1. The Lean LaunchPad
Presentation examplesused in
Class 7 - Revenue Models
07/02/12

2. Optical Equipment
Revenue Model Example

3. Academia Payment Flow
activity
payment
Component
Phi Optics
vendors
QPI info & price
Buys QPI
device funds grant/contract
request for equipment
University
Grant Agencies
Researcher Business
Industry Contracts
Services
applies for grants/contracts

4. Bio-Pharma Payment Flow
activity
payment
Component
Phi Optics
vendors
QPI specs
+ price Includes equipment in the
budget
Buys QPI
device
Purchasing CTO
Researcher
Dept. VP for R&D
Justifies need for equipment

5. OEM Payment Flow
activity
payment
Equipment
Phi Optics
suppliers
QPI specs + price
+ SOW
Allocates funds in the
Funds SOW budget
Pays royalties/sub-
licensing/other recurring
fees
Product Dev
Accounting CTO
Engineers + VP for R&D
Dept.
Business Dev ($) +
Legal Dept
(royalties)
Justifies QPI integration in OEM system
Suggests co-development deal

6. Nitrate Sensor
Revenue Model Example

7. Product
Money
OEM Water
Data
only
Large farm
Small farm
USDA/EPA

8. Product
Money
OEM Nutrient
Data
Large farm
Us
Small farm
USDA/EPA
Product sales

9. Product
Money
OEM Nutrient
Data
Large farm
Us
Small farm
USDA/EPA
Licensing/sales

10. Product
Money
OEM Nutrient
Data
Large farm
Us
Small farm
USDA/EPA
Independent of
licensing decision

11. Using $1000 per sensor (2x cost) puts us ~$350 more expensive than current commercial
nitrate sensors. We’re including pH, moisture, and conductivity, though.
Incentives: Best case scenario $45.89/acre
Worst case: $9.65/acre or state dependent 25% cost
coverage
Install sensors
400 acres, 4 soil
Us Small farm
types: 8 sensors
$1K/sensor less
incentive = $4140
$3860 for 400 acre
nutrient management
USDA/EPA

12. Using $1000 per sensor (2x cost) puts us ~$350 more expensive than current commercial
nitrate sensors. We’re including pH, moisture, and conductivity, though.
Incentives: Best case scenario $45.89/acre
Worst case: $9.65/acre or state dependent 25% cost
coverage
Install sensors
400 acres, 4 soil
Us Small farm
types: 8 sensors
$1K/sensor less
incentive = $4140
Average $10.40 in N-
$3860 for 400 acre
fertilizer lost to groundwater
nutrient management
per acre: Repaid in 1 year
USDA/EPA

13. Bio-Based Chemical Intermediates
Revenue Model Example

14. Revenue model: Hypothesis
Here’s what we hypothesized…
Biomass supplier Biomass 15 c/lb
Biomass Range 5-20c/lb
Monomer
manufacturer Monomer ?
Detergent alcohols 80c/lb
Distributor
Surfactant Formulation ?
formulator Formulated Surfactant 90c/lb
Surfactant Surfactant 100 c/lb
Decision user Formulated Detergent 100c/lb
Makers
Consumer facing Detergent 200 c/lb
company 10% Surfactant in Detergent
Consumer Market Pull Product
(Sustainability agenda)

15. Revenue Model: Experiment 1
Here’s what we did…
Production Economics Experts
Economic analysis expert
Director
Director
Techno-commercial analysis expert
Life Cycle Assessment Expert Economic analysis expert Business Manager

16. Revenue model: Result 1
Financial metrics
Ethanol DMF Lactic Bi-functional
fatty acid
Scale (T/day) 500,0001b/da 600,000 300,000
y lb/day lb/day
Feedstock 15 c/lb 19 c/lb 16 c/lb
Processing 2 c/lb 26 c/lb 25 c/lb
Capital 1 c/lb 2 c/lb 41 c/lb
Other 3 c/lb 15 c/lb 39 c/lb
MSP (c/lb) 21 c/lb 62 c/lb 120 c/lb

