1. Aaron Eden
Created by Steve Blank

2. » 5/12 – What to Expect
» 5/19 – First Pitches
» 5/26 – Experiment Day
» 6/2 –Value Propositions
» 6/9 – Customers, Users, Payers
» 6/16 – Distribution Channels (Justin)
» 6/23 – Customer Relationships
» 6/30 – Revenue Models
» 7/7 – Partners
» 7/14 – Key Resources & Costs
» 7/21 – Lessons Learned Presentations

3. » Team Presentations
» Distribution Channels
» Mentoring

4. » What were your hypotheses about users and
customers? Did you learn anything different?
» Did anything change about Value Proposition?
» What do customers say their problems are? How
do they solve this problem(s) today? Does your
value proposition solve it? How?
» What was it about your product that made
customers interested? excited?
» If B-B, who’s: decision maker, size of budget, what
are they spending it on today, how will this buying
decision be made?

10. Channels
10

11. Test Hypotheses: Channels
11

12. Two Critical Channel Questions
How do you want to sell your product?
Is subtle, but more important than the
first: How does your customer want to buy
your product?
12

13. How Do You Want Your Product To Get
To Your Customer?
Yourself
Someone else
Retail
Wholesale
Bundled with other goods or services 13

14. How Does Your Customer Want to Buy
Your Product From Your Channel?
Same Day
Delivered and installed
Downloaded
Bundled with other products
As a service
14
…

15. Web Channels
15

16. Physical Channels
16

17. Types of Channels
Direct Indirect Licensing
• OEM
• VAR
• Reseller
• Distributor
17

18. The Channel as a Customer
» Some products are embedded in others
(OEM)
» Some products are resold by others
(VARs)
» Some products are distributed by others
» Who’s the customer?
18

19. Distribution Complexity
Global Systems
Systems Integrators
WANs
Evangelists Mainframes
Direct Sales
Marketing Complexity
Minis
LANs
VARs
PC Servers
Desktop PCs
Retail
Printers
Keyboards
Service
Web, Telesales Technicians
Toner
19
Solution Complexity

20. How Are Channels Compensated?
» Commission
» Percentage of sales price
» Discounted pre-purchase
20

21. How Are Channels Motivated or Incented?
» Money! What makes them the most?
» Training
» Marketing to the channel
» SPIF
21

22. Channel Economics: “Direct” Sales
List
Revenue Price
End Consumer
Discounts
Cost of Goods
EU
Profit + SG&A + R&D
(Supply Chain)
22
Source: Mark Leslie, Stanford GSB

23. Channel Economics: Resellers
List
Revenue Price
End Consumer
Discounts
Cost of Goods
EU
Profit + SG&A + R&D Reseller
(Supply Chain)
23
Source: Mark Leslie, Stanford GSB

24. Channel Economics: Distributors/Resellers
List
Revenue Price
End Consumer
Distributor
Discounts
Cost of Goods Profit + SG&A +
EU
Reseller
(Supply Chain) R&D
24
Source: Mark Leslie, Stanford GSB

25. Channel Economics: OEM or IP Licensing
List
Your Revenue Price
Cost of
Distributor
Distributor
Discounts
Master
Goods Profit + SG&A +
EU
Reseller
(Supply R&D
Chain)
Cost of
Goods Profit + SG&A
Reseller
(Supply + R&D
Chain)
Your Product Becomes Your
Customer’s Cost of Goods
25
Source: Mark Leslie, Stanford GSB

26. Example: Book Publishing
National
Publisher Printer Wholesaler Retailer Customer
Distributor
26

27. Book Publishing
National
Publisher Distributor Retailer Customer
Wholesaler
•Percent of
Retail 35% 15% 10% 40%
$7.00 $3.00 $2.00 $8.00 $20.00
• You get
- 35% of retail
- the distributor gets 10%
- the wholesaler gets 15%
- the retailer gets 40%
- less any discount they offer the customer
27

