1. Welcome to Customer Development Steve Blank Stanford - School of Engineering U.C. Berkeley - Haas School Of Business www.steveblank.com Twitter: sgblank Slides at: slideshare.net/sblank

2. I Write a Blog www.steveblank.com

3. I Drew This CustomerDiscovery Company Building CustomerValidation Customer Creation Pivot

4. I Called It:Customer Development CustomerDiscovery Company Building CustomerValidation Customer Creation Pivot

5. This Talk is Based On Business Model Generation Four Steps to the Epiphany Lean Startup

7. i.e. Product/Market fit- Repeatable sales model - Managers hired What’s A Startup? Search Execute A Startup is a temporary organization used to search for a repeatable and scalable business model

9. Professional Mgmt

10. Process

13. Product/Market fit- Repeatable sales model - Managers hired

15. Cash Flow Statement

17. Viral coefficient

18. Customer Lifetime Value

19. Average Selling Price/Order Size

20. Monthly burn rate

22. Cash Flow Statement

24. Scalable

25. Price List/Data Sheets

27. Pricing/Feature unstable

28. Not yet repeatable

30. Scalable

31. Price List/Data Sheets

33. Waterfall Development

34. QA

36. Waterfall Development

37. QA

39. Continuous Learning

40. Self Organizing Teams

41. Minimum Feature Set

43. features

44. customers/markets

46. describes “unknowns”

47. customer needs

48. feature set

49. business model

50. found by iteration

51. Plan describes “knowns”

52. Known features for line extensions

53. Known customers/markets

55. The Implementation is Agile Development

57. I Have a Vision

58. I Know What Needs to Be Done

59. Lets Launch a New Product!

60. Five Ways Founders Fail

61. #1I Know Who The Customer Is

62. #2I Know Exactly the Product They Need

63. #3I Know the Problem They Have

64. #4We Can Fix It After We Ship It All

65. #5 All I Need to Do is Execute the Plan

66. Product Introduction Model Concept/Seed Round Product Dev. Alpha/Beta Test Launch/ 1st Ship

67. Product Introduction Model The Leading Cause of Startup Death Concept/Seed Round Product Dev. Alpha/Beta Test Launch/ 1st Ship

68. Product Introduction Model:Two Implicit Assumptions Customer Problem: known Concept/Seed Round Product Dev. Alpha/Beta Test Launch/ 1st Ship Product Features: known

71. Hire Sales VP

72. Hire 1st Sales StaffSales

74. Hire Sales VP

77. Hire Sales VP

80. Waterfall

81. Q/A

83. Startups Are Not Smaller Versions of Large Companies

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

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

86. So Search for a Business Model

87. The Business Model: Any company can be described in 9 building blocks

88. CUSTOMER SEGMENTS which customers and users are you serving? which jobs do they really want to get done?

89. VALUE PROPOSITIONS what are you offering them? what is that getting done for them? do they care?

90. CHANNELS how does each customer segment want to be reached? through which interaction points?

91. CUSTOMER RELATIONSHIPS what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?

92. REVENUE STREAMS what are customers really willing to pay for? how? are you generating transactional or recurring revenues?

93. KEY RESOURCES which resources underpin your business model? which assets are essential?

94. KEY ACTIVITIES which activities do you need to perform well in your business model? what is crucial? 48

95. KEY PARTNERS which partners and suppliers leverage your model? who do you need to rely on?

96. COST STRUCTURE what is the resulting cost structure? which key elements drive your costs?

97. value proposition customer relationships key activities customer segments key partners cost structure revenue streams key resources channels 51 images by JAM

98. sketch out your business model

99. sketch out your business models

100. But,Realize They’re Hypotheses

101. 9 Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess

102. Customer Development The founders ^ Get Out of the Building

103. Customer DevelopmentThe Search For the Business Model Company Building CustomerDiscovery CustomerValidation Customer Creation Pivot

