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Contents
1 Executive summary 3
2 Product idea 52.1 Opportunity definition . . . . . . . . . . .
. . . . . . . . . . . . . . . . 52.2 Customer Benefit . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . 52.3 Product
visualisation . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 62.4 Development progress . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 6
3 Management team 7
3.1 The start-up team . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 73.2 Additional personnel . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 7
4 Marketing 8
4.1 Market segments and market size . . . . . . . . . . . . . .
. . . . . . . 84.2 Unique selling proposition . . . . . . . . . . .
. . . . . . . . . . . . . . 84.3 Target market and customers . . .
. . . . . . . . . . . . . . . . . . . . 94.4 Competitors . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.5
Market size and growth . . . . . . . . . . . . . . . . . . . . . .
. . . . . 114.6 Marketing Strategy . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 114.7 Pricing . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 124.8 Place . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124.9
Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 12
5 Business system and organization 13
5.1 Business activities . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 135.2 Organizational arrangement . . . . . . .
. . . . . . . . . . . . . . . . . 135.3 Location . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 145.4 Patent .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 14
6 Realisation schedule 15
6.1 Starting . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 156.2 Preparing research . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 156.3 Research and Marketing . .
. . . . . . . . . . . . . . . . . . . . . . . . 166.4 Testing and
Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
6.5 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 16
7 Risks 17
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8 Financing 18
8.1 Cost Expenditures . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 188.2 Pricing Policy . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 19
8.3 Revenue Assumption . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 208.4 Funding . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 228.5 Ownership and Stock Option . .
. . . . . . . . . . . . . . . . . . . . . . 228.6 Worst to Best
Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . .
258.7 Exit Strategy . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 258.8 Realization Strategy . . . . . . . . . . . .
. . . . . . . . . . . . . . . . 25
Authors
Martijn Bakker s1340921Maaike Rump s1368761Chris Wouters
s1354620Simon Pietersen s1381911Adi Abyoga s1232991
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1 Executive summary
What?
Following Moores Law, the trend is that electronics gets faster
and faster. At themoment this holds for processors and memory but
not for the receptional sensitivity ofcommunication devices, like
mobile phones and laptops. Furthermore, the trend is alsothat the
requirement for access to different frequency bands ever increases.
A mobilephone in the past only had access to the GSM network, now
it also needs to access GPS,Wifi, 3G, 4G, HSDPA and Bluetooth. Many
of these protocols operate at different fre-quencies and in order
to keep the receptional quality high, it is necessary to
includeseveral different antennas in the mobile device, which are
all filling valuable physicalspace inside the device. The solution
is straightforward and arises from physics. In-stead of the
receiving the electric field, you can measure the magnetic field,
which isinterchangable in the reception of electromagnetic
radiation. There are several advan-
tages related to this. Firstly, one magnetic sensor is capable
of receiving all signals forwhich there used to be an array of
different antennas, saving space. Secondly, using anewly developed
SQUID (Superconducting Quantum Interference Device) -sensor it
ispossible to detect signals with a lower intensity than possible
using regular antennasthat are used currently by the consumer
electronics industry.
How?
The SQUID-sensor that will be used in our design is a result of
a PhD thesis by MatthiasSchmeltz. We are going to acquire a license
for the patent, currently owned by IPHTJena, for which he performed
his doctoral research. As IPHT Jena is not in the samemarket
segment as we are, it will be an easy negotiation for a license. We
get touse their technology and they get additional income from
another market segment withminimal work involved. Concurrently with
acquiring the license we are going to start theresearch on the
integration of the sensor in a single chip including all required
supportingcircuitry. Secondly, the research will focus on
implementing a cooling solution for thesensor, for which we found
promising technology from the group of M. ter Brake at
theUniversity of Twente. After a year of research by master
students and experts in thefield, we will outlicense our product,
including the license from IPHT Jena, to consumerelectronics
manufacturers, as they already have the scale capabilities for
high-volumeproduction of integrated circuits. As we start
generating revenue and profits, we willkeep up the R&D in order
to remain ahead of possible competitors. This allows us to
sustain our position in the market in order to keep improving
our product and branchingout to other applications: sensors in
scientific devices or the optimization of multiplesensor to serve
as a 3D position detector.
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Where?
The market for magnetic sensors consists of two main segments,
consumer electronicsand the automotive industry. The demands for
accuracy and sensitivity in the automo-
tive segment are low, the sensor has to work and has to be
cheap. For this reason wechose to focus on the consumer electronics
market. This market demands high accuracysensors for a variety of
purposes: compasses, position sensing and, using our SQUIDsensor,
the reception of radio waves for communication purposes.
Who?
Our management team consists of 5 people. The CEO of the company
is MartijnBakker. He knows most about all the different aspects of
our technology and worksin a structured and organized manner so it
is easy to understand by others. As COOwe have Maaike Rump. She is
responsible for the short term planning of the companyand making
sure that the communications with suppliers and researchers are
running
smoothly. Her skills in planning, organizing and practical
thinking help immensely andfurthermore she is very dedicated to
everything she does. In the marketing managementwe have Chris
Wouters and Simon Pietersen. This combo is very good at
spottingtrends, anticipating and coming up with a proper reaction.
Next to their analyticalskills they are also very good at
improvising when things do not go exactly as planned.Together they
fulfill the position of CMO. Lastly, in charge of the financial
part of ourcompany, we have our CFO Adi Abyoga. He is very
experienced with bookkeeping andunderstands the importance of
maximizing financial efficiency like no other.