17. Revenue model: Result 1
Financial metrics
Ethanol DMF Lactic Bi-functional
fatty acid
Scale (T/day) 500,0001b/da 600,000 300,000
y lb/day lb/day
Feedstock 15 c/lb 19 c/lb 16 c/lb
Processing 2 c/lb 26 c/lb 25 c/lb
Capital 1 c/lb 2 c/lb 41 c/lb
Other 3 c/lb 15 c/lb 39 c/lb
MSP (c/lb) 21 c/lb 62 c/lb 120 c/lb

18. Revenue model: Result 1
Financial metrics
Ethanol DMF Lactic Bi-functional
fatty acid
Scale (T/day) 500,0001b/da 600,000 300,000
y lb/day lb/day
Feedstock 15 c/lb 19 c/lb 16 c/lb
Processing 2 c/lb 26 c/lb 25 c/lb
Capital 1 c/lb 2 c/lb 41 c/lb
Other 3 c/lb 15 c/lb 39 c/lb
MSP (c/lb) 21 c/lb 62 c/lb 120 c/lb

19. Revenue model: Result 1
Financial metrics
Ethanol DMF Lactic Bi-functional
fatty acid
Scale (T/day) 500,0001b/da 600,000 300,000 ?
y lb/day lb/day
Feedstock 15 c/lb 19 c/lb 16 c/lb 15 c/lb
Processing 2 c/lb 26 c/lb 25 c/lb ?
Capital 1 c/lb 2 c/lb 41 c/lb ?
Other 3 c/lb 15 c/lb 39 c/lb ?
MSP (c/lb) 21 c/lb 62 c/lb 120 c/lb < 100 c/lb
Less than 100 c/lbis achievable when:
1. Large reactor with 500,000 lb/day capacity
2. Optimized fermentation and processing costs

20. Revenue model: Result 2
Payment Flow
Biomass supplier Biomass 15 c/lb
Biomass Range 5-20c/lb
Monomer
manufacturer Monomer 80 c/lb
Detergent alcohols 80c/lb
Distributor
Surfactant Formulation 90 c/lb
formulator Formulated Surfactant 90c/lb
Surfactant Surfactant 100 c/lb
Decision user Formulated Detergent 100c/lb
Makers
Consumer facing Detergent 200 c/lb
company 10% Surfactant in Detergent
Consumer Market Pull Product
(Sustainability agenda)
Disposal Regulations Waste

21. Payment Flows Example

22. Payment Flows
Clinical Diagnostic Services Pharmaceutical Products
Private
Sales/order Sales/order
payer/MAC Payment Payment
Service Service
$$
Hospital / Clinic Pharmaceutical Company
Pathologist/ Researchers
Oncologist
billing
$$ Instr. /
Kits
$$
CanScan CanScan
Services rendered
Class 6 - Update 3.5.2012

23. Medical Device
Pricing Example

26. Graphene
Revenue Model Example

27. Payment flow
Researchers
Add value More work
Current TEM Distributors
grid provider
Graphene Frontiers
Material supplier

28. Payment flow
Electronic User
Distributors
E-reader manufacturer Parts suppliers
Flexible display Graphene Frontiers
manufacturer
Parts suppliers Material Research, cost
supplier

29. Direct Cost Estimates: Scale Matters
• Cost per in2 – 1” Furnace = $.80
• Cost per in2 – 2” Furnace = $.45
• Cost per in2 – 4” Furnace = $.20
If we can move to N (replacing Ar, key direct cost driver)
• Cost per in2 – 1” Furnace = $.50
• Cost per in2 – 2” Furnace = $.25
• Cost per in2 – 4” Furnace = $.10
“Holy Grail”: 4” or larger continuous production w/Nitrogen
Cost per in2 – 4” Furnace, Batch/Continuous = … $.05

30. Sensor
Pricing Tactics Example

31. Understand Economics of Plant + Sensors Industrial Plants
Understand Economics of Technology Supplier Plant #1
Plant #2
Plant #3
Technology Supplier
Who does this?

