable

Cost of the device

Service per year

Per-use fee

Consumable

$50,000

$3,000

0

0

$5,000

$10,000

0

0

$5,000

0

$50

0

$25,000

0

0

$20

Approved by

customers and

investors

ACOGACS

Doctor specialty

committee

Hospital Administrati

on

Technician

RadiologistMammography

MammOpticsCustomer Workflow

Current market Insurance

ACOGACS

Doctor specialty

committee


on

Technician



Current market

But what would happen if we replace mammography?

Insurance

ACOGACS

Doctor specialty

committee


on

Technician

Radiologist

Mammography


Breast Radiologists

Technicians Hospitals

Loss of jobs

Loss of jobs Eliminates loss leaderPuts emphasis on

biopsies

Insurance

ACOGACS

Doctor specialty

committee


on

Technician

Radiologist

Mammography


Insurance

ACOGACS

Doctor specialty

committee


on

Technician

Radiologist

Mammography


InsuranceSame cost as mammography

($140)Reduced number of biopsies

($1000)

ACOG/ACSImproved healthcare(mammography weak

technique)

Insurance

ACOGACS

Doctor specialty

committee


on

Technician

Insurance

Radiologist

Mammography


Insurance

Doctor specialty

committee


on

Technician



ACOGACS

MammOptics

Patient

PCPOB/GYN

Insurance

Doctor specialty

committee


on

Technician

Radiologist

Mammography


ACOGACS

MammOptics

Patient

PCPOB/GYN


on

Technician

Radiologist

Mammography

MammOptics

Patient

PCPOB/GYN

PCP OB/GYNsIncreased revenue

More complete patient care

PatientImproved healthcare

Comfort

MammOpticsRevenue

ACOGACS

Doctor specialty

committee


on

Technician

Insurance

Radiologist

Mammography


MammOptics

Patient

PCPOB/GYN

OB/GYNsPCPs





Product DevelopmentIPClinical trialsFDAPublishing






OB/GYNsPCPs





Product DevelopmentIPClinical trialsFDAReimbursementPublishing






Learned how to reach the customer

How do we build a company based on this?

Building the companyThe backstage of a medical device company

MammOpticsInterviews

FDA Clinical Trials

Manufacturing

Venture Capitalists

Reimbursement

Stanford Statistics Steve AxelrodMarga Ortigas-

Wedekind

Nick MourlasDon

Archambault

Shannon BergstedtAli Habib

Dana MeadBill Starling

Doctors/Sales

Dr. Aron Shuftan

Jed HwangMichael J. Nohr

Manufacturing

MammOpticsPartners

Choose manufacturing facility close to

home

Manufacturing Partner

75% gross margin

9 Inches

~5 lbs

DSP

RFIC

Photo probe

Disposable head

Discounts for Revenue Model

COGS$4-5k per

unit

MammOptics

I.I.T.Y.I.W.H.T.K.Y

Part IP Development

Manufacturing

COGS

1 Digital Processing Unit / Algorithms MammOptics In-House Off the Shelf $200

2 Customized RF Integrated Circuitry MammOptics In-House Out-Sourced $500

3 Probe Bank (Lasers and Photo-Detectors)

Licensed - Off the Shelf $1500

4 Disposable Skin Contact Pad MammOptics In-House Out-Sourced $2

5 Packaging MammOptics Out-Sourced Out-Sourced $2000

TechnologyMammOptics

I.I.T.Y.I.W.H.T.K.Y

Manufacturing Reimbursement

MammOpticsPartners

Difficult to get coverage for new product.

