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What Angels and Entrepreneurs Need to

Know About Steve Blank’s Lean Launchpad

Welcome!

February 25, 2015

• Use chat to submit questions

• Yes, you’ll get the slides

• We’re recorded, so come back and listen again

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Mission: Fuel the success of angel groups and accredited individuals active in the early-stage landscape

• World’s largest trade group for angel investorso 220+ angel groups

o 12,000 accredited investors

o Voice of accredited individuals, portals, and family offices

• 50 US states + Canada

• Research/ education partner

Member Groups & Accredited Platforms

New Dominion Angels

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ACA Partners

Our Speaker - and a little about him

Allan May Vice Chair, Angel Resource Institute Chair, Life Science Angels

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• What We Used to Believe

• What We Now Know

• The Lean Startup

• Commercialization Insights

• Technology Readiness Level

• Investment Readiness Level

Lean May Save Your Life: Lean Launchpad/NSF I-Corps

What We Used to Believe

Search vs. Execution

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Startups are Smaller Versions of Large

Companies

Start With an Operating Plan

and Financial Model

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21 Years Executing the Plan

Actual Photo of What Happened

When My Plan Had

First Contact With Customers

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No Business Plan survives first contact

with customers

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What We Used to Believe

All I Need is the 5-Year Forecast

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VC’s and the

Soviet Union

are the only

people to require

5-Year Plans

What We Now Know

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Startups Are Not Smaller Versions of Large

Companies

Startups Are Not Smaller Versions of Large

CompaniesLarge Companies Execute

Known Business Models

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Startups Are Not Smaller Versions of Large

CompaniesStartups Search for Unknown

Business Models

What’s A Startup?

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A temporary organization designed to search

for a repeatable and scalable business model

A temporary organization designed to search

for a repeatable and scalable business model

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A temporary organization designed to search

for a repeatable and scalable business model

A temporary organization designed to search

for a repeatable and scalable business model

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Startups Fail Because They Confuse Search with

Execute

Startups need their own tools, different from those

used in existing companies

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Startups need their own tools, different from those

used in existing companies

The Lean Startup

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The Lean Startup

A much better way to build a business

Taking you from an Idea to a Business

The Lean Startup In Three Steps

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1. Frame Hypotheses

• Frame Hypotheses

1. Frame Hypotheses

• Frame Hypotheses Business Model Canvas

Customers

Revenue

Partners

Activities

Resources

Costs

Channel

Get/Keep/GrowProduct /

Service

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2. Test Hypotheses

• Frame Hypotheses

• Test Hypotheses

Business Model Canvas

2. Test Hypotheses

• Frame Hypotheses

• Test Hypotheses

Business Model

Customer Development

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3. Build Incrementally & Iteratively

• Frame Hypotheses

• Test Hypotheses

• Build the product incrementally & Iteratively

Business Model

Customer Development

Agile Engineering

Insight Life Science/Health Care

Commercialization in the 21st

Century

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Commercialization Insights

• Commercialization efforts have two

components

1. The science/technology

2. The business model

• Current Commercialization efforts focus on #1

• Successful efforts require the team to do both

Technology Development Process

Regulatory

financing

Project Management

Product Development

IntellectualProperty

BusinessDevelopment

Current Thinking about Translational Medicine

Mentors

Use Outside Consultants

License Startup

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Add Evidence-based

Commercialization

Inward-facing

Add Evidence-based Commercialization

Reimbursement

Partners

Customers (users, payers, etc.)

Commercialization Development

Process

Value Propositio

n

Intellectual Property

Inward-facing

Regulation

Add a parallel Outward-Facing

Commercialization Process

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Add Evidence-based Commercialization

Reimbursement

Partners

Customers (users, payers, etc.)

Commercialization Development

Process

Value Proposition

Intellectual Property

Inward-facing

Outward-facingBy the Founding Team

Regulation

physical space & equipment

seed $’s

MentorshipWorkshops/Webinars

Technology ProgressClinical Trials, etc.