Financing
We realize that since our business model will be using a high
technology based, we willneed a lot of initial investment. We
estimated around 1,000,000 euros will be needed inthe first year,
this consists of 600,000 euros that is funded by us, and we are
going tofind investors to cover up the rest of initial investment.
In total, the shares is dividedalmost evenly, with 60 % for us and
40% for the investors with a total of 1,000,000shares. We believe
that this will result in a very profitable since in the third year,
weassumed that we will have a net income of 1,709,698 Euros with
1.7 euros earnings pershare, and 0.4 dividends per share.
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2 Product idea
2.1 Opportunity definition
In many fields there is a need for accurate sensing of
electromagnetic radiation forwireless communications: remote
controls, mobile phones and wifi-receivers. Currently,these
communications devices are housing a multitude of antennas
necessary for cap-turing all incoming transmission frequencies,
which all take up physical space in thedevice. However, using a
single antenna results in an undesirable decrease in
sensitivity.From physics we know that magnetic fields cause
electric fields and vice versa. As such,it suffices to measure the
magnetic signals instead of the electric signals captured by
theantenna in order to receive the data for the communications
device. That is where ouropportunity comes in. Communication device
manufacturers are trying to add moreand more ways of receiving
data: GPS, Bluetooth, WiFi, 3G, 4G, HSDPA and other
protocols. Using our new magnetic sensor chip, we can capture
all these signals, usingone antenna and with a higher sensitivity
than currently possible with a standard arrayof different
antennas.
2.2 Customer Benefit
Our product uses a new generation of SQUID sensor
(Superconducting Quantum Inter-ference Device). This new
development allows us to replace the high frequency receivingpart
of a communication device by a single chip, saving the space of the
antenna arrayand improving the sensitivity. This allows for two
things. Either the device becomessmaller with the same capabilities
or the device becomes more powerful or valuable if
the saved space is used for other purposes, like a battery of
larger capacity, more mem-ory or a faster processor. Space is very
limited in mobile devices and as such very small,yet very high
quality components are paramount. Furthermore, due to the
increasedsensitivity the reception range of the device will
increase, again contributing to a highervalue of the final
product.
Figure 1: Would you want your phone to look like this?
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2.3 Product visualisation
(a) Sensor core (b) Chip package (c) Main market
Figure 2: The product as seen from different levels
The figures show the three main views on our product. First,
figure 2a shows apicture, made by an electron microscope of the
technology responsible for the actualdetection. As we zoom out
(figure 2b), we see our final product: a chip with the sensorcore
from figure 2a and all supporting electronics integrated. Next, in
figure 2c you cansee our main market: consumer electronics and then
especially communication deviceslike smartphones and laptops.
2.4 Development progress
The feasibility of the SQUID sensor as magnetic sensor has been
shown in the PhDthesis of M. Schmeltz. In the thesis he developed a
sensor on the microscale and he
then used the sensor to measure the conductivity of the ground
for the detection ofminerals and other disturbances in the soil.
There is one main area on which we needto focus in our R&D
period. The sensor used in the thesis was cooled to 4 Kelvin
usingliquid helium in order to work properly. As mentioned by J.
Flokstra, the sensor is alsocapable of working at higher
temperatures (77K, liquid nitrogen). However, this raisesthe first
problem. We need to do on-chip cooling because it is not feasible
to repeatedlypour liquid nitrogen over the sensing chip. There have
been promising developments atthe group of M. ter Brake at the
University of Twente which will allow us to cool ourSQUID sensor
without an external application of liquid nitrogen or helium.
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3 Management team
3.1 The start-up team
Figure 3: Organizational chart
The CEO of the company is Martijn Bakker. He knows most about
all the differentaspects of our technology and works in a
structured and organized manner so it is easyto understand by
others.Maaike Rump is responsible for all the operations of the
company, hence COO. Her
expertise is planning and organizing which makes her cut for the
job.Marketing research is done by Chris Wouters and Simon
Pietersen. This duo has excessto analytic skills, work fast and
neat and can improvise when necessary. These traitsare well
combined as they are team players.Our CFO is Adi Abyoga. He has
experience with bookkeeping and always looks forwardto learning new
things that improve his work.
3.2 Additional personnel
In addition to our workforce we are going to hire master
students to research and designthe cooling mechanism. They can do
their master project with us, which also gives usa financial
advantage. For them it is an attractive opportunity because it will
be amultidisciplinary project which combines electronics,
thermodynamics and mechanics.The design team will have the
challenge to create a working chip which is easiest andcheapest to
produce.
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4 Marketing
4.1 Market segments and market size
The market for highly sensitive single-chip magnetometers can be
divided in the fol-lowing segments.
40%
45%
5%
10%
Automotive industry
Consumer electronicsHealthcareHomeland security and defense
Figure 4: Estimation of the market size of the different
segments in the magnetic sensormarket. Based on market research
from Markets and Markets (2011)
The market segment for consumer electronics is one of the main
segments in themarket for magnetometers, next to the automotive
industry. The consumer electronics
segment mainly consists of smartphones, home electronics and
computing applications.The automotive segment the magnetic sensors
improve drivers safety and engine effi-ciency. The automotive
applications do not require sensors with a very high
sensitivity,which is something our product does offer. For this
reason we decide to focus on theconsumer electronics market as we
do not want to waste the potential and strength ofour technology.