Manufacturing

MammOpticsPartners

Reimbursement PartnersMammOptics

Insurances

CPT Codes$75-$150

MammOpticsPartners

Manufacturing

FDA Clinical Trials

Reimbursement

510K vs. PMALargest cost

Biggest financial risk

Clinical Trials

12/4/2009

Stage 1Pilot trials

50 patients$600K

MammOptics

6 months

FeasibilityComparison

with mammograph

y

Clinical Trials

12/4/2009

MammOptics

6 months 15 months

Stage 1Pilot trials

Stage 2Interim trials

500 patients$7.2M

Prove superior safety-

efficacy & sensitivity

Clinical Trials

12/4/2009

MammOptics

6 months 15 months

Stage 1Pilot trials


24 months

Stage 3FDA

pivotal trials1500

patients$20.5M

FDA class II, 510(K) w/ trials

Focus on superiority &

economic end-points

Clinical Trials

12/4/2009

MammOptics

6 months 15 months

Stage 1Pilot trials


Stage 3FDA

pivotal trials

Stage 4Post-

market studies2000 patients$26.8M

Specific Cat III CPT/ACP CodesMarket traction

24 months24 months

Clinical Trials

12/4/2009

MammOptics

6 months 15 months

Stage 1Pilot trials


Stage 3FDA

pivotal trials$600K

$7.2M

$20.5M

$26.8M

Stage 4Post-

market studies

24 months 24 months

Clinical Trials

12/4/2009

MammOptics

MammOpticsPartners

MammOpticsPartners

Manufacturing

FDA Clinical Trials

Reimbursement

Financial timeline

Funding

$10M

$15M

2012

Series A $3.5 MM

Cash

Rese

rve

Clin

ical

Mile

stones

$5M

Initialize

Desi

gn

Mile

stones

Reg

ula

tory

/ IP

M

ilest

ones

Q1 Q2 Q3 Q4

2013Q1 Q2 Q3 Q4

2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016

Series B $9 MM

System

2017Q1 Q2Q1 Q2 Q3 Q4

2018Q3

Launch

Series C $30.5 MM

$30M

$20M

Regulatory / Clinical

Series D $35

MM

M&A / IPO $50 MM

$40M

145 12/4/2009

Proof of Concep

t

Pilot Studie

s

IC and Processing Patents

Marketable Product

Provisional Patent

Beta-Versio

n Testin

g

Application and

System Patents

IRB / IDE

Clinical Results

Second Release

Initial Product Launch

Specific Codes (Cat. I CPT / APC)