104. Customer Discovery CustomerDiscovery CustomerValidation Company Building CustomerCreation Stop selling, start listening Test your hypotheses Continuous Discovery Done by founders

106. Market Type

107. CompetitionTurning Hypotheses to Facts

109. Customer

110. User

112. Customer

113. User

115. Market Type

117. (Customer)

120. Customer

121. User

123. Market Type

125. (Customer)

129. Iteration without crisis

131. Minimum feature set speeds up cycle time

133. The Pivot Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA Publishing Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive A Pivot is the change of one or more Business Model Canvas Components Leading doctors Key Opinion Leaders 3rd party manufacturers Distributors Breast Cancer Foundations ACOGACS OB/GYNs PCPs Direct Sales to hospitals Distributor IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Capital Equipment Sales and disposable item Per use fees

134. How Does This Really Work?Stanford Lean LaunchPad Class

135. How Does This Really Work?Stanford Lean LaunchPad Class 8 Weeks From an Idea to a Business

136. Pivot ExampleRobotic Weeding Talked 75 Customers in 8 Weeks

137. Our initial plan Confidential

139. White Farms, Large Peanut farmer in Georgia

140. REFCO Farms, large grower in Salinas Valley

141. Rincon Farms, large grower in Salinas Valley

142. Small Organic Corn/Soy grower in Nebraska

143. Heirloom Organics, small owner/operator, Santa Cruz Mts

144. Two small organic farmers at farmers market

146. Parks: Stanford Grounds Supervisor, head of maintenance and lead operator (has crew of 6)

147. Toro dealer (large mower manufacturer)

148. User of back-yard mowing system

149. Maintenance Services for City of Los Altos

151. Found weeding in organic crops is HUGE problem; 50 - 75% of costs Crews of 100s-1000 Back-breaking task (Ilegal) labor harder to get 1-5 weedings per year/field $250-3,500 per acre and increasing Food contamination risk

152. Decision to make – mowing vs weeding

153. Autonomous vehiclesWEEDING Dealers sell, installs and supports customer Co. trains dealers, supports dealers - Innovation - Customer Education - Dealer training - Low density vegetable growers - High density vegetable growers - Thinning operations - Conventional vegetables We reduce operating cost - Labor reduction (100 to 1) - Reduced risk of contamination - Mitigate labor availability concerns - Ag Dealers - Ag Service providers - Research labs - Ag Dealers - Ag Service providers Engineers on Machine Vision Two problems: - Identification - Elimination Asset sale Our revenue stream derives from selling the equipment Dealer discount COGS seek a 50-60% Gross Margin Heavy R&D investment

154. 1 Week – 1 CarrotBot Confidential

155. CarrotBot Machine Vision data collection platform Monochrome & Color Cameras Laser-line sweep (depth measurement) Encoders (position/velocity) Onboard data acquisition & power CarrotBot 1.0

157. Demo, demo, and demo!!

158. Proximity is paramount

159. Technology Design

160. Marketing

161. Demo and customer feedback

162. Organic Farmers

163. Weeding Service Providers

164. Conventional Farmers

165. Cost Reduction

166. Remove labor force pains

167. Eliminate bio-waste hazards

168. Research Labs

169. Equipment Manufacturers

170. Distribution Network

171. Service Providers

172. IP – Patents

173. Video Classifier Files

174. Robust Technology

175. Dealers

176. Direct Service

177. Indirect Service

178. … then Dealers

179. Asset Sale

180. Direct Service with equipment rental

181. … then Asset SaleValue-Driven

182. Visit Highlights Above: Organic Carrots, 7wks. Top right: Conventional carrots Bottom Right: Very weedy. Will require multiple passes of hand weeding