Alongside this, the total market is growing fast (as seen in figure
5).Furthermore, from table 1, we deduce that the main increase in
the market is comingfrom our target segment, the manufacturers of
consumer electronics which are in needof magnetic sensing
(smartphones, laptops etc.). This allows us to expand and
increaserevenues very quickly.
4.2 Unique selling proposition
There are a lot of devices with a multitude of receiving
elements. However, all of thesesensors have not yet been combined
into a single chip which reduces the use of spaceinside the device.
Our chip can receive every frequency up to the gigahertz range.
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Table 1: Consumer Electronics Company Shares in the Netherlands
2007-2011
Company 2007 2008 2009 2010 2011
Apple Computer Benelux BV 3.0 4.4 5.1 7.1 11.0
Nokia Nederland BV 9.3 9.5 9.0 12.6 9.5Sony Nederland BV 8.7 9.6
10.0 9.7 8.8Samsung Electronics Nederland BV 5.9 4.4 4.4 4.9
8.6Koninklijke Philips Electronics NV 7.4 7.4 7.1 7.2 7.0Panasonic
BV 4.3 4.3 4.3 4.2 4.1Hewlett-Packard Nederland BV 5.7 5.5 5.6 4.7
4.1HTC Nederland BV 0.1 0.2 0.8 1.6 4.0Research in Motion Ltd 0.0
0.2 0.7 1.5 2.3Acer Computer BV 1.7 2.2 2.4 2.2 1.7LG Electronics
Benelux NV 1.4 1.5 1.4 1.5 1.6
Dell BV 1.3 1.4 1.8 1.3 1.2Packard Bell BV 1.5 1.6 1.7 1.6
1.2Toshiba Benelux BV 1.4 1.5 1.2 0.9 0.8AsusTek Computer Inc 1.0
1.1 1.2 0.7 0.7Microsoft Nederland BV 0.5 0.5 0.5 0.5 0.5Others
46.6 45.2 39.2 40.9 33.1Total 100.0 100.0 100.0 100.0 100.0
Furthermore, by using multiple magnetic sensors it is possible
to accurately determinepositions from the magnetic field strength,
for example coming from a magnetic stylus.
This allows for three dimensional input for electronic
devices.After we entered the market, our main concern in marketing
is that we stay aheadof our competitors. We need to keep an eye on
what our competitors are working on,and of course that our R&D
and accomplishments has that cutting edge which providesus that
unique selling proposition. In order to keep having this
opportunity, we alwayshave a large team working on research and
development. After we have entered themarket, we also have to start
looking out for even newer companies entering, as it couldbe
expected that new companies can take our technology as example. We
need to haveour patents strong, and our technology fresh.
4.3 Target market and customers
We are aiming for larger companies, that produce laptops/PCs at
a large scale. Thatmeans that our company will be a business to
business company. The businesses arepurchasing a significant amount
of licenses for the production of sensors, as they producea large
number of devices.
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2010 2012 2014 2016
4
5
6
7
109
Year
Units
Figure 5: Demand in units: Market growth of magnetic field
sensors as estimated in aresearch from Markets and Markets
(2011)
We consider the following companies high-end laptop and
smartphone manufacturers(in other words, our target customers):
Apple Computer, Sony, Samsung Electronics,HTC and LG Electronics.
However, large companies have a tendency to distrust tech-nology
not originating from their own research facilities. For this
reason, as a start, wefocus on smaller companies.
4.4 Competitors
The company Honeywell has a Magnetic Sensor division. They sell
sensors in all thosedifferent segments. Therefore this is one of
our competitors. We have an advantageover this company since their
3-axis magnetometers have larger dimensions (approx. 70cm3),
compared to our product (approx. 0.5 cm3 or smaller), which is more
practicalfor example when implemented in a smartphone. Another
competitor is Memsic. Thismanufacturers products have a lot of
noise and therefore not suitable for implementa-tion in smartphones
or laptops. Moreover, none of these sensors use a SQUID, whichis
much more accurate and have a much larger bandwidth than the
magnetoresistivemeasurement technique used by the existing sensors.
This makes it have new appli-cations, compared to the existing
sensors. Due to the accuracy, it can be used as aposition sensor of
the stylus of a touchscreen, making 3D detection possible. Thereare
other companies developing magnetic sensors, but they are in
different areas. For
example Infineon, they are mostly selling magnetic sensors for
automotive applications,and only components of similar
products.
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4.5 Market size and growth
The market we are aiming at involves large companies as
mentioned. We are primarilyaiming at laptop-companies, our chip can
be used for. For example, the Wi-Fi receiver
on the laptop, and other appliances. We are not aiming at
smartphones as of yet,because we think the technology is a long way
before we can implement such a smallcooling device, capable of
cooling our chip. This is because a cooling system is moredifficult
to produce when it is smaller, this is because a very low
temperature is needed.We do want to get into the market for
smartphones after we have bloomed in the laptop-market. The market
size of the market we are aiming at can be easily estimated, since
itis very clear how many companies there are on the laptop market.
After some researchwe found that there around 20-25 large laptop/PC
companies. We estimate that thereshould be around 20 more that are
not large enough to find globally. That means thatwe estimate there
to be around 40 potential customers, at any time. The time-factoris
important because these companies will keep releasing new laptops,
and we wantthem to buy our product for every model they release.