Non-Specific Codes

1st Release

Test

2nd 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

MammOpticsMammOptics

Financial timeline

$10M

$15M

2012

Cash

Rese

rve

Clin

ical

Mile

stones

$5M

Initialize

Desi

gn

Mile

stones

Reg

ula

tory

/ IP

M

ilest

ones

Q1 Q2 Q3 Q4

2013Q1 Q2 Q3 Q4

2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016 2017Q1 Q2Q1 Q2 Q3 Q4

2018Q3

$30M

$20M

$40M

146 12/4/2009

Proof of Concep

t

Provisional Patent


Technology

Licensing


$10M

$15M

2012

Series A $3.5 MM

Cash

Rese

rve

Clin

ical

Mile

stones

$5M

Initialize

Desi

gn

Mile

stones

Reg

ula

tory

/ IP

M

ilest

ones

Q1 Q2 Q3 Q4

2013Q1 Q2 Q3 Q4

2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016

System

2017Q1 Q2Q1 Q2 Q3 Q4

2018Q3

$30M

$20M

$40M

147 12/4/2009

Proof of Concep

t

Provisional Patent

Beta-Versio

n Testin

g

Laboratory

Prototype

Beta Prototype

Technology

Licensing


Pilot Studie

s


$10M

$15M

2012

Series A $3.5 MM

Cash

Rese

rve

Clin

ical

Mile

stones

$5M

Desi

gn

Mile

stones

Reg

ula

tory

/ IP

M

ilest

ones

Q1 Q2 Q3 Q4

2013Q1 Q2 Q3 Q4

2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016

Series B $9 MM

System

2017Q1 Q2Q1 Q2 Q3 Q4

2018Q3

$30M

$20M

$40M

148 12/4/2009


Marketable Product

Beta-Versio

n Testin

g

Application and

System Patents

IRB / IDE

Beta Prototype


Pilot Studie

s


Laboratory

Prototype


$10M

$15M

2012

Cash

Rese

rve

Clin

ical

Mile

stones

$5M

Desi

gn

Mile

stones

Reg

ula

tory

/ IP

M

ilest

ones

Q1 Q2 Q3 Q4

2013Q1 Q2 Q3 Q4

2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016

Series B $9 MM

System

2017Q1 Q2Q1 Q2 Q3 Q4

2018Q3

Series C $30.5 MM

$30M

$20M


$40M

149


Application and

System Patents

IRB / IDE

Cat III

CPT

Second Release

1st Release

Test

US Interim Trials US Pivotal Clinical Trials

Publication


Pilot Studie

s


$10M

$15M

2012

Cash

Rese

rve

Clin

ical

Mile

stones

$5M

Desi

gn

Mile

stones

Reg

ula

tory

/ IP

M

ilest

ones

Q1 Q2 Q3 Q4

2013Q1 Q2 Q3 Q4

2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016 2017Q1 Q2Q1 Q2 Q3 Q4

2018Q3

Launch

Series C $30.5 MM

$30M

$20M


Series D $35

MM

$40M

150 12/4/2009

Clinical Results

Second Release


Non-Specific Codes

2nd Release Test

Publication

US Interim Trials


Publication




$10M

$15M

2012

Cash

Rese

rve

Clin

ical

Mile

stones

$5M

Desi

gn

Mile

stones

Reg

ula

tory

/ IP

M

ilest

ones

Q1 Q2 Q3 Q4

2013Q1 Q2 Q3 Q4

2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016 2017Q1 Q2Q1 Q2 Q3 Q4

2018Q3

Launch

$30M

$20M


Series D $35

MM

M&A / IPO $50 MM

$40M

12/4/2009

Clinical Results



Non-Specific Codes

Publication



Financial / Operations TimelineMammOpticsMammOptics

$10M

$15M

2012

Series A $3.5 MM

Cash

Rese

rve

Clin

ical

Mile

stones

$5M

Initialize

Desi

gn

Mile

stones

Reg

ula

tory

/ IP

M

ilest

ones

Q1 Q2 Q3 Q4

2013Q1 Q2 Q3 Q4

2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016

Series B $9 MM

System

2017Q1 Q2Q1 Q2 Q3 Q4

2018Q3

Launch

Series C $30.5 MM

$30M

$20M


Series D $35

MM

M&A / IPO $50 MM

$40M

152 12/4/2009

Proof of Concep

t

Pilot Studie

s


Marketable Product

Provisional Patent

Beta-Versio

n Testin

g

Application and

System Patents

IRB / IDE

Clinical Results

Second Release



Non-Specific Codes

1st Release

Test

2nd Release Test

Publication


Beta Prototype

US Interim Trials


Publication


Cat III

CPT


Laboratory

Prototype

Technology

Licensing



OB/GYNsPCPs

Direct Sales to hospitalsDistributorOnline



Per use fees

Product DevelopmentIPClinical trialsFDAReimbursement Publishing


KOLs3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACSClinical trial designer

Doctors:Earlier detectionPriceAccuracyImmediate Results



Earlier detectionNon invasivePriceAccuracyImmediate Results

OB/GYNsPCPs

Direct Sales to hospitalsDistributorOnline



Per use fees



KOLs3rd party manufacturersBreast Cancer FoundationsACOGACSClinical trial designer

Final iteration of our business model

But… need to think about the big picture…

Radiation-freeEarlier detectionNon invasive

Pioneering DoctorsHospitals

Direct Sales to hospitals







MammOpticsBusiness Model Canvas 1

Radiation-freeEarlier detectionNon invasive








HospitalsLeading doctors3rd party manufacturersDistributorsResearch Hospitals









Hospitals (Capital Spending Committee)Leading doctors3rd party manufacturersDistributorsResearch HospitalsBreast Cancer Foundations




OB/GYNsPCPs





Product DevelopmentIPClinical trialsFDAReimbursementPublishing






OB/GYNsPCPs







KOLs3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACS




OB/GYNsPCPs




Per use fees



KOLs3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACSClinical trial designer




OB/GYNsPCPs




Per use fees



KOLs3rd party manufacturers(local)Breast Cancer FoundationsACOGACSClinical trial designer




