Last assignment in Technology Ventures Course at Stanford

1. Canned Heat
Cost and Revenue Model
Stanford Technology Ventures II Course
Summer 2013

2. Physico-Chemical Energy Storage
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A B
A and B can be stored independently, at room temp
for months with no loss of energy
A B
When A & B are brought into contact, heat is
generated
A B
Energy In
Energy Out
When AB are heated, energy is stored as A and B separate

3. Distributed Electric Thermal Storage System
(ETS)
• Initial Market- about 40% of all US homes (northern ½ of US), all of
Canada, most of central, northern, eastern Europe
• Energy can be stored at room temp for weeks, months with no power
or insulation
• Units are “charged” during low electricity prices using the grid, or via
solar PV
• kW of Heat (warm air) released on demand- only watts needed to
release kWs
• Low temperature, benign and inert materials
• Utilities providing incentives for ETS
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4. How does the end user save heating costs?
• Charge the unit during low electricity prices
• Early AM or weekends
• Release heat when needed (and costs are much higher)
• Modular reactor can be removed, charged, and stored.
• Breakeven in 4-5 years, sooner with utility incentives
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5. Heating A Room with ETS
• Put your Canned Heat unit in the
office or room
• Add water to the humidifier
• Set the thermostat and timer
• Heat
• Fan draws in room air
• Mixes with humid air
• Air reacts in chamber
• Releases warm air (+10-40F
increase)
• Recharging
• Unit waits until programmed low
rates set in, then charges.
Humidifier
Warm Air (75F)
Room Air (60F)
Thermostat controls operation
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6. Products
• End Users
• Heat only units
• Integral heat/charge unit
• Replaceable reactors
• Separate recharger
• Infrastructure - Distributor/Partner
• Multiple Reactor charging system (solar or wind driven) for
installer/distributors
• Bulk refilling of reactor modules
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7. Sales Model
• Based on well established models
• Ink jet printers/ink, bottled water for office, propane for grills
• Sales Model
• Canned Heat unit(s) installed by user or installer
• Accessories include
• Extra reactor modules
• Separate charger unit
• Evergreen Revenue
• Installer- Replace reactors after 3 years (due mainly to fouling from particulates)
• Installer- Store pre charged reactor modules on site
• Sell through:
• Existing ETS Suppliers (using older technology)
• PV System Integrators
• HVAC majors (Lennox, Trane, Carrier)
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8. Sales Process
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Canned Heat
Sells Program to
Major Disty
Canned Heat
Sells Program to
Major Disty
Joint Sales Calls
to Customers
Disty/OEM
Sales Start
$100K/2 months
Customer
Orders
OEM Orders to
Canned Heat
$$
Ship products to OEM, modules
Terms NET 30
2 Months
30 Days

9. Basic Cost Model Assumptions
• Mfg
• Assembly time- 0.5 hrs @ $30 per hour rate
• Light assembly area, 500ft2 at $6 per ft2
• Light electronics assy
• Electronic modules outsourced
• Core manufacturing (reactor modules) done internally (some patents pending)
• A/R
• Inventory Turns- 12 per year
• Sales cycle
• 30 days
• Terms to disty- net 30
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10. Unit Sales Revenue
Model
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Pro Forma P&L for Canned Heat
Stanford Technology Course
Summer 2013 2014
Jan Feb Mar Apr May Jun Jul
Sales/Revenues 42,000$ 46,200$ 50,820$ 55,902$ 61,492$ 67,641$ 74,406$
COGS 19,000$ 20,900$ 22,990$ 25,289$ 27,818$ 30,600$ 33,660$
Gross Margin 23,000$ 25,300$ 27,830$ 30,613$ 33,674$ 37,042$ 40,746$
% 55% 55% 55% 55% 55% 55% 55%
Operating Expense
Office Rent 3,000$ 3,000$ 3,000$ 3,000$ 3,000$ 3,000$ 3,000$
Mfg Rent 3,000$ 3,000$ 3,000$ 3,000$ 3,000$ 3,000$ 3,000$
Communications 500$ 500$ 500$ 500$ 500$ 500$ 500$
Utilities 450$ 450$ 450$ 450$ 450$ 450$ 450$
Other 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$
Marketing/Travel Expense 2,000$ 2,000$ 2,000$ 2,000$ 2,000$ 2,000$ 2,000$
Mfg Payroll 12,000$ 12,000$ 12,000$ 12,000$ 12,000$ 12,000$ 12,000$
Office Payroll 19,500$ 19,500$ 19,500$ 19,500$ 19,500$ 19,500$ 19,500$
Total Expense 41,450$ 41,450$ 41,450$ 41,450$ 41,450$ 41,450$ 41,450$
% of Revenue 99% 90% 82% 74% 67% 61% 56%
Net Income -$18,450 -$16,150 -$13,620 -$10,837 -$7,776 -$4,408 -$704
Return on Sales -44% -35% -27% -19% -13% -7% -1%
Sales per Employee 14,000$ 15,400$ 16,940$ 18,634$ 20,497$ 22,547$ 24,802$
Office_Headcount 3 3 3 3 3 3 3
Mfg Headcount 3 3 3 3 3 3 3
Unit Forecast 100 110 121 133.1 146.41 161.051 177.1561
Overheads 1.3
Avg_Salary 5,000$
Space_per_person 100
Class_B_OFFICE 10.00$
Utilities_sqft 1.50$
Mfg salary 4,000$
What the Unit Sales Model
Shows
• With current assumptions
about 6 F/T employees,
break even occurs at
approximately 178 units
shipped per month or at
$74,406 in net revenue
• Model does NOT include
marketing, training, sotware
revenues

11. Unit Cost Model
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Summer 2013 2014
Jan Feb Mar Apr May Jun Jul
5KW Units
Revenue 42,000$ 46,200$ 50,820$ 55,902$ 61,492$ 67,641$ 74,406$
MFG COST 19,000$ 20,900$ 22,990$ 25,289$ 27,818$ 30,600$ 33,660$
Unit forecast 0.1 100 110 121 133 146 161 177
List Price 700.00$ 700.00$ 700.00$ 700.00$ 700.00$ 700.00$ 700.00$
Disty Discount 40% 280.00$ 280.00$ 280.00$ 280.00$ 280.00$ 280.00$ 280.00$
Net Sales 420.00$ 420.00$ 420.00$ 420.00$ 420.00$ 420.00$ 420.00$
COGS 190.00$ 190.00$ 190.00$ 190.00$ 190.00$ 190.00$ 190.00$
Humidifier $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00
Case $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Electronics $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Fan/blower assy $20.00 $20.00 $20.00 $20.00 $20.00 $20.00 $20.00
Adsorbent $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00
Assembly Cost 0.5 $0 $0 $0 $0 $0 $0 $0
Heater assy $30 $31 $32 $33 $34 $35 $36
Gross margin 230.00$ 230.00$ 230.00$ 230.00$ 230.00$ 230.00$ 230.00$
• 5kW unit model show here
• Other planned products include
• Replacement reactor modules
• Rechargers
• Infrastructure products and
services
• Patent licensing