Lean Business Plans

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Template for Lean Business Plans ALS 458: Applied Entrepreneurship

Keck Graduate Institute Revised February 18, 2015

Contents

Introduction ............................................................................................................................... 1 Business Plan Format ................................................................................................................ 2

Front Matter .......................................................................................................................... 2 1. Product ........................................................................................................................... 2 2. Customer ........................................................................................................................ 2 3. Competition .................................................................................................................... 2 4. Marketing ....................................................................................................................... 2 5. Internal and External Resources .................................................................................... 2 6. Development .................................................................................................................. 3 7. Risks ............................................................................................................................... 3 8. Financials ....................................................................................................................... 3 9. Funds Required .............................................................................................................. 3 Appendices ............................................................................................................................ 3

References ................................................................................................................................. 4 Appendix 1: Business Plan Grading ......................................................................................... 5

Relative Importance .............................................................................................................. 5 Presentation Guidelines ........................................................................................................ 5

Appendix 2: Application of Readings ....................................................................................... 6 Blank: Four Steps to the Epiphany ....................................................................................... 6 Curry: Topics to Cover in Life Science Business ................................................................. 7 Osterwalder: Business Model Canvas .................................................................................. 7 Shimasaki, Biotechnology Entrepreneurship ........................................................................ 7 Zacharakis et al: Business Plans That Work ......................................................................... 8

Introduction This document describes the required format for ALS 458 business plans. The intention is to

combine these elements: • the “Lean Launchpad” of Blank (2011), Osterwalder & Pigneur (2010) and Ries —

among others; • as adapted by Blank (2013-2014) for life science startups; • the conventional business plan format defined by Timmons (e.g. Zacharakis, Spinelli

& Timmons, 2011); and • the expectations of venture investors (as represented by Berkery, 2008).

Reference is made to specific texts (or KGI courses) as appropriate for each section. Below is the outline of the required business plan sections, and a discussion of how the

various readings map onto these sections. The plan must include all the specified sections, but the organization of the sections is up to you if it covers the topics marked in bold.

Note that the plan must be internally consistent: for example, the sales forecast (§4) should match the financials (§8) and the funding milestones (§9) match the corresponding development milestones (§6). Judges will also look for internal consistence in the financial statements.


Business Plan Format

Front Matter Except as noted, exactly as specified by Chapter 3 of Zacharakis et al (2011)

1. Title page 2. Table of Contents 3. Executive Summary: 1 page, single-spaced, 400-600 words. Do not summarize your

business plan: emphasize what is novel for the seasoned life science investor.

1. Product 1. Product Features: minimum vs. eventual 2. Scientific evidence: efficacy, data, publications

2. Customer 1. Types of Customer/Customer Segments: which might include patients, clinicians,

provider organizations, payers, others. You should hypothesize the widest possible definition, and then test those hypotheses.

For each customer type 2. Problem: including Pain Points, Needs, Wants 3. Existing Solution 4. Value Proposition: benefits of product (compared to existing) and (where available)

customer ROI for using it 5. Use Case as defined in reading

3. Competition 1. Market Definition. What is the narrowest definition that encompasses your product

and your competitors? Are you targeting US only, key developed countries, or worldwide? [If non-US, does your IP and distribution strategy cover non-US?]

2. Market Type [as defined by Ch. 3 of Blank 2011] 3. Market Size: units (patients: incidence, prevalence, treatments/year), revenues,

current and projected. You may need to define the larger market and then the market you are targeting.

4. Competition, including market share, revenues, growth

4. Marketing 1. Revenue model, including revenue streams and pricing 2. Sales (adoption) process: for key customers (including payer reimbursement). 3. Distribution channels (including licensing or acquisition) 4. Promotion: all forms of demand creation 5. Sales forecast: units, and both retail and firm revenues for the life of the patent

5. Internal and External Resources 1. IP: patents, trade secrets, copyright (existing or planned); ownership [ALS 470]

• Explicit table of all pending or granted patents • Licensing terms for university IP (exclusive, non-exclusive, royalty rate)

2. Key internal resources and activities


3. External partners: (big pharma, distributor, CMO, CRO, etc.) describe each role, possible partners and the value creation activities they would perform

6. Development 1. Activities required to bring company to first revenues (or exit), e.g.

a. Product development b. Beta testing c. Clinical research d. Regulatory approval e. Reimbursement approval f. Key executive hires

2. Development timeline with key milestones

7. Risks 1. Critical risks (ca. 5-7) and planned mitigation (if any) 2. Other external dependencies not previously noted

8. Financials 1. Financial highlights (elevator pitch) 2. Financial assumptions 3. Pro forma annual financials: income statement, cash flow, balance sheet (5 years) Finances can be bottom up or based on comparables [Zacharakis et al, pp. 138-14]

9. Funds Required Provide a table and explanatory text that explains for each funding round:

1. Projected date 2. Type (debt, equity, grant, etc) and source (VC, SBIR etc) of funding 3. For equity, projected valuation [ALS 472] 4. Use of funds and completion milestone

Also 5. Exit strategy: date, format, valuation, financial returns to investors

[As recommended by Berkery (2008), esp. Ch. 1-4,7]

Appendices Longer items too long to include in the body of the plan (e.g., anything bigger than a half-

page table) should be included here. The mandatory items include: • Business Model Canvas (initial and final) • Summary of interviews (how many, category of respondent, statistics) • Pro forma financials Other possible items include: • Comparables for out-licensing and exit strategies • Status of competitors’ products in clinical trials