Personal Libraries

Insight: No more bookshelves

Printed Books -20% YoY ‘10

eBooks+150% YoY ‘10

Version 1.0: Personal Libraries

Original Idea: Personal Digital Libraries

Import, organize and share thousands of digital papers

something-something-something.com

Original idea

SHORT TERMResearchersLawyersScientists

LONG TERMAvid book readersProfessionals

Import, organize and share thousands of papers

FB/TW posts from users you know

Company blog, FB, TW, support forums

Affiliate program

SEO/SEM/SM

IE/FF/Chrome App Stores

Targeted marketing

Product development

Constant iteration & testing

DevelopersMarketers

Libraries, Universities, Research Centers

Bloggers and media targeting customer segment

Academic Database providers

Affiliate program feesLicensingSubscription feesAd revenue

AWS InfrastructureSEMEng & Marketing OpEx

Invincible Business Model: Version 1.0

Here’s What We DidVersion 1.0: Personal Libraries

Got out of the building


• 100+ Interviews

Professors, Litigators, IP lawyers, Post-docs, PhD researchers, Engineering Students, Law Students…


• 100+ Interviews• Extensive Surveys


• 100+ Interviews• Extensive Surveys• 33,000+ Adwords


• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review


• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing


• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers


• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks


• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks• Usability Tests


• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks• Usability Tests• Rapid Iteration

Here’s What We FoundVersion 1.0: Personal Libraries

Here's what we found: Version 1.0

GOOD• Subscriptions Rock

A great business if we had more users…


GOOD• Subscriptions Rock• Pipelines Optimize

Shorter pages raise conversions 80%


GOOD• Subscriptions Rock• Pipelines Optimize• The Web Listens

Sites will feature your service



BAD• Academics = Cheap

Teaching team saw pattern in our data

Run away from this customer as fast as possible.

Run away from this customer as fast as possible.

They don’t want to spend money and will incur infinite support and infinite cost.



BAD• Academics = Cheap• Negative Margins

Working for peanuts, and hitting wild product success leads to economic failure



BAD• Academics = Cheap• Negative Margins• ECM = Boring

No adjacent pivots worked for the team

Version 2.0: Trusted Advice


Original idea

Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)

Discover online goods recommended by friends at the lowest possible price from trusted vendors


Company blog, FB, TW accounts

Affiliate program

SEO/SEM/SM


Developing trusted advice and advisors

Web marketing

Affiliate partnerships


DevelopersMarketersContent LibraryInstall baseReadership base

Bloggers and Media targeting customer segment

Retail marketing partners

IE/FF/Chrome teams

Affiliate Program Providers




New Hypotheses

Here’s What We DidVersion 2.0: Trusted Advice

Got out of the building, again

• 40+ Interviews


• 40+ Interviews• Extensive Surveys


• 40+ Interviews• Extensive Surveys• Landing Page Tests

Landing pages tested on affluent, career aged professionals, approximately 70/30

male/female, N=800+


• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research


• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research• Compete Research


• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research• Compete Research• Revenue Analysis


• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research• Compete Research• Revenue Analysis• Two Prototypes

Insidely.com

wantio.com


• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research• Compete Research• Revenue Analysis• Two Prototypes• Refined Personas

Customer Segment: Professional-class consumers shopping frequently online

Pat the ProfessionalUpwardly mobile professional (some Grad Students)Salary: $40,000 – 150,000/yearFinance, Consulting, PR, MarketingFollows fashion/technology trendsSpends $1-15K on discretionary items onlinePurchased online in last 30 days

Demographics• Male/female, aged 18-35• Minimum bachelors from expensive schoolTraits:• Ideas from blogs & shopping websites • Values celebrity trends & friends’ opinions• Wants high ticket items at lowest price• Event-driven shopper—new release or sale

Motivation• Craves new products• Hates tedious work• Identifies as influencer among friends• Fears being cheated online

Behavior• Spends 5 hour+ monthly hearing about products • Shares online and in person about products he

lovesBudget• $2-10K+/year in discretionary online purchases

“The XXX is awesome, I really want one. I know I just bought the YYY, but it’s probably time to upgrade.”