183. Visit Highlights Carrot vs. Weeds Due to small root systems, carrots have no chance against weeds

184. Visit Highlights Organic Broccoli, closely cultivated. Weeds close to plants are hand-picked

185. Visit Highlights State of the Art in Weeding Technology for Organic Crops

187. Industrial (10,000s of acres)

188. Large (1,000s of acres)

189. Willing to pay $100k for one unit

190. Smaller growers (100s of acres) usually subcontract the labor services or rent equipment

191. All purchases through local dealers

192. Customer service is essentialPost-Test

194. Local Farm Mgr

195. Cliff Kirkpatrick, visited

196. Director, Ag Technology

198. CFO, CEO (Jeff Dunn)Cliff, Farm Mgr

200. Grower

202. Demo, demo, and demo!!

203. Proximity is paramount

204. Technology Design

205. Marketing

206. Demo and customer feedback

207. Mid/Large Organic Farmers

208. Agricultural corporations

209. Weeding Service Providers

210. Mid/Large Conventional Farmers

211. Cost Reduction

212. Remove labor force pains

213. Eliminate bio-waste hazards

214. Research Labs

215. Equipment Manufacturers

216. Distribution Network

217. Service Providers

218. IP – Patents

219. Video Classifier Files

220. Robust Technology

221. Direct Service

222. Indirect Service

223. … then Dealers

224. Direct Service with equipment rental

225. ($1,500/d; 120d/yr )

226. Low density: $1,500/d

227. High density: $6,000/dValue-Driven

228. World Ag Expo interviews:the need is real and wide spread 10+ interviews at show Everyone confirmed the need Robocrop, UK based, crude competitor sells for $171 K Revenue Stream Mid to small growers prefer a service Large growers prefer to buy, but OK with service until technology is proven Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability) Confidential

230. Demo, demo, and demo!!

231. Proximity is paramount

232. Technology Design

233. Marketing

234. Demo and customer feedback

235. Mid/Large Organic Farmers

236. Agricultural corporations

237. Weeding Service Providers

238. Mid/Large Conventional Farmers

239. Research Labs

240. Equipment Manufacturer

241. Distribution Network

242. Service Providers

243. 2 or 3 Key Farms

244. Cost Reduction

245. Remove labor force pains

246. Eliminate bio-waste hazards

247. IP – Patents

248. Video Classifier Files

249. Robust Technology

250. Direct Service

251. Indirect Service

252. … then Dealers

253. Direct Service with equipment rental

254. Low density: $1,500/d

256. Bill of Materials

257. Training & Service

259. MammOptics Final project presentation for E 245 Winter 2011

260. Project Overview Initial industry guesses and customer hypothesis

262. Non-radiative

264. MammOptics Business Model Canvas 1 of 4 Strong clinical data Training Maintenance Product Development IP Clinical trials FDA Hospitals Leading doctors 3rd party manufacturers Distributors Pioneering radiologists in hospitals Radiation-free Earlier detection Non-invasive IP Leading doctors Technical Expertise Direct sales to hospitals Product Development Clinical trials Operating Costs Capital equipment sales and disposable item

265. MammOptics MammOptics Business Model Canvas 1 of 4 Business Model Canvas 1 of 4 Strong clinical data Training Maintenance Product Development IP Clinical trials FDA Initial guess Initial guess Hospitals Leading doctors 3rd party manufacturers Distributors Pioneering radiologists in hospitals Radiation-free Earlier detection Non-invasive Test: Customer segment Value proposition Initial guess IP Leading doctors Technical Expertise Direct sales to hospitals Product Development Clinical trials Operating Costs Initial guess Capital equipment sales and disposable item

266. Finding the right customer From radiologists to gynecologists

267. MammOptics Excursions into hospitals Debra Ikeda Jason Davies Jafi Alissa Lipson Sunita Pal Leading doctors 6 women >40 8 women <40 Patients Alicia X-ray mammography Technicians Hospital Managers Paul Billings Holly V. Gautier

268. MammOptics Hospital purchasing decision tree

269. MammOptics Hospital purchasing decision tree Hospitals Complex purchasing decision tree. Several saboteours

270