28. Book Publishing Economics
National
Publisher Wholesaler Retailer Customer
Distributor
Allowances
Wholesale costs
Bills
Markup
Credit
guarantees
Payment
guarantees
Payment
guarantees
Return rights
Credits
28
Payments

29. Book Publishing Delivery
National
Publisher Printer Wholesaler Retailer
Distributor
Prepare film Receive
(content)  Schedules
 Print
Determine Merchandise
orders
allocations titles
 Bundle
counts
 Film
Deliver Sell
orders magazines
 Establish Prepare Print and
identity galleys ship
 Create magazines
demand
Acknowledge 29
returns

30. Nature of Products Impact Channel:
Physical or Virtual?
» Access to customers changes
dramatically
» Logistics related to product complexity
» People as products
30

31. Bits vs. Atoms
Channel
Web Physical
Bits
Product
Physical
31

32. Product and Channel Are Bits
Channel
Web Physical
 Rapid Agile and
Customer Development
 Fastest to acquire early
Bits customers and scale
Product
Physical
32

33. Web 2.0 – Product/Channel Are Bits
Channel
Web Physical
 Google
 Twitter
 Facebook
Bits
 Zynga
 Cloud Services
Product
Physical
33

34. Product Is Bits, but Channel Is People
Channel
Web Physical
 Rapid Agile and  Rapid Agile and
Customer Development Customer development
 Fastest to acquire early  Traditional sales channel
Bits customers and scale  May require installation
Product
Physical
34

35. Traditional Enterprise Software
Channel
Web Physical
 Google  Microsoft
 Twitter  SAP
 Facebook  Oracle
Bits
 Zynga
 Cloud Services
Product
Physical
35

36. Physical Products Sold Over the Web
Channel
Web Physical
 Rapid Agile and  Rapid Agile and
Customer Customer
development development
Bits  Fastest to acquire early  Traditional sales
customers and scale channel
 May require installation
Product
 Rapid Customer
development
 Logistics, shipping and
Physical manufacturing critical
 Customer service
36

37. Killing Traditional Storefronts
Channel
Web Physical
 Google  Microsoft
 Twitter  SAP
 Facebook  Oracle
Bits
 Zynga
 Cloud Services
Product
 Zappos
 Amazon
 Cafepress
Physical
 Netflix
 Consumer electronics
37

38. The Factories May Be in China
Channel
Web Physical
 Rapid Agile and  Rapid Agile and
Customer development Customer development
 Fastest to acquire early  Traditional sales channel
Bits customers and scale  May require installation
Product
 Rapid Customer  Longer customer
development feedback cycle
 Logistics, shipping and  May require large capital
Physical manufacturing critical requirements for scale
 Customer service
38

39. We Still Make Things that Need Salespeople
Channel
Web Physical
 Google  Microsoft
 Twitter  SAP
 Facebook  Oracle
Bits
 Zynga
 Cloud Services
Product
 Zappos  Cars
 Amazon  Solar panels
 Cafepress  Wind turbines
Physical
 Netflix  Bookstores
 Consumer electronics  Consumer electronics 39

40. Homework
» Talk to 10-15 potential channel partners
+ (Salesmen, OEM’s distributors, etc.)
» What were your hypotheses about who/what your channel would
be? Did you learn anything different?
» Did anything change about Value Proposition?
» Update your Google Group with Business Model Canvas
» Draw your channel diagram
» Summarized in a 5 Minute Presentation
» Read
» Startup Owner’s Manual pages :227-256, 332-342
40

41. Appendix
41

42. implantable drug infusion pumps
with remote physician control
for chronic pain patients at home
“the right dose at the right time and place”
42
Christian Gutierrez (EL), Ellis Meng (PI), Carol Christopher (IM), Tuan Hoang (FE)