32. 32
Diaphragm Membrane
$240/MT Cl2
 Operational conditions
 Capital cost per incident
 Downtime per incident
 # of cells protected Cost of damages + downtime per incident per year
 Time between incidents
 Number of cells, US and worldwide
Value per unit per year
Diaphragm Membrane Membrane Header
$2,500 $270 $10,600

33. Soft product launch projected for Q1-Q2 2012
General launch projected for Q4 2012
Diaphragm Membrane Membrane Header
$2,500 $270 $10,600
Year Type % Revenue [/year]
1 Innovators (US) 2.5 $271,500
Operating costs for 1st year projected to be $350,000
2 Early Adopters 16 $15,040,000
3 Early Majority 50 $47,000,000
4 Late Majority 84 $78,960,000
Full Penetration 100 $94,000,000
33

34. Medical Device
Revenue Model Example

35. What we make
Device cost
(one time)
~$2000
Dental
Dentist
Optics
Disposables
~$2.50 per patient

36. What the dentist normally makes
$250
Insurance
Membership
$250
Co-pay
Dentist Patient
Equipment / Variable Costs
Note: Assumes 50/50 copay-insurance split

37. What we’d add for the dentist
Device creates
$250 additional
Insurance periodontal
procedures
Device cost
(one time)
Membership
~$2000 $250
Co-pay
Dental
Dentist Patient
Optics
Disposables
~$2.50 per patient
Equipment / Variable Costs
Note: Assumes 50/50 copay-insurance split

38. Farm Nitrate Sensor
Revenue Model Example

39. Economics of TSP Operation
Incentives: Best case scenario $45.89/acre
Worst case: $9.65/acre or state dependent 25% cost coverage
Install sensors, provide service
400 acres, 4 soil
Us
Pay for 2-3 year contract service monthly types: 8 sensors
Small farm
$3860 for 400 acre Average $10.40 in N-
nutrient management fertilizer lost to
groundwater per acre
$1K/sensor less
incentive = $4140 to USDA/EPA
recover in contract

40. Economics of TSP Operation
Incentives: Best case scenario $45.89/acre
Worst case: $9.65/acre or state dependent 25% cost coverage
Install sensors, provide service
400 acres, 4 soil
Us
Pay for 2-3 year contract service monthly types: 8 sensors
Small farm
Onion Case Study (44K acres):
$3860 for 400 acre Cost: DAP - $700/ton + $25/a
nutrient management Rate: 280lb/a for 400a farm
$1K/sensor less = $39K
incentive = $4140 to USDA/EPA
recover in contract 30% Improvement: $13K saved
Charge: $6K/season
= $660K/yr contract revenue

41. Biofactories for Therapeutics
Revenue Model Example

42. Revenue Model
= money = relationship
= information = AAT
Patient
Large Pharma Private Payor
Employer
Government Payor
Wholesalers
Hospital/Clinic
Government
Physicians
Taxpayer
Pulmonary Function Lab INFLUENCER

43. Optics Design Company
Revenue Model Example

44. ™
Revenue Model & Payment Flows
Customer:
LED company
LighTip™ Engineering contract ($150-300/hour)
Light source
Advanced
Quantity purchase of
Illumination
components for prototype &
Engineering Reflector
mass production .
Desired
target
Key Partner: Our
Optical Manufacturer deliverable
Prototype & High Volume
Production (0.25%-8%
Customer’s final product
commission)
5/23/2012 44

45. Complex Sensor Networks
Revenue Model Example

46. Revenue Model and Customer
SET Sensor Node Product
Acquisition
Middleware and
Reusable Software
OEM HW components Subsystems
($100 COGS)
SET’s price $400
Year 1: Year 2: Year 3: Year 4: Year 5:
(3 Customers) (10 Customers) (30 Customers) (100 Customers) (200 Customers)
1K nodes 5K nodes 30K nodes 200K nodes 400K nodes
$400K $2M $12M $80M $160M
First target
customers
Leverage our partners’
existing customers

47. Healthcare Software
Revenue Model Example

48. Revenue Model
Health
Healthcare Patient Data
Information
Providers Exchanges
Tailored Messaging
Portal $$$
for + Patient Outcomes
Patient Data
Patient Analytics
$$$
Resources/To Health
ols Patient Profile Insights
Patient