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1 The Entrepreneurship Path: The Road Less Traveled Justin Mansell, Ph.D. VP and CTO of MZA Associates Corporation President of Active.

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Presentation on theme: "1 The Entrepreneurship Path: The Road Less Traveled Justin Mansell, Ph.D. VP and CTO of MZA Associates Corporation President of Active."— Presentation transcript:

1 1 The Entrepreneurship Path: The Road Less Traveled Justin Mansell, Ph.D. VP and CTO of MZA Associates Corporation President of Active Optical Systems, LLC

2 2 Outline My Path to Entrepreneurship Beginning Your Entrepreneurship Journey –Introduction –Creating a Business Plan –Beyond the Plan Conclusions Example Pitch

3 3 My Entrepreneurship Path (so far)

4 4 Brief Resume 1991-1996: Computer Consultant 1993-1996: Internships 1995-1996: Research Consulting 1996-1999: Wavefront Sciences 1996-2001: RA at Stanford University 1999-2001: Optics Consultant 2000: Stanford e-challenge 2000-2002: Founder/CTO at Intellite, Inc. (AgilOptics) 2002-present: Mansell & Associates, LLC 2002-2003: Chief Engineer at Qynergy Corporation 2003-present: VP and CTO at MZA Associates Corp 2005-present: President of Active Optical Systems, LLC

5 5 1991-1996: Computer Consultant During my undergraduate, I worked part- time as a consultant, mostly on computer database development. –ATM Accounting –Medical Doctor Professional Society Database –Security System for Cleveland Museum of Art –Probate Court Case Tracking Database Lessons Learned: –Project Management –Billing & Invoicing –Tracking Time –Importance of Customer Relationships New Biz through Customer Recommendations

6 6 1993-1996: Internships NASA Glenn –Developed the control system for the ISS Plasma Contactor Sandia National Labs –Data reduction from Tri-Axial Compression Experiments –Shack-Hartmann Wavefront Sensing and Micro-Optics Lessons Learned –How to solve problems independently –Being part of a research team –Value of experience –Large amount of fertile ground at the intersection between almost any two fields –Value of Intellectual Property (IP) and how to protect it

7 7 1995-1996: Independent Researcher After my SNL internship, I got back to CWRU and found the research path outlined by my research advisor unappealing. I pitched doing an independent research project for my MS Thesis that involved –Developing software for automation of mask pattern generation. –Demonstrating a technique for improving micro-optics performance. Pitched this to SNL and got it funded. Lessons Learned –Think creatively about education (you dont necessarily have to do things traditionally) –How to write a proposal. –How to develop a credible project plan and budget.

8 8 1996-1999: Wavefront Sciences As I was leaving SNL to go to Stanford for my Ph.D., my SNL boss was leaving to try a start-up called Wavefront Sciences (WFSI). I agreed to work part-time on IR&D, software development, and micro-optics development. Lessons Learned –How to start a business (peripherally) –How to productize (peripherally) –How to manage research (remotely) –Really being part of a research team –Be creative in working deals: We traded a wavefront sensor we could not afford for a CRaDA with WFSI. –Small businesses can be a lot of fun!

9 9 1996-2002: RA at Stanford Worked on numerous projects including –MEMS Spectrometer –MEMS Deformable Mirrors –Wavefront Sensors –Low-Cost AO for Lasers Lessons Learned –How to Write & Present –Engineering Ethics –Safety Policies and Procedures –Working Collaboratively –Managing Expectations (Upwards)

10 10 2000-2002: Intellite / AgilOptics Founded Intellite to commercialize the MEMS deformable mirrors we developed at Stanford. Pitched Intellite at a Venture Capital Symposium Lessons Learned –Productization (manuals, packaging, etc.) –Writing a business plan What do VCs care about How to sell to them –How to roll with the unexpected Intellite had to change its name due to legal pressure

11 11 2002-Present: Mansell and Associates Founded to do engineering and IP consulting Lessons Learned –You really can do it all yourself –You may not really want to Having a team really does help!