43. Chronic Pain v3 FS Team
Training Patients
Faster relief
KOLs Trade shows
Formulary Acceptance
Clinical data
Efficient patient
Foundations management and Clinicians
FDA Dosing flexibility Support
Advocacy Groups
Access to high-value
Institutions
OEMs therapies and
pharmacoeconomics Hospitals
IP
Payors
Wireless Proprietary
Developers Reduce length of Pain clinics
knowledge
hospital stays and
Human Resources pharmacoeconomics
Product Dev Costs Unit sales
Manufacturing Costs Support Services
Marketing Costs FDA/Clinical Trials 43

44. Chronic Pain v4 FS Team
Trade shows Training
Faster relief Patients
KOLs Formulary Acceptance
Clinical data
FDA Efficient patient
Foundations management and Clinicians
CMS (Medicare) Dosing flexibility Support
Advocacy Groups
Access to high-value
Institutions
OEMs therapies and
pharmacoeconomics Hospitals
IP
Wireless Payors
Developers Proprietary
pharmacoeconomics Pain clinics
knowledge
Electronic health Human Resources
record providers
Product Dev Costs Unit sales
Manufacturing Costs Support Services
Marketing Costs FDA/Clinical Trials Bundled kits Electronic records 44

45. Getting Out
Clinicians » Dr. Stan Louie, Drug Formulation Expert (USC Pharmacy)
» Dr. Giovanni Cucchiaro, Anesthesiologist (CHLA)
Institutions/patients » Dr. Diana Hull, Physician (Group Health in Washington
state, formerly at Kaiser California)
» Thomas Hsu, Insurance Specialist (Network Medical
Management; a California ICA)
» Two chronic pain patients
˃ Pump user and creator of support forum
˃ User of oral narcotics and patches
Regulatory » Dr. Frances Richmond (Director Regulatory Science
Program, USC)
Entrepreneurs/ » Richard Hull (formerly at company selling Lapband)
45
Industry

46. Product Flow/Channel
Electronic Partners/
Health Fluid Synchrony
OEMS
Records
Electronic Support Pump + Bundled
Records Services Controller Kits
Hospitals
(Anesthesiologists
Patients Neurosurgeons)
Pain Clinic
(Anesthesiologists
Neurosurgeons)
46

47. Channels (Direct)
Hospitals • Direct to institutions
• Some formularies involved in purchase decisions
Pain Clinics
• Some doctors make purchase decision directly
• Device company/Doctor relationship is key
• Heavily influenced by :
• Clinical study results
• Regulatory approval
• Reimbursement
47

48. Patient Care Flow (Now)
Partners/
Fluid Synchrony
OEMS
Support Pump + Bundled
Services Controller Kits
Hospitals
Surgery/Rx/ (Anesthesiologists
Patient
Discharged reprogramming Neurosurgeons)
Pain Clinic
Trial period/ Scheduled (Anesthesiologists
Home setting follow-up Neurosurgeons)
48
Weeks/months
Key factors: Reimbursement , state regulations

49. Patient Care Flow (Proposed)
Electronic Partners/
Health Fluid Synchrony
OEMS
Records
Electronic Support Pump + Bundled
Records Services Controller Kits
Actionable feedback
to doctors/institutions
E-prescription / closing loop
Hospitals
Surgery/Rx/ (Anesthesiologists
Patient
Discharged reprogramming Neurosurgeons)
Pain Clinic
Trial period/ Scheduled (Anesthesiologists
Home setting follow-up Neurosurgeons)
49
Weeks/months
Days Key factors: Reimbursement , state regulations

50. Regulatory Considerations
PMA 510K
Trial size 100’s of patients 20-100
Costs Up to $100,000 per patient
$10-50 MM $1-10 MM
Time ~ 3-4 yrs + post ~ 2-3 yrs
approval follow-on
• PMA approval with grouping of FDA approved drugs.
• Clinical trials results used to obtain CMS (Medicare) approval
• 510K restricts technology to predicate devices
• Can be more difficult to market against incumbents
• European CE mark is easier to attain (safety and performance only)
50