This means that we need toachieve a good reputation. As mentioned,
the market keeps evolving and renewing, thisis positive because
whenever we are exceeded by a competitor we will get a new
chance.Breaking into the market is, however, difficult. It is also
important that after we havebroken in to the markets, we stay there
as the go-to company for our customers. Wehave to make sure that we
have good relations with our customers. Our predictionsaccording to
the market growth are based on different levels. On micro-scale, we
expectthat our product is a valuable addition to consumer
electronics. We expect that themarket will keep growing, as this
innovation has broad applications, in which our R&Dwill
maintain a big player. On meso-scale, we can already see that this
market is vastly
growing, as its potential is being discovered by different
companies, and the need for,for example wi-fi receivers, is
growing. On a macro-level this market is not as muchimpacted. This
is because it is a component of a larger electronic device. We do
howevertake into account that this technology can be used for
different applications. As a broadinnovation as ours can be
implemented in a lot of technologies.
4.6 Marketing Strategy
It is important that our product is safe, and easy to assemble.
In order to stay aheadof the competition we need to keep developing
and improving our product. The marketwe are trying to enter is a
fast changing market with fierce competition. Based on the
knowledge of our competitors we can determine a good price, and
have a strong uniqueselling point. We want to sell the license, and
leave production to the company. Therehas to be a reason for the
consumer to decide on our product. The market segment thatwe are
aiming for already has this kind of products, which means that our
promotionneeds to be strong. A potential customer is not going to
look for our product, we
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have to bring it to them. Since we are aiming on large laptop/PC
companies, weneed to stand out at trade fairs and customer visits.
This type of advertising is moreexpensive than for example
advertisement on television, but this is the only way for us
to obtain a good reputation and become known. That means that we
have to obtaingood customer relations, and personal connections to
potential customers, and this canonly be obtained face-to-face. And
as is the standard in the current economy, we needa good clear
website for potential customers.
4.7 Pricing
The price we ask for the license we offer is based on multiple
factors. First of all, wehave a price for our technology license
that comes from the cost expenditures, the totalof costs
expenditure per month is around 79,000 euros, so well take the 25 %
of it,then the price for our technology license becomes 20,000
euros. Second, we have also
royalties, for the sake of pro forma, we decided to have a 0.5
euros or 50 cents perproduct. Based on the volume of the market of
consumer electronics, the sales are verylarge, and if every end
products use our chip, 50 cents of royalties are good.
A company is not going to switch to our product if it does not
offer a significantbenefit. More exact information about the
pricing of our product can be found under8.2.
4.8 Place
The internet is our distribution channel. We need to be easy to
reach. Our websiteis automatically our businesscard. After we have
promoted at fairs or companies, the
first thing that potential customer will do is visit our
website. Our website stays up-to-date informing visitors about our
new accomplishments and goals. This includes ourR&D goals, so
potential customers know what we are working on. This is of
courselimited, since we do not want to expose our projects to full
extend, keeping potentialcompetitors in mind.
4.9 Promotion
To promote our product, we are going to attend trade fairs,
exhibitions and customervisits. A good first impression attracts
potential costumers. In order to make a good
impression, we have a strong presentation of our product. Our
website makes us ap-proachable online.
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5 Business system and organization
5.1 Business activities
Figure 6: Our business system
Our company focuses on developing a cooling system for SQUIDS on
a chip. Then welicense the technology to companies who want to use
our technology in their product,
which will be our source of income. The total business system is
shown in figure 6The first step is to do research in the field of
cooling on small scale. The NanoLab
at the university of Twente provides the cleanroom and other
equipment to do theresearch.
Companies that want to use our technology will pay a license fee
to gain access tothe design and also a royalty on every chip that
uses the licensed design. This royaltyis agreed upon in the license
contract.
The distribution of our technology is different from
distributing a real product. Theproduct is a design, which we
license to another party. As soon as the contract is signedthe
easiest way (and cheapest) to get the technology to the partner
company is digitally.
5.2 Organizational arrangement
The organization is arranged as can be seen in figure 3, section
3. Collaborate workis important and so the communication is
informal and the leadership is participative,everyones input is
valued in making decisions. Also performance will to be praised
to
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achieve our goals, but also to create a challenging environment
where people can growin their area of specialty. This all to
establish a company that is successful and whereemployees enjoy
their work.
5.3 Location
The company is based at the Kennispark of Enschede,
Hengelosestraat 705. It is closeto the University of Twente where
the NanoLab of MESA+ is located. Furthermoreour legal form is bv
because being not liable for the companies finances personally
ismore important than choosing the cheapest legal form.
5.4 Patent
In the development of our new technology, we focus on the patent
of our product. Our
company makes profit with licensing the technology, so it is
fundamental to protect theintellectual property we are working
on.
Before we file for a patent, we are going to sign a contract
with IPHT Jena. Theyhold the patent for the SQUID magnetometer (WO
2004015436 A1) that is still validand contains the technology we
want to use.
Subsequently we are going to research and develop the cooling
system for a SQUIDdevice on a chip. When the research has reached a
certain point (see section 7) we willbe working together with the
University of Twente on the patent application. Theywill provide
attorneys to help with the legal formation of the patent. In return
they are
the owners of the patent until we have financial stability or
when we need the patentthey would want a compensation in equity. As
soon as we have financial stability (seesection 9), we buy the
patent rights from the University of Twente.