CommercializationProgress

Accelerating Commercialization: – Requires Parallel Paths

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Answers to Hypotheses are Outside The Lab

• You may be the smartest person in your lab

• But you are not smarter than the collective intelligence of your potential customers, partners, payers and regulators

• You can’t learn this by reading papers or listening to lectures

Need a process for hypotheses testing

InsightCommercialization Evidence Requires

Outward Focus

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EXAMPLE: ”Value

Proposition” and the Customer Discovery Process

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Value Proposition inherently includes Value AND a specific Customer

A Value Proposition describes the net impact of the cost/improvement equation associated with a new offering in terms that are meaningful to decision makers and sufficiently convincing to elicit a change in their behavior

There will be a separate Value Proposition for every Customer

I-Corps @ NIH - Allan May 48

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Testing Value Propositions Requires Formulating A “Clinical Needs Statement”

A one-sentence hypothesis that clearly articulates the basic problem, the target population, and the outcome you are solving for

I-Corps @ NIH - Allan May 49

Validating A Needs Statement is Done Via Customer Discovery

Quantify the Value Proposition for each Customer

Focus Customer Discovery efforts on:The disease state (what is known; what is not)

The landscape of existing solutions (what’s available; what has been tried before and did/didn’t it work)

Identifying Customers (Stakeholders)

Defining the true MarketMust Have versus Nice to Have

Core patient group versus Possible patient use

For whom would it be malpractice NOT to use your solution

I-Corps @ NIH - Allan May 50

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Download A Free Book!

By Giff Constable (Frank Rimkowski, Ed.)

http://www.talkingtohumans.com/

InsightWe Know How To Build

these Programs

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I-Corps @ NIH

class design components

The Tactics

• Organize P.I.’s into Commercialization Teams

• Active NIH SBIR and STTR Phase I grantees

• Teams of 3

• C-Level (CEO, CTO, COO) Officer

• Industry Expert

• Principal Investigator

• Offer a 10-week training program

• Get them out of the building

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Rapid Learning

• Out of the building 10-15 hours/weekly

• Formal methodology for customer interaction

• Evidence-based decisions

• Focus on rapid learning

100 customers/partners in ten weeks

I-Corps Commercialization Strategy

• Define clinical utility up front• before spending millions

• Understand core customers & sales/mktg process• for initial clinical sales and downstream commercialization

• Assess IP and regulatory risk • before design and build

• Gather data essential to customer partnerships/collaboration/purchases

• before doing extensive engineering or science

• Identify financing vehicles before you need them

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Commercialization affects biological and clinical hypotheses

• As you validate the commercial hypotheses you make substantive changes to one or more parts of your initial business model

• And this new data on commercialization affects your biological and clinical hypotheses

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Class – key design components

• Framework for results

• Experiential

• Evidence-based

• Mentor supported

• Team Teaching

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Lean Framework

• Business Model Canvas • Articulate initial Hypotheses

• Weekly Progress Scorecard

• Customer Development• Test hypotheses in front of customers

• Hypothesis > Experiment > Data > Insight

• Agile Development• Build Minimum Viable Product

Experiential

• Getting out of the building – 10-15

hours/weekly

• Formal methodology for customer interaction

• Focus on Minimal Viable Products and Pivots

• Getting out of the building is a big idea

• It accelerates speed of translation

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Teams Present Results Weekly

Update Business Model Canvas Weekly

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Use Canvas As a Weekly Scorecard

Week 2

Week 1

Week 3

Insight100% Visibility on Progress

LaunchPad Central

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LaunchPad Central

• Needed a way to “Look over their shoulders”

• Central place for cohort “Command and

Control”

• Got it wrong multiple times

• Finally built custom tool for the NSF

• LaunchPad Central

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Cohort

Leaderboard

Customer

Interviews

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Hypotheses

to Test

Invalidated

Hypotheses

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Weekly

Canvas

Updates

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NASA

NASA/DOD

Technology Readiness Level (TRL)

• Formal Way to assess project maturity

• Quantify Relative Risks

• Data Driven

• Adopted by NASA, DOD, FAA, ESA…

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NASA/DOD Technology Readiness: Levels 1 & 2

Basic Technology Research• Basic principles observed• Technology concept formulated

Concept

NASA/DOD Technology Readiness Levels 3 & 4

Research to prove Feasibility • Experimental proof of concept• Breadboard validation in lab

Research

Concept

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NASA/DOD Technology Readiness Levels 5 & 6

Demo Prototype • Breadboard validation outside the building• System demo in real-world

Research

Concept

Demo

NASA/DOD Technology Readiness Levels 7, 8, 9

Deployment• System Development• System deployed in real-world

Research

Concept

Demo

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Investment Readiness Level

We can do the same for

Commercialization/New

Venture Activities

Investment Readiness Level

Emphasis is on data

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Investment Readiness Level

• A Formal Way to Quantify Relative Risks

• Data Driven

• Analog to NASA/DOD

Technology Readiness Level (TRL)

DIAGNOSTICSThe Investment Readiness Level

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Diagnostics Investment Readiness Level

Example

First Pass Canvas

Product/Market Fit

Revenue Model/Reimbursement Est.