51. Take-Aways
• Channel is direct in this existing market
• Channel for e-health is more complex and evolving
• State-to-state regulations can impact incentives
• Can pose problems as electronic records systems vary
across the country
Next Steps
• Understand costs associated with reaching
doctors/institutions directly
• Understand structure of e-health channel
• Develop regulatory pathway (timelines and cost profile) 51

52. Advanced Chemistry for
Pharmaceutical Progress
Team: Kiel Neumann (EL)
Stephen DiMagno (PI)
Allan Green (Mentor)
52

53.  PET is a non-invasive medical diagnostic
technique for cardiac, brain, and tumor imaging
 GFP technology makes new (unknown) and
known (but clinically inaccessible) [18F]-labeled
radiotracers readily available
 Fast, multiplatform, high efficiency synthesis of
these fleeting, precious agents.
 Initial target indications: pediatric neuroblastoma,
Parkinson’s disease.
53

54. The Business Model Canvas
SOPs for precursors Technical Assistance
cGMP manufacturer and drugs (Image Atlas)
Radiopharmacies Accessibility (RCY) Radiopharmacies
Recruit clinical sites FDA regulatory support
Nuclear Medicine and Purity
In vivo animal studies
Radiology departments Speed Equipment producers
Develop regulatory
PET/SPECT
plan for pre IND
Multiplatform Technical assistance Prescribing physicians
meeting
Sensitivity (nca)
ID cGMP CRO
Pharmaceutical Specific compounds Radiologist who perform
Fund-raising
development studies
companies
Direct sales of precursor
General
IP methodology for
PoP data adding fluorine to Drug developers
R&D and clinical studies
IP lead compounds of
presented in journals and
PoP data interest
meetings
Regulatory plan Sales of precursor Radiologists
Understanding of the through global finished
regulatory process pharmaceutical
distributor
Sales of intermediates
Contract cGMP precursor manufacture
Salary, Rents Technology license 54
Clinical trials
Product license (royalty)

55. 1) Radiologists and Nuclear Medicine Physicians
2) Radiopharmacy companies (Cardinal Health, Siemens, GE Healthcare, IBA,
AAA)
3) Equipment manufacturers (GE, Philips, IBA, Advion)
4) cGMP manufacturers
1) Pharmaceutical companies
2) Radiologists and Nuclear Medicine Physicians
55

56. - Face to face with attending Radiologist at Stanford
University
- Face to face with radiopharmacist at UCSF
- Conference call with Nuclear Radiologist at
Memorial Sloan Kettering
- Conference call with president of medium size
drug company with PET product at the FDA
- Telephone conference with cGMP facility 56

57. - Immediate need for our product
- Currently used SPECT product for neuroblastoma is limited by
absence of correlative CT data
- Our lead PET agent would provide more information on existing
imaging equipment base
- Two customers offered to participate in clinical trials
- Potential for further development of other tracers identified in
interviews
- Actual need for the general procedure
- Allow access to previously unknown tracers
57

58.  Face to Face meeting with president of small radiopharmaceutical company
 Face to face with a clinician at Memorial Sloan-Kettering
 Face to face with Global Production Manager of Molecular imaging for one of
world’s largest radiopharmaceutical companies
 OncoKinib collaboration between Geurbet, OncoDesign, and Ariana
pharmaceuticals
 Face to face meeting with head of R & D and International Production
Manager from Linz, Austria
 Eckert and Zeigler – German PET modular synthesis provider
 Face to face meeting with Executive Director and CEO of Scott Tech Center in
Omaha, NE
 Introductory teleconference to CEO of Innovation Accelerator 58

59.  Significant Interest in our technology
 Radiopharmacies want GMP product
 No interest in GMP reagent preparation
 Third-party manufacturers would use our developed synthetic pathways
 Internal competition with one world radiopharmaceutical leader
 Best to approach one of other two world leaders
 Scott Tech Center
 Willing to offer free advice on startup strategy
 Provided introduction to Innovation Accelerator
 Offered introduction to Director of Venture Technology of one of world’s leading
radiopharmaceutical companies 59