Source: US Bureau of Labor Statistics

~5.9M “Pat the Professionals” in USDrawn from top 1/3 of 17.8M frequent online shoppers17.8M based on 40.2M Professionals (2008 Census) * 0.762 US Internet Penetration (Nielsen 2010Q1) * 0.58 consumers shopping online in last month (Nielsen 2010Q1)

Online Recommendation Market Opportunity (conservative strawman #s)Assuming 10% share, 5% affiliate fees

Top Shoppers (~$7B/year spend): ~ $35M/year

Professional-class frequent shoppers (~$1.8B/year): ~ $9M/year

Other Professional-class shoppers ($0.7B/year): ~3.5M/year

Version 2.0: Trusted AdviceTop ~6M US Influentials (~$9B/year)


Original idea

Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)

Discover online goods recommended by friends at the lowest possible price from trusted vendors



Affiliate program

SEO/SEM/SM



Web marketing






IE/FF/Chrome teams





Here’s What We FoundVersion 2: Trusted Advice

Findings on "Trusted Advice"

GOOD• Fast Interest

Insidely.comTrusted advice site for Silicon Valley/Stanford MBAs

Launched 2/15

425 visitors by 2/28


GOOD• Fast Interest

Ranked #6 by Google for “Stanford Admissions Books”


GOOD• Fast Interest• High Conversion

43% clickthrough on Top Admissions Books for Stanford MBAs article

Compare to 0.5% clickthrough on ads

~100x difference


GOOD• Fast Interest• High Conversion• Needs Addressed

Positive results on “Trusted Advice” Shopping Add-in testing

See videos at http://factnote.com/c/e245

http://factnote.com/c/e245


GOOD• Fast Interest• High Conversion• Needs Addressed

Super easy to install and use.

I really did enjoy it!

Great idea! I will keep the extension installed because I do think this is practical!

I could see myself using this regularly

Positive results on “Trusted Advice” Shopping Add-in testing


GOOD• Fast Interest• High Conversion• Needs Addressed BAD• Missing Features

Some negative results on “Trusted Advice” Shopping Add-in testing

See videos at http://factnote.com/c/e245

http://factnote.com/c/e245


GOOD• Fast Interest• High Conversion• Needs Addressed BAD• Missing Features

Some negative results on “Trusted Advice” Shopping Add-in testing

I was a little frustrated when it didn’t find the item I was looking for

I can find more thorough price comparisons elsewhere…

I usually don’t shop in Chrome, so that’s an inconvenience.


GOOD• Fast Interest• High Conversion• Needs Addressed BAD• Missing Features• SEO Battle

MBA Exchange spams us out of Google

Here’s Where We Ended Up Version 2.1: Trusted Advice

The adventure continues

Trusted Advice 2.0

Protection against SEO-spammers

Next Experiments: • Trusted Lead Gen • Trusted Advice

website powered by Shopping Add-in


Original idea

PAT THE PROFESSIONALUpwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)

TRUSTED ADVICE Discover online goods recommended by friends at the lowest possible price from trusted vendors

Foil advertorial spammers polluting the Interweb with toxic pseudo-content



Affiliate program

SEO/SEM/SM



Web marketing






IE/FF/Chrome teams





What We Learned

• Potential for disruption abounds

What We Learned


• Life is short, focus on big markets

What We Learned


• Life is short, focus on big markets

• All we need is to be relentless

Blog Your Progress

How?

• Customer Development– The Process

• Narrative– Interviews– Surveys– Videos– Prototypes

• Business Model Canvas– Scorekeeping

• Real-time Feedback• Physical Reality Checks

– Skype– Face-to-face

We Made Students Blog Their Progress

It Changed Everything

Interview

Photos Videos

Surveys

Interview& Photos

Competitive Analysis

Key Findings

A/B Test Results

Key Question

Strategy

Business Model Canvas as the Scorecard

Carpe Diem

www.steveblank.com

Customer DevelopmentTesting Your Hypotheses

Stanford - School of EngineeringU.C. Berkeley - Haas School Of Business

www.steveblank.comTwitter: sgblank

Steve Blank

I Write a Blog www.steveblank.com

This Talk is Based On• Business Model Generation• Four Steps to the Epiphany

• Lean Startup

Customer Discovery Phase 1 - Hypotheses

Stop selling, start listening

Test your hypotheses Two are fundamental: problem and product concept

Customer Discovery

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation

Customer Discovery

CustomerDiscovery

Phase 1AuthorHypothesis

Phase 2Test ProblemHypothesis

Phase 4Verify, Iterate & Expand

Phase 3Test SolutionHypothesis

To Validation

Customer Discovery

Customer Discovery

Outside the Building

Inside the Building

Value Prop 1Product/MVP

CustomersWho/Problem

ChannelsPhysical/

Virtual

Value Prop 2Market Type

Customer RelationshipsGet/Keep/Grow

Revenue StreamsPricing

PartnersKey Resources

Customer Discovery Phase 1 - Hypotheses


CustomersWho/

Problem

ChannelsPhysical/Virtual


Customer Relationships

Get/Keep/Grow



Customer Discovery Value Proposition – Product/MVP

Long-Term Vision/

Mkt Size

Product Features/B

enefits

MVP

VALUE PROPOSITIONS

what are you offering them? what is that getting done for them? do they care?