The filing for a patent takes longer then a year. Therefore, all
employees have tosing a confidentiality agreement (NDA) to prevent
any publicity of our technology anddesigns before the patent is
granted.
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6 Realisation schedule
Our venture consists of 5 stages, starting the company,
preparing the research, doingthe research and the marketing,
testing the product and marketing and lastly the mostimportant
stage of any company, generating revenue and finally becoming
profitable.
Figure 7: Our path to revenue.
6.1 Starting
We start with arranging the required space for our company and
make sure all the legalmatters are in order, for instance claiming
our company name and registering ourself as
a BV. Moreover, during the starting phase we will establish
contacts to the universityof Twente in order to facilitate our
upcoming research and researcher candidates. Thisphase will last
three months.
6.2 Preparing research
After the initial three months have passed, we will focus on the
preparation of theresearch. This involves getting permissions from
the Mesa+ institute to do our researchthere and more importantly,
getting Masters students who are willing to do their finalproject
as a research project whilst getting paid for doing so.
Furthermore, we willarrange the materials required to do the
research and set up the contracts with the
researchers who will be employed by our company. The length of
this phase is variable,as it depends on recruiting people. However,
we expect that this phase will also lastapproximately three months.
If this planning comes true, we will be able to start theactual
research in september 2014, at the beginning of the new academic
year 2014-2015.
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6.3 Research and Marketing
During this stage, our researchers prepare an on-chip cooling
method. Another areaof research will be the practical capabilities
of the SQUID sensors included in a chip,
which are still cooled externally. This allows us to focus both
on the improvement ofthe product whilst still developing one of the
parts of the product. Of course, as soonas we have any improvement
over the current SQUID system, we patent it.
During the research phase, alongside the task of guiding the
research, the boardprepares the market. We already have the working
specs of the sensors cooled exter-nally (by liquid nitrogen or
helium) and because of this we can start contacting therelevant
companies which are going to be our customers (companies producing
con-sumer electronics, like Samsung, Lenovo and Apple). We are
going to show them ourprogress (protected by our patents of course)
and ask them whether they see possibleimprovements which would be
useful in their specific case of business, which would onlyimprove
our product further and eventually, it would improve their products
as well ifthey start producing the chips under our license.
As research is inherently uncertain, it is impossible to state a
fixed length of theresearch peroid, the only option we have is to
carefully monitor the research progressand if the progress in the
research is not enough, we can opt for more researchers tospeed up
the process. We aim to have the main research stage last 12 months,
up toSeptember 2015.
6.4 Testing and Marketing
Afterwards, when we have a working on-chip cooler, we are going
to conduct further
research into the exact specifications of the chip which has
been designed in the previousstage. Again, this information (after
being patented) is corresponded to the potentialcustomers to allow
them to provide feedback which both improves our product as wellas
the product they are going to receive. This phase will last three
months, up toDecember 2015.
6.5 Revenue
Lastly, when we have a fully functional chip of which all
specifications are known weare going to license out the
construction process to the customers with whom we havebeen in
contact with already. If the schedule so far comes true, we will be
able to start
getting revenues in January 2016.
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7 Risks
Insufficient starting capital
As a starting company, you do not have the financial strength
yet to support all theresearch and the setting up of the legal
form. If the funding is not enough (see section9) to start the
company, we are going to look for partner companies who develop
theproduct with us or we are going to cooperate with the University
of Twente to becomea spin-off company. Partner companies are
preferred because of their knowledge supplythat comes with the
partnership. Being a spin-off company means losing shares to
theUniversity of Twente, so those can not be offered to potential
employees or investorsanymore.
Research does not find an applicable solution
The problem that we are going to solve is the cooling mechanism.
When finding asolution to a problem there is always the risk of not
finding the preferable solution orthe time needed to find the
desired solution is longer (than predicted in section 7). Ifthe
master students have not been able to find a solution that is
applicable, we aregoing to hire a PhD student. We do it this way
because master students can solvethis problem, only they have less
experience in lab work than PhD students and aretherefore cheaper
to hire. To prevent that our idea reaches competing companies
beforewe have the patent, we work with NDAs (see section 5.4).
Every month the researchis extended is going to cost what is
calculated in Table 3 plus an additional paymentof approx. 1500.-
for the PhD student because they are more expensive than
masterstudents.
Insufficient interest in our market segment
The profit of the company is completely based on the licensing
procedure. When laptopmanufacturers are not interested we are going
to focus on another market segment (othersegments are in section
4). This is the same procedure as when suddenly a competitorenters
with a cheaper (alternative) product.
Research location unavailable
There is a risk in cost and availability of the NanoLab at the
University of Twente.
We are dependent on the equipment and cleanrooms available there
to do our research.However, there are more cleanrooms in the
Netherlands.
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8 Financing
In this section, the financing analysis is explained, for a
further use of decision makingof our company. A good analysis will
lead to a sustainable growth of our company. Thesection is divided
into several subsections: profitability, revenue assumption and
salesprojection, cost statement, subsidies, financing, realization
strategy, and appendicesthat include the balance sheet, income
statement and others.
8.1 Cost Expenditures
Salary is based on the website we found,
http://www.iamexpat.nl/career/main/environment,which is 2500 euro a
month, 1770 euro including taxis. For the working hours, accord-ing
to Dutch law, you should not work more than eight hours per day or
40 hours perweek.
Depending on the industry, a maximum of nine hours per day and
45 hours perweek could be the case, but no one is allowed to work
more than 2.080 hours a year.Consequently, the average working week
in the Netherlands is approximately 40 hours.
Facilities are divided into three parts. One is the office,
which costs around 300euro. This office is located at the
Hengelosstraat. Another one is the NanoLab, whichcosts around
26280. Lastly the supplies for R&D which we estimated to be
around10,000 euro. The price is unpredictable and we know that the
research instruments inthe NanoLab are expensive to be rented. This
is of course also including the materials.
We divided the additional costs into several factors. First of
all, traveling costs areput at 1,000 euros. It is mainly the result
of renting cars and gas, taxi, or train. Second,insurances are
based on website of
https://www.undutchables.nl/working-en-living-in-
the-netherlands/working-for-undutchables/health-insurance, For
the basic insurance,you pay a premium to the insurance company.
This is known as the nominal premium.This nominal premium generally
costs about 1,100 euro per annum [year] per person.For children
under the age of 18, the standard insurance (basisverzekering) is
free ofcharge. We have 9 people, in 12 months, so 1 month will only
incur 825 euro.
The licensing is around 10,000 euro since we dont know the price
of license that weare going to buy from IPHT Jena. We assume that
we have different kinds of paymentafter we have negotiated. We
either have to pay royalties each month based on sales,starting
from 1 to 5% and decreasing to 0.5%, or a lump sump payment. Both
resultsin a total of 10,000 euro.
Marketing is also put around 10,000 euro, since its not only the
advertisementand promotion, but also renting tools for marketing,
which are variable costs. This isalready doubled from our first
estimation because marketing always escalates beyondexpectations.
So in total we will have costs of expenditures in 1 month of 79605
euro.Another thing that we have to take into account is patenting
our technology. We are
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going to have university to patent our technology, and let them
have shares of 10%, butthen the fund is completely funded by
university. University focuses on the protectingthe idea.
Monthly CostsAssumption
TechnologyLicense
(in euro)
Year 1 Year 2 Year 3Facility costs 36580 37311.6 38057.8R&D,
License, Patent 10000 10000 10000Total salaries(including
taxes)
21200 26200 31200
Marketing (includingonline presence)
10000 10000 10000
Other (utilities,
communication, travel,taxes) 1825 1825 1825
Total expenses 79605 85336.6 91082.8
Table 2: Monthly Costs Assumption
8.2 Pricing Policy
Pricing of the product is determined by two factors, the added
value of end product(chip) and also the costs expenditures we made.
Looking to our competitors which
has similar product but different technology, the chip costs
around 635 euros, then weassume that our customers will sell the
chip less than that, for example 50 cents, thenit will have an
added value of 634.5 euros. This is further explained in the
marketingsection in the pricing section. Furthermore we also have a
fix price of our license costsof 20,000 euros, or 25 % of the costs
expenditures, and its because we have now twostreams of revenue, so
putting a fixed price of the license, will also be covered up bythe
royalties.
Our term of contract for the license ranges from 1 year term to
5 year term. Everyterm start on the effective date of the order and
shall continue for that period that hasbeen agreed on.
If your Program License does not specify a term, the Program
license is perpetualand shall continue unless terminated as
otherwise provided in the Agreement.
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Costs Expenditures per Month (in Euros) NanoSQUID
Personal Number of PersonnelAdministrative and Finances 4000
2
Sales and Marketing 7200 3R&D and Production 10000 4
FacilitiesRent(Bureau) 300
R&D Supplies 10000Rent(NanoLab for research) 26280
AdditionalTravel 1000
Insurances 825Licensing 10000
Marketing 10000Total without Production Costs 79605
License Costs 79605
Table 3: Cost of all the expenditures needed to develop the
technology
8.3 Revenue Assumption
Theoretically, our companys revenue will be zero at the
beginning since we focusedon the R&D in the first year. Hence,
we mainly get our revenue from the investmentof investors such as
business angels. After we successfully make a patent out of
thetechnology, our product will be sell to several companies that
has lower shares first inorder to position our company in the
market share. Our next revenue stream will comefrom the royalties
based on how many sales our consumers generated which is
alreadyexplained in the pricing policy section. Continually, the
number of sales will grow witha growth of 10 % a month. Based on
the profit and loss statement, we will have breakeven point in the
middle of the third year.
8.4 Ownership and Stock Option
Based on the income statement, we analyze that our company is
going to be profitable
since it will earned 1,709,698 euro over 3 years ended 17 June,
2016 Our initial invest-ments will have a 60 % shares while
investors will have 40 %, with the dividend paidin the third year
0.4 euro per shares.
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ProfitandLossStatementforthegrowthrateof5percentpermonth
Year1
TotalExpenses
7
9605
79605
79605
796
05
79605
79605
79605
79605
79605
79605
79605
79605
955260
Revenues
0
0
0
0
0
0
0
0
0
0
0
0
0
Profit
-7
9605
-79605
-79605
-796
05
-79605
-79605
-79605
-79605
-79605
-79605
-79605
-79605
-955260
Income
taxes(credit)
-23881.5
-23881.5
-23881.5
-23881.5
-23881.5
-23881.5
-23881.5
-23881.5
-23881.5
-23881.5
-23881.5
-23881.5
-286578
Netprofit
-55723.5
-55723.5
-55723.5
-55723.5
-55723.5
-55723.5
-55723.5
-55723.5
-55723.5
-55723.5
-55723.5
-55723.5
-668682
(Accumulated
profit)
-55723.5
-111447
-167170.5
-2228
94
-278617.5
-334341
-390064.5
-445788
-501511.5
-557235
-612958.5
-668682
Technology
License
0
0
0
0
0
0
0
0
0
0
0
0
0
Priceof
Technology
License
20,000.00
20000
20000
200
00
20000
20000
20000
20000
20000
20000
20000
20000
240000
SalesofEnd
Product
0
0
0
0
0
0
0
0
0
0
0
0
2400000
Royalties
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
13
14
15
16
17
18
19
20
21
22
23
24
TotalExpenses
85336.6
85336.6
85336.6
85336.6
85336.6
85336.6
85336.6
85336.6
85336.6
85336.6
85336.6
85336.6
1024039.2
Revenues
6
0000
66143
72787
800
47
88033
96861.6
106524.66
117198.03
128890.33
141795.86
156032.55
171640
1285953.03
Profit
-25336.6
-19193.6
-12549.6
-5289.6
2696.4
11525
21188.06
31861.426
43553.729
56459.261
70695.948
86303.402
261913.826
Income
taxes(credit)
-7600.98
-5758.08
-3764.88
-1586.88
808.92
3457.5
6356.418
9558.4278
13066.119
16937.778
21208.784
25891.021
78574.1478
Netprofit
-17735.62
-13435.52
-8784.72
-3702.72
1887.48
8067.5
14831.642
22302.998
30487.61
39521.483
49487.163
60412.382
183339.678
(Accumulated
profit)
-686417.6
-699853.1
-708637.9
-712340.6
-710453.1
-702385.6
-687554
-665251
-634763.3
-595241.9
-545754.7
-485342.3
Technology
License
3
3
4
4
4
5
5
6
6
7
8
9
64
Priceof
Technology
License
2
0000
20000
20000
200
00
20000
20000
20000
20000
20000
20000
20000
20000
240000
SalesofEnd
Product
0
286
374
3
74
374
462
462
550
550
638
816
906
2403207.64
Royalties
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
Year3
25
26
27
28
29
30
31
32
33
34
35
36
TotalExpenses
9
1083
91083
91083
910
83
91083
91083
91083
91083
91083
91083
91083
91083
1092996
Revenues
205953.9
226551.34
249279.53
274398.88
301904.87
332156.06
365425.86
402244.55
442953.95
487874.5
538019.5
593303.3
4420066.22
Profit
114870.9
135468.34
158196.53
183315.88
210821.87
241073.06
274342.86
311161.55
351870.95
396791.5
446936.5
502220.3
3327070.22
Income
taxes(credit)
34461.271
40640.503
47458.958
54994.7
64
63246.56
72321.917
82302.858
93348.464
105561.29
119037.45
134080.95
150666.09
998121.067
Netprofit
80409.632
94827.84
110737.57
128321.12
147575.31
168751.14
192040
217813.08
246309.67
277754.05
312855.55
351554.21
1977394.95
(Accumulated
profit)
-404932.7
-310104.8
-199367.3
-71046.16
76529.143
245280.28
437320.28
655133.37
901443.03
1179197.1
1492052.6
1843606.8
Technology
License
10
11
12
14
15
17
18
20
22
24
27
29
220
Priceof
Technology
License
2
0000
20000
20000
200
00
20000
20000
20000
20000
20000
20000
20000
20000
240000
SalesofEnd
Product
1059
1169
1432
19
58
2286
2636
3008
3861
5217
6989
10403
14407
284
Royalties
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
0.5
720000
2 6 5 2 3 9 7 8 9
Table 4: Profit and Loss Statement and Sales Forecast21
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8.5 Funding
The following pictures of calculations and predictions of
expenses and revenues, incomestatement and balance sheet are pro
forma in accounting term and based on the per-
centage of growth we predict to be. During the expected time
frame we expect highinvestment in facilities (we would increase
more facilities, and that would means extrarental cost) ,
equipment, and employees especially if we are planning to expand
andgrow our company.
For initial investment, we will have 2 stages. The first and
second quarter needsto be covered by our initial investment from
several investors, for example businessangels. The first stages is
500,000 euro, 400,000 euro covered by investors, and 100,000will
come from us. Second stages will also need another 500,000 which
will be coveredby several banks. Because we know that bank wont
invest in high risk company, soif we divided into several banks,
each of them will only have to invest 100,000 euro to150,000 euros
instead of 500,000 which has more solvability for each bank.
End of month
1 of Year 1 End of Year 1 End of Year 2 End of Year 3
Assets
Cash and/or AccountPayables
450000 32740 242459 2858410
Total assets 450000 32740 242459 2858410Liabilities
Loan payable 500000 525000 551250 578812Equity
Owners contributions 50000 100000 100000 100000Business Angels
200000 200000 200000 200000Investors 200000 200000 200000
200000Retainedearnings(deficit)
0.00 32740 242459 2858410
Total owners equity 50000 132740 342459 2958410Total liabilities
andowners equity
450000 32740 242459 2858410
Table 5: Balance Sheet
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CashFlow
forStandardV
ersion
NanoSQUID
Year1
1
2
3
4
5
6
7
8
9
10
11
12
AnnualTotal
OperatingActivities
OperatingActivities
NetProfit
-79605
-79605
-79605
-7
9605
-79605
-79605
-79605
-79605
-79605
-79605
-79605
-79605
-955260
Depreciation
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-12000
CashFlow
from
Operations
-80605
-80605
-80605
-8
0605
-80605
-80605
-80605
-80605
-80605
-80605
-80605
-80605
-967260
FinancingActivities
Investmentfrom
Investors
200000
200000
BusinessAngels
200000
200000
BankLoan
500000
500000
OwnersCash
Contribution
50000
50000
100000
IncreaseinCash
369395
-80605
-80605
-8
0605
-80605
-80605
469395
-80605
-80605
-80605
-80605
-80605
BeginningCash
Balance
0
369395
288790
20
8185
127580
46975
-33630
435765
355160
274555
193950
113345
EndingCash
Balance
369395
288790
208185
12
7580
46975
-33630
435765
355160
274555
193950
113345
32740
Year2/Month
13
14
15
16
17
18
19
20
21
22
23
24
AnnualTotal
OperatingActivities
OperatingActivities
NetProfit
-17735.6
-13435.5
-8784.72
-3702.72
1887.48
8067.5
14831.64
22303
30487.61
39521.48
494
87.16
60412.38
183339.7
Depreciation
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-12000
CashFlow
from
Operations
-18735.6
-14435.5
-9784.72
-4702.72
887.48
7067.5
13831.64
21303
29487.61
38521.48
484
87.16
59412.38
171339.7
FinancingActivities
BankLoan
OwnersCash
Contribution
IncreaseinCash
-18735.6
-14435.5
-9784.72
-4702.72
887.48
7067.5
13831.64
21303
29487.61
38521.48
484
87.16
59412.38
171339.7
BeginningCash
Balance
71120
52384.38
37948.86
28164.14
23461.42
24348.9
31416.4
45248.04
66551.04
96038.65
134
560.1
183047.3
EndingCash
Balance
52384.38
37948.86
28164.14
23461.42
24348.9
31416.4
45248.04
66551.04
96038.65
134560.1
183
047.3
242459.7
Year3/Month
25
26
27
28
29
30
31
32
33
34
35
36
AnnualTotal
OperatingActivities
OperatingActivities
NetProfit
80409.63
94827.84
110737.6
128321.1
147575.3
168751.1
192040
217813.1
246309.7
277754
312
855.5
351554.2
2328949
Depreciation
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-1000
-12000
CashFlow
from
Operations
79409.63
93827.84
109737.6
127321.1
146575.3
167751.1
191040
216813.1
245309.7
276754
311
855.5
350554.2
2316949
FinancingActivities
BankLoan
OwnersCash
Contribution
IncreaseinCash
79409.63
93827.84
109737.6
127321.1
146575.3
167751.1
191040
216813.1
245309.7
276754
311
855.5
350554.2
2316949
BeginningCash
Balance
541460.6
620870.2
714698.1
824435.6
951756.8
1098332
1266083
1457123
1673936
1919246
2196000
2507856
EndingCash
Balance
620870.2
714698.1
824435.6
951756.8
1098332
1266083
1457123
1673936
1919246
2196000
2507856
2858410
Total
2858410
InterestExpense
2279598
C
t
T
5 6 9 8 9 9 4
Table 6: Cash Flow and Income Statement
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8.6 Worst to Best Scenario
Three scenarios were made for NanoSQUID. These are all based on
the sales and mar-keting strategy for our company. We have set the
margin factor to 10 percent profit of
the total costs to develop this technology. The standard
scenario is already discussedabove as it is the most realistic for
our venture.
In the pessimistic case, first of all, this holds under the
assumption that we havetrouble of getting the development of the
product, then we would need more time. 2ndassumption is that we
also have trouble of getting this patent, and since we also have
togive early adoption product to several small companies, we would
not have big profit inthe 2nd quarter of the 2nd year. Growth rate
for all goods stay at 5 percent and afterthe 2nd year, the growth
rate for technology license will stay constant at 1 percent.It is
estimated to reach break even point at the beginning of 2nd quarter
at year 5.The liability reaches bottom at the end of the 4rd year.
In this worst case scenario, wewould need a lot more
investment.
In the optimistic scenario, technology license is expected to
have a constant growth,with the beginning of 5 % and 10 % in the
first year, and increase to 10 % and 20% in the 2nd year. In the
3rd year, it will drop to a constant growth rate of 1 %
fortechnology license, and named user plus will drop to 10 %. In
this case, our total netprofits exceed two million euros after 3
years. We will reach break even point at the lastquarter of 2nd
year, which results in our liability becoming positive from the
beginningof 3rd year.
8.7 Exit Strategy
This exit strategy solely depends on the current assumption that
we made. First ofall, if the company has grow into massive
multinational company, we are going tonegotiate with our investors
whether they are still going to invest on our company ornot. Many
investors wanted their money to get paid soon enough, and that is
why, afternegotiating, they can decide whether they are still going
to continue the investment, orwe can buy the whole sales as a
founders. We expect, if investors decided to stop theirinvestment,
to return the investments in 5 years, this goes under the case of
standardand optimistic case. As a founder, we can also decide later
and negotiate whether weare still going to run this company or
instead selling the whole shares to investors ifthey want.
8.8 Realization Strategy
The realization schedule can be found in section 6. NanoSQUID
will get involved in allthe market based on the marketing section,
but for further growth and development,we will get involved in
every market we believe to be profitable.