60. The Business Model Canvas
Technical Assistance
cGMP manufacturer SOPs for precursors
(Image Atlas) Radiopharmacies
Radiopharmacies and drugs
Accessibility (RCY) FDA regulatory support
Nuclear Medicine and Recruit clinical sites
Purity Equipment producers
Radiology In vivo animal studies
departments Develop regulatory Speed
PET/SPECT Prescribing physicians
plan for pre IND
meeting Multiplatform Technical assistance
Sensitivity (nca) Radiologist who perform
ID cGMP CRO
Pharmaceutical Specific compounds studies
Fund-raising
development
companies
General
methodology for Direct sales of precursor
IP adding fluorine to Drug developers
PoP data lead compounds of R&D and clinical studies
interest presented in journals and
IP meetings Radiologists
PoP data
Regulatory plan Sales of precursor
Understanding of the through global finished
regulatory process pharmaceutical
distributor
Sales of intermediates
Contract cGMP precursor manufacture
Salary, Rents 60
Technology license
Clinical trials
Product license (royalty)

61. • F-dopa iodonium intermediate
• F-dopamine iodonium intermediate We provide accessibility
Reagents
•ABX
Could license precursor
•Eckert & Ziegler synthesis for
•GE MX module for TracerLab
GMP Cassette or •Siemens Explora incorporation in
Components
modules
•TracerLab/ GE Require GMP precursor (or
•Eckert & Ziegler
•Siemens Explora cassette) to develop our
GMP Compliant
Synthesizer
•Neoprobe
•Synthra
product with their
synthesizer
•Siemens PETNet
•GE Amersham Only want GMP
PET
•Cardinal Health
•AAA
precursor in modules 61
Radiopharmacy
distributor
•Iason without development

62.  Conference call with top 40 Fortune 500 chemical distribution company
 Open to cGMP production of our potentially proprietary precursors
 Interested in developing a general “plug-and-play” cassette
 Would allow implementation of our methodology and precursors for any
radiochemistry module
 Important for FDA compliant production of any drug used in patient diagnostics
 Face to face meeting with Director of Business Development of a leading drug
discovery outsourcing company
 Discussed preclinical studies and contract manufacturing of proprietary
intermediates
- Face to face with former Director of Chemistry of major pharmaceutical
company
- Significant interest in general methodology application to proprietary
compound syntheses
62

63. » Initially seeking to market method technology
-too diffuse, but many opportunities (i.e. product-driven
opportunities more than general technology-driven)
» Need to identify specific imaging product opportunities
» Validated hypothesis for immediate need of tracers
» Raised question on identity of lead compound pipeline
for Parkinson’s disease
» Recruited two potential partners for clinical trials
63

64. Approximately 2.2 million procedures in the US.
Drug costs range from $700 (on-patent) to ~$150 (generic FDG)
US sales of radiopharmaceuticals for PET and SPECT $1.2 billion
US sales expected to grow to $6 billion by 2018
Global numbers approximately 2x
64
Source: Bio-Tech Systems Report #330; data for 2010.

65. 2500 installed PET scanners
PET radiopharmacies cover the entire US market
Radiopharmacies have an interest in proprietary agents as a basis of competition
in their market.
65

66. Neuroblastoma Parkinson’s Disease
Prevalence: about 6000 US cases DatSCAN sales in Europe ~$100 M
about 1000 new cases per year
The world's highest recorded
Subjects receive 3-6 images/year prevalence of Parkinson's Disease of
to follow response to therapeutic protocols any region is in Nebraska, with 329.3
people per 100,000 population
World market at U.S. x 2 gives potential of
40,000-70,000 scans/year US – 600,000 patients 1 scan per year
@ $500 = $300 M
Drug costs $500/per gives ~$20 - $35 M
66