12 12 2002-2003: Qynergy Business founded to commercialize technology invented at SNL for radioisotope energy generation Strategy was to top-load the team –Lots of Grade A Management, but light on the technical team Lessons Learned –Research How to work limited resources Managing research outside of my expertise A 90% solution now is better than a 100% solution later –Business The costs and benefits of a high-quality team IP Development & Protection Business Plan Development

13 13 2003-Present: MZA Associates Primarily DoD consulting firm specializing in detailed physics- level modeling of defense optical systems. MZA has grown from 1 office of ~15 people to 3 offices of ~35 people in the last 4 years Lessons Learned (and Learning) –Managing Growth –How to Transition from a Small to a Medium-Sized Company

14 14 2005-Present: Active Optical Systems Spin-off of MZA founded to commercialize a new low-cost AO technology Lessons Learned (& Learning) –Unusual Funding Sources –Leverage Existing Technology –Luck Matters Polymer Membrane Under 12 kW CW 1-μm Light

15 15 Getting Started as an Entrepreneur

16 16 Limitations & Caveats People spend their life studying this topic. –I will only have time to present some of the basics. I have no formal business school training. There are many books and much literature on this topic, including: –The Start-up Entrepreneur, J.R. Cook –Entrepreneurship For Dummies, Kathleen Allen –Outline for a Business Plan ( for_a_Business_Plan.pdf) for_a_Business_Plan.pdf

17 17 Entrepreneurs… Identify business opportunities (spark) Create a plan to capitalize on the opportunity (diligence) Find the resources (marketing) And (sometimes) execute the plan (leadership)

18 18 New Business Idea Quick Test: Should I be an Entrepreneur? Am I excited about this idea or opportunity? –E-ink ideas Do others also think its a great idea? Are there people willing to pay for what Im offering? Why am I the right person for this? Why should I go forward with this idea or opportunity now? –Diode Laser vs. HeNe for Barcode Scanners Entrepreneurship for Dummies, Kathleen Allen

19 19 The Business Plan

20 20 Business Plan Basics A business plan is like a job application to becoming an entrepreneur. A well-written business plan forces the author to evaluate the idea in sufficient detail to sell it and/or guide the development of the resulting business. Reasons for Writing a Business Plan: –Organizes and Structures the Business to Capitalize on the Opportunity –Sells the Opportunity to Investors

21 21 Comments on Investors Investors should be thought of as members of your team. –What assets (other than financial) do they bring to the table? Investors are not stupid, … –Would you want them on your team if they were? …especially about business –How do you think they got that money to invest? Investors are looking for a substantial increase in the value of your venture (5-10x) in a fairly short period (5 years) –Success Stats are Dismal, but ask, What is success? Investors generally wont sign NDAs Investors might be considering other deals in your space. Its generally OK to ask them this question. Investors often care more about team than opportunity. –Experience more than education

22 22 Components of a Business Plan The Opportunity –Product / Service –Industry & Market Analysis –Competitive & SWOT Analysis The Team –Management –Company Description The Plans & Projections –Financial (including projections), Marketing, and Operating Flip in the Final Version

23 23 Product / Service Coming from a technical background, I like to write this first and then write the industry part second, but switch the order for the investors. Describe the product or service in detail. Focus on the distinguishing features. Compare to the existing solutions. –There are always existing solutions. Give as much detail as you feel comfortable releasing publicly –Investors often wont sign NDAs Include a description of existing or applied for IP –Investors generally discount provisional patents

24 24 Industry & Market Analysis There can be multiple industries or applications, but often targeting more than one at a time may not be possible given resources, so choose one & prioritize the others. Find as much data as possible on the industry and market segment including –Size (dollars and units) –Recent and Projected Growth Rate (especially in your segment) –Location (where is the money spent?) This data can be hard to come by, but look –On the internet –In relevant trade journals –In the local business school library –At Technology Venture Corporation (TVC) –Customer Surveys (keep good records) This part can be the hardest part for technologists, so dont be afraid to ask for help. –Investors will most likely be better than you at this, so spend the time to get it right.

25 25 Competitive Analysis Who else out there is doing something that competes in any way? –Important because it could be a hidden opportunity Why would their customers become your customers? A comparison table is often useful here.

26 26 SWOT Analysis Strengths, Weaknesses, Opportunities, and Threats Try to be as realistic and objective as possible Include global considerations. You may have done this throughout the other portions, but investors are sometimes looking for this as a summary.

27 27 The Team Investors generally weigh this more heavily than the opportunity –Id rather have an A team with a B idea than a B team with an A idea Experience is key They will be looking for a core management team with all the key areas covered and ideally with experience. –Address any key weaknesses (What you dont have you might hire.)

28 28 Plans and Projections Tie these back to the industry data as much as possible. Investors generally wont believe ridiculous market share predictions, so be realistic. Create a budget of how you think money will be spent. –include a detailed budget if youre asking for investment.