Testing the MVP

• Smoke testing with landing pages using AdWords• In-product split-testing• Prototypes (particularly for hardware)• Removing features• Continued customer discovery and validation• Surveys• Interviews

Testing the MVP (Web Example)

Can you get customers to pay for a product that doesn’t yet exist (or barely does)?

• Do customers say they have a matching core problem?• Landing page test for conversion• What’s required to get customers to activate? (prizes, payment)• Use customer problem to identify key word list

– plug into Google search traffic estimator - high traffic means there is problem awareness

• Drive traffic to site using Google search and see how deep into a registration process customers are willing to go through

Testing the MVP (Non-Web)Can you get customers to pay for a product that

doesn’t yet exist (or barely does)?

• Interview customers to make sure they have a matching core problem

• Set up web site landing page to test for conversion• Set up a Lighthouse Customer Program where

potential customers pay to get early access to product prototypes



ChannelsPhysical/

Virtual


Customer RelationshipsGet/Keep/Grow



Customer Discovery Customer Segments

CUSTOMER SEGMENTS

which customers and users are you serving? which jobs do they really want to get done?

Who’s The Customer?

Consumer End Users, Corporate Customers Pay

Multiple Consumers Etc.

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 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 Do I Find Out?• Talk to potential customers

• Identify and talk to channel partners

• Identify and talk to competitors

TotalAvailableMarket Target

Market

ServedAvailableMarket

TotalAvailableMarket

SegmentationIdentification of groups most likely to buy

254

ServedAvailableMarket

Target Market

• Geographic• Demographic• Psychographic variables• Behavioral variables• Channel• etc…

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

Corporate? Consumer?

Business to Business (B to B) Use or buy inside a company

Business to Consumer (B to C) Use or buy for themselves

Business to Business to Consumer (B to B to C) Sell a business to get to a consumer Other Multi-sided Markets with multiple

customers

What do they want you to do?Corporate

Increase revenue? Decrease costs? Get them new customers? Keep up with or pass competitors? How important is it?

What do they want you to do?Consumers

Does it entertain them? Does it connect them with others? Does it make their lives easier? Does it satisfy a basic need? How important is it? Can they afford it?

Market Type & Ignoring Customers

Existing Market? Resegmenting an Existing Market?

niche or low cost New Market?

When do I ignore customer feedback?

Who’s the Customer in a Company?

User? Influencer? Recommender? Decision Maker? Economic Buyer? Saboteur? Archetypes for each?


HospitalsComplex purchasing decision tree. Several saboteours


Private practiceFaster adoption rateGood value proposition

✔

Radiologist

Mammography

Technician

Doctor specialty

committee


on

Insurance

ACOGACS

PCPOB/GYN

Patient

MammOptics

Sales representatives

Demand Creation


How Do Corporate Customers Interact to Buy?

Organization Chart Influence Map Sales Road Map

Consumer Customer Interactions

Do they buy it by themselves? Do they need approval of others? Do they use it alone or with others?

Pass/Fail Signals & Experiments

How do you test interest? Where do you test interest? What kind of experiments can you run? How many do you test?

How Do They Hear About You?

Demand Creation Network effect Sales


ChannelsPhysical/Virtual



Customer Relationships

Get/Keep/Grow



Customer Discovery Channels

Multiple Customer Segments

Each has its own Value Proposition Each has its own Revenue Stream One segment cannot exist without the other Which one do you start with?

CHANNELS

how does each customer segment want to be reached? through which interaction points?

Our Company

Our Customers

System Integrators

Direct Sales Force

Value-Added Resellers (VAR’s)

Dealers

Distributors

Retail/Mass Merchants

OEM

Web/Online

OEM

System Integrators

Direct Sales Force

Value-Added Reseller

Dealers

Distributors

Retailers/Mass Merchants