Left-side of the Canvas/IP Strategy

Minimum Viable Product/Regulatory

Reimbursement/IP/Regulatory/Costs Validated

Right-side of the Canvas/

Reimbursement/CPT Code

Clinical Trial/Technical Validation

THERAPEUTICSThe Investment Readiness Level

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Left-side of the Canvas: KOL network, IP review, partner due diligence

Define clinical problem & early customer data, CRO’s, IP check

Problem/Solution validation w/pharma/biotech, present indepth data

Business Case Defined, recruit talent gaps, select investors

High Fidelity MVP, customer partners highly engaged

Path to Revenues, OP Plan, on target activity, therapeutics effect & liabilities

Low Fidelity MVP, KOL’s, pre & Clinical Paths ID’d, tech validated

Product/Market Fit: timeline to pre & clinical data, cost & value at data pts

Right-side of the Canvas: present data to 5 customers, proof of relevance

Therapeutics Investment Readiness Level

Example

MEDICAL DEVICESThe Investment Readiness Level

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Existing reimbursement

Effective team?

Technical solution, data & MVP

Unit economics - Margin Validated

Targeted market rollout plan

Clear exit strategy

Medical Device Investment Readiness Level

Example

Compelling clinical need + substantial market

IP: Patentability, Freedom to Operate

Regulatory certainty/difficulty

DIGITAL HEALTHThe Investment Readiness Level

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Digital Health Investment Readiness Level

Example

First Pass Canvas

Low Fidelity MVP

Product/Market Fit

Left-side of the Canvas

Market Opportunity

High Fidelity MVP

Metrics That Matter

Right-side of the Canvas

Problem/Solution validation

Technology

Readiness Level

Problem/Solution

Hypotheses

Product/Market Fit

Validate Right side of Canvas

Validate Left side of Canvas

Metrics that Matter

Investment

Readiness Level

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UCSF Class Summary

• 26 teams: therapeutics, devices, diagnostics, digital-health

• 2,355 in-person customer interviews

• 952 hypotheses tested

• 423 Pivots

NIH Class Summary

• 21 teams: therapeutics, devices, diagnostics

• 1,920 in-person customer interviews

• 833 hypotheses tested

• 195 Pivots

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NSF Class Summary

• 400 teams

• 39,789 in-person customer interviews

• 15,432 hypotheses tested

• 3,735 Pivots

Conclusion

The Lean Startup is a much better way to build a business

1. Frame Hypothesis

2. Test Hypothesis

3. Build Incrementally and Iteratively

The emphasis is on data

Successful commercialization requires a startup to assess evidence based

1. Investment Readiness

(outward focus)

2. Technological Readiness (inward focus)

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Audience Resources

Allan May’s email - amay@emvllp.com

Life Science Angels - http://lifescienceangels.com/

Angel Resource Institute -http://www.angelresourceinstitute.org/

For more information on Steve Blank’s Lean Launchpad

Steve Blank - www.steveblank.com

Thanks

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Thank you!

Audience Questions

March 11, 2015: Invest Like a Super Angel

March 25, 2015: What Angels and Entrepreneurs Need to Know Before You Syndicate a Deal

Webinar programs archived at:

www.angelcapitalassociation.org/events/webinars/

Additional Resources

Marianne Hudson

Executive Director

Angel Capital Association

Christopher Mirabile

Managing Director, Launchpad;

Vice Chair, Angel Capital

Association

http://www.angelcapitalassociation.org

/news-forbes/http://www.angelcapitalassociation.org/

news-inc/

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2015 ACA Summit

April 14-16, San Diego, CALeverage Our Decade

of Investing Expertise

ACA Annual Partners

• COME LEARN THE LATEST

INVESTING IDEAS

• FIND CONNECTIONS THAT

MATTER

• PROGRAM HIGHLIGHTS

• Pre-Summit (April 14)

• ACA Summit (April 15-16)

REGISTER ONLINEwww.angelcapitalassociation.org/2015summit

ACA Members: $820 early bird, $895 after February 3

Non-Members: $1120 early bird, $1195 after February 3

Additional fees apply for programs on Tuesday, April 14

ACCOMMODATIONSA room block is reserved for Summit attendees at the

Marriott Marquis San Diego Marina, 333 West Harbor Drive, San

Diego, CA.

Act by March 27secure your discounted room ($229) or ($249).

Reservations can be made by calling the hotel at

619-234-1500 (reference “ACA”) or via the ACA Summit website.

Summit Keynoter Steve Blank

ACA Summit Sponsors