29 29 Beyond the Business Plan

30 30 The 5-Minute (Elevator) Pitch Once the business plan is complete, it is important to write down and rehearse a 5- minute pitch of your business Touch on: –Product/Service –Industry & Market –Potential for Growth –Management Team

31 31 Types of Investors Government (Grants / SBIRs) –No equity cost –Not just the USA either… Other Corporations –Small and Large Angel Investors –Small and early round investors Venture Capitalists –Typically $1M+ investment –Significant equity cost

32 32 Entrepreneurs Skills Management Legal Intellectual Property Marketing Accounting Human Relations Insurance Workmans Compensation & Unemployment Tax You dont have to be an expert in all of these areas, but if youre going to lead the team, you need to know a bit about all of them.

33 33 Conclusions Entrepreneurs capitalize on business opportunities. Getting started means writing a plan covering the: –Opportunity, Team, & Plan & Projections. The plan will guide your company and help you hook investors.

34 34 Example Pitch: Active Optical Systems, LLC

35 35 Problem: Optical Distortions Application / Market Segment Effect of Distortions 1. LasersLarger Spot Size Reduced Intensity 2. PhotolithographyReduced Feature Sizes and Resolution 3. OphthalmologyMissed Diagnoses 4. Free-Space Communications Large Bit Error Rate and Lost Data 5. Optical Data Storage Lower Data Density 6. TelecommunicationsSignal Degradation Human Retinal Image Distortions Gone With Distortions

36 36 Laser AO Market Opportunity Laser Market (~$2B) –Large High-Growth Market ~$2B in 2000 with ~10% growth –High Product Cost (~$100k) –Industry Contacts & Contracts Laser Adaptive Optics –OEM Segment for AO $240 Million (2001) $500 Million in 7 years –End-User Segment for AO $140 Million (2001) –Estimated $380M AO System Revenue Potential by 2012 NOTE: Numbers here are not necessarily traceable to research.

37 37 Example: Photolithography Masks Electron Beam Written Masks –Higher Resolution –Mask Cost: $3,000 to >$20,000 Laser Beam Written Masks –Higher Productivity –Mask Cost: $300 to $1,500 Benefits of Laser AO –Mask Maker Electron Beam quality Laser beam cost –Laser Manufacturers New Sales Possibilities E-beam Mask Writer Laser Mask Writer

38 38 AOSs Adaptive Optics Product Before After Laser AOSs Polymer Deformable Mirror AOSs Control Computer AOSs Competitive Edge Polymer DM Significantly Reduced Cost with Higher Volume Benefits to OEM and End-User Reduces Laser Cost Increases Intensity Opens New Application Doors Sensor

39 39 AOS Component Technologies Polymer Deformable Mirror (patents pending) Webcam Hartmann Sensor Drive Electronics DM Before Packaging

40 40 Competitive Analysis CompetitorAnalysis Company AMEMS-based (costly ~$50k) High Power Laser Capable Slow Growth Strategy (CEO is a Professor) Products Need Engineering (not turn-key) Company BLimited in size Limited Laser Power Handling High Cost (~$100k for DM + Electronics) Company CFocusing on the Ophthalmology Market High Cost ($75k for DM + Electronics) Cannot handle high power lasers AOSLow Cost ($6.5k DM + Electronics, $7.5k Systems) Turn-key Systems

41 41 Management Team Justin Mansell-President –Ph. D. from Stanford Univ. in adaptive optics for high power laser wavefront control –10 years of Technical and Business Start-up Experience Robert Praus & Steve Coy – VPs –Each has 20 years of experience in developing and modeling high power laser systems for DoD applications Defining Marketing and COO Positions

42 42 MEMS FT Spectrometer (2000) Binary Optics Smoothing (1996) Apodized Microlens Arrays (1999) Experience (1996) MOPA AO (2000) Gaussian to Top-Hat Beam Shaping (2000) US Patent 6,707,020 (2004) (2005) (1998) US Patent 5,864,381 (1999) US Patent 6,108,121 (2000) (1991) Boeing Relay Mirror AO Testbed (2004) Mini-Cass (2001) Delay Line M 2 Meter (2001) Knife Edge SHWFS US Patent 6,376,819 (1999)

43 43 Financial Projections Seeking $1M in Start-up Capital Break-Even in Year 3 $60 M Revenue by Year 5

44 44 Questions? Justin Mansell, Ph.D. (505) 245-9970 x122

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