References Dermot Berkery, Raising Venture Capital for the Serious Entrepreneur, McGraw-Hill, 2008. Steve Blank, The Four Steps to the Epiphany, 5th edition, 2011 Steve Blank, weblog postings on “Life Sciences (NIH)”, 2013-2014, www.SteveBlank.com Steve Blank, “I-Corps @ NIH – Pivoting the Curriculum,” June 26, 2014, URL:

http://steveblank.com/2014/06/26/i-corps-nih-pivoting-the-curriculum/ Alexander Osterwalder & Yves Pigneur, Business Model Generation, Wiley, 2010. Eric Ries, The Lean Startup, Crown Business, 2011. Craig Shimasaki, Biotechnology Entrepreneurship, Academic Press, 2014. Strategyzer, “The Business Model Canvas,” n.d., URL:

http://www.businessmodelgeneration.com/canvas/bmc Andrew Zacharakis, Stephen Spinelli, Jeffry A. Timmons, Business Plans That Work, 2nd ed.,

McGraw-Hill, 2011.


Appendix 1: Business Plan Grading

Relative Importance The grade for business plan drafts will be the weighted after of the grade for each section:

% BP § Title 5% 1 Product 15% 2 Customer 5% 3 Competition 10% 4 Marketing 10% 5 Internal and External Resources 5% 6 Development 5% 7 Risks 15% 8 Financials 10% 9 Funds Required

Appendices 20% Writing Quality

Presentation Guidelines Some general guidelines for presentations (beyond normal KGI guidelines).

• For presentations of more than 10 minutes, every team member must present. • Every presentation that mentions the customer segments and value proposition should

list the total number of interviews completed by category. • For presentations of the business plan, the time budget should be (roughly)

proportionate to the weights listed above.


Appendix 2: Application of Readings

BP § Title Blank Osterwalder Shimasaki Zacharakis 1 Product X 5 2 Customer X 1, 2 16 4, 5 3 Competition X 4 4 Marketing X 6, 8 12, 16, 17 6

5 Internal and External Resources X 3, 4, 5 12, 26 7

6 Development X 9, 11, 23,

24, 25 7

7 Risks X 9 8 Financials 9 10 9 Funds Required† 19, 20 9

† Berkery primarily applies to BP §9.

Blank: Four Steps to the Epiphany Categories from Chapter 3 of Blank (2011): “Phase 1: State Your Hypotheses” and

“Customer Discovery Summary”.

Hypothesis Category BP § A-1 Product Features 1 A-2 Product Benefits 2.4 A-3 Product IP 5.1 A-4 Product Dependency 7 A-5 Product Delivery Schedule 6 A-6 Product Adoption Barriers 4.2 B-1 Types of Customer 2.1 B-2 Customer Wants 2.2 B-3 Customer Problems (Pain Points) 2.2 B-4 Customer Day in Life (Use Case) 2.5 B-5 Customer Organization/Influencer Map 4.2 B-6 Customer ROI 2.4 B-7 Customer Minimum Feature Set 1 C-1 Channel 4.3 C-2 Pricing 4.1 D Creating Customer Demand 4.4 E Market Type 3.2 F Competition 3.4


Curry: Topics to Cover in Life Science Business # Topic BP § 1 What is the market need? 2 2 How big is the market? 3.3 3 Competition? 3.4 4 How will the product be marketed? 4 5 What are the features/risks of the technology? 1.1, 7 6 What are the regulatory and payor issues? 2.4, 6 7 Intellectual property 5.1 8 How, when and from whom will company be funded? 9.2 9 People -

Osterwalder: Business Model Canvas The Business Model Canvas is described in Osterwalder & Pigneur (2010), while the cells

are numbered for life science business plans as recommended by Blank (2014).

Cell Description BP § 1 Value Propositions 2.4 2 Customer Segments 2.1 3 Key Activities 5 4 Key Resources 5.2 5 Key Partners† 5.3 6 Channels 4.3 7 Customer Relationships - 8 Revenue Streams 4.1 9 Cost Structure 8

† Partners may also impact 4.3, 9.2, 9.5


Shimasaki, Biotechnology Entrepreneurship Chapter Title BP §

9 Understanding Biotechnology Product Sectors 6 11 Commercialization of Bioagricultural Products 6

12 Understanding Biotechnology Business Models and Managing Risk 4.1, 5

16 Biotechnology Products and Their Customers: Developing a Successful Market Strategy 2.1, 4

17 Biotechnology Product Coverage, Coding, and Reimbursement Strategies 4

19 Sources of Capital and Investor Motivations 9

20 Securing Angel Capital and Understanding How Angel Networks Operate 9

23 Therapeutic Drug Development and Human Clinical Trials 6

24 Development and Commercialization of In Vitro Diagnostics: Applications for Companion Diagnostics 6

25 Regulatory Approval and Compliances for Biotechnology Products 6

26 The Biomanufacturing of Biotechnology Products 5

Zacharakis et al: Business Plans That Work Chapter Title BP §

3 Getting Started Front Matter 4 Opportunity 2 4 Industry 2, 3 5 Company - 5 Product 1, 2 6 Marketing Plan 4 7 Operations Plan 5 7 Development Plan 6 8 Team - 9 Critical Risks 7 9 Funds Required 9 10 Financials 8

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