What Angels and Entrepreneurs Need to Know About ’s Lean Launchpad Welcome! February 25, 2015

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1 Mission: Fuel the success of angel groups and accredited individuals active in the early-stage landscape • World’s largest trade group for angel investors o 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

2 ACA Partners

Our Speaker - and a little about him

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

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

• What We Used to Believe • What We Now Know • The Lean Startup • Commercialization Insights • Technology Readiness Level • Investment Readiness Level

What We Used to Believe Search vs. Execution

4 Startups are Smaller Versions of Large Companies

Start With an Operating Plan and Financial Model

5 21 Years Executing the Plan

Actual Photo of What Happened When My Plan Had First Contact With Customers

6 No Business Plan survives first contact with customers

7 What We Used to Believe

All I Need is the 5-Year Forecast

8 VC’s and the Soviet Union are the only people to require 5-Year Plans

What We Now Know

9 Startups Are Not Smaller Versions of Large Companies

Startups Are Not Smaller Versions of Large Companies Large Companies Execute Known Business Models

10 Startups Are Not Smaller Versions of Large Companies Startups Search for Unknown Business Models

What’s A Startup?

11 A temporary organization designed to search for a repeatable and scalable

A temporary organization designed to search for a repeatable and scalable business model

12 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

13 Startups Fail Because They Confuse Search with Execute

Startups need their own tools, different from those used in existing companies

14 Startups need their own tools, different from those used in existing companies

The Lean Startup

15 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

16 1. Frame Hypotheses

• Frame Hypotheses 

1. Frame Hypotheses

• Frame Hypotheses  Business Model Canvas

Partners Activities Get/Keep/ Grow Product / Customers Service

Resources Channel

Costs Revenue

17 2. Test Hypotheses

• Frame Hypotheses  Business Model Canvas

• Test Hypotheses 

2. Test Hypotheses

• Frame Hypotheses  Business Model

• Test Hypotheses  Customer Development

18 3. Build Incrementally & Iteratively

• Frame Hypotheses  Business Model

• Test Hypotheses  Customer Development

• Build the product  Agile Engineering incrementally & Iteratively

Insight Life Science/Health Care Commercialization in the 21st Century

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19 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

Current Thinking about Translational Medicine

Use Outside Consultants

Intellectual Regulatory Property Product Development Mentors Technology Development Process Project Business financing Management Development

License Startup

20 Add Evidence-based Commercialization

Inward-facing

Add Evidence-based Commercialization

Value Add a parallelReimburs Propositio ement Customers (users, n Outward-Facing payers, etc.)

CommercializationCommercialization Process Development Process

Regulation Partners Intellectual Property Inward-facing

21 Add Evidence-based Commercialization

Outward-facing By the Founding Team

Reimburs Value ement Proposition Customers (users, payers, etc.)

Commercialization Development Process

Regulation Partners Intellectual Property Inward-facing

Accelerating Commercialization: – Requires Parallel Paths

Technology Progress Clinical Trials, etc.

Commercialization Progress

Mentorship Workshops/Webinars

seed $’s

physical space & equipment

22 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

Insight Commercialization Evidence Requires Outward Focus

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23 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

24 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 Market Must 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

25 Download A Free Book!

By Giff Constable (Frank Rimkowski, Ed.) http://www.talkingtohumans.com/

Insight We Know How To Build these Programs

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26 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

27 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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28 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

29 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

30 Teams Present Results Weekly

Update Business Model Canvas Weekly

31 Use Canvas As a Weekly Scorecard

Week 1

Week 2

Week 3

Insight 100% Visibility on Progress LaunchPad Central

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32 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

33 Cohort Leaderboard

Customer Interviews

34 Hypotheses to Test

Invalidated Hypotheses

35 Weekly Canvas Updates

36 NASA

NASA/DOD Technology Readiness Level (TRL)

• Formal Way to assess project maturity • Quantify Relative Risks • Data Driven • Adopted by NASA, DOD, FAA, ESA…

37 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

38 NASA/DOD Technology Readiness Levels 5 & 6

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

Demo

Research

Concept

NASA/DOD Technology Readiness Levels 7, 8, 9

Deployment • System Development • System deployed in real-world

Demo

Research

Concept

39 Investment Readiness Level

We can do the same for Commercialization/New Venture Activities

Investment Readiness Level

Emphasis is on data

40 Investment Readiness Level

• A Formal Way to Quantify Relative Risks • Data Driven • Analog to NASA/DOD Technology Readiness Level (TRL)

DIAGNOSTICS The Investment Readiness Level

41 Diagnostics Investment Readiness Level Example

Reimbursement/IP/Regulatory/Costs Validated Clinical Trial/Technical Validation Minimum Viable Product/Regulatory

Left-side of the Canvas/IP Strategy

Right-side of the Canvas/ Revenue Model/Reimbursement Est. Reimbursement/CPT Code

Product/Market Fit

First Pass Canvas

THERAPEUTICS The Investment Readiness Level

42 Therapeutics Investment Readiness Level Example

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

High Fidelity MVP, customer partners highly engaged Business Case Defined, recruit talent gaps, select investors

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

Right-side of the Canvas: present data to 5 customers, proof of relevance Product/Market Fit: timeline to pre & clinical data, cost & value at data pts Problem/Solution validation w/pharma/biotech, present indepth data

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

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

MEDICAL DEVICES The Investment Readiness Level

43 Medical Device Investment Readiness Level Example

Clear exit strategy Targeted market rollout plan Unit economics - Margin Validated

Existing reimbursement

Regulatory certainty/difficulty IP: Patentability, Freedom to Operate

Technical solution, data & MVP Compelling clinical need + substantial market

Effective team?

DIGITAL HEALTH The Investment Readiness Level

44 Digital Health Investment Readiness Level Example

Metrics That Matter High Fidelity MVP Market Opportunity

Left-side of the Canvas

Right-side of the Canvas Product/Market Fit Problem/Solution validation

Low Fidelity MVP

First Pass Canvas

Technology Investment Readiness Level Readiness Level

Metrics that Matter

Validate Left side of Canvas

Validate Right side of Canvas

Product/Market Fit

Problem/Solution

Hypotheses

45 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

46 NSF Class Summary

• 400 teams • 39,789 in-person customer interviews • 15,432 hypotheses tested • 3,735 Pivots

Conclusion

The Lean Startup is a Successful much better way to build commercialization a business requires a startup to 1. Frame Hypothesis assess evidence based 2. Test Hypothesis 1. Investment Readiness 3. Build Incrementally (outward focus) and Iteratively 2. Technological The emphasis is on data Readiness (inward focus)

47 Audience Resources

Allan May’s email - [email protected] 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

48 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 Christopher Mirabile Executive Director Managing Director, Launchpad; Vice Chair, Angel Capital Angel Capital Association Association http://www.angelcapitalassociation.org http://www.angelcapitalassociation.org/ /news-forbes/ news-inc/

49 2015 ACA Summit April 14-16, San Diego, CA Leverage Our Decade of Investing Expertise Summit Keynoter Steve Blank REGISTER ONLINE www.angelcapitalassociation.org/2015summit ACA Members: $820 early bird, $895 after February 3 • COME LEARN THE LATEST Non-Members: $1120 early bird, $1195 after February 3 INVESTING IDEAS Additional fees apply for programs on Tuesday, April 14 • FIND CONNECTIONS THAT ACCOMMODATIONS MATTER A room block is reserved for Summit attendees at the • PROGRAM HIGHLIGHTS Marriott Marquis San Diego Marina, 333 West Harbor Drive, San Diego, CA. • Pre-Summit (April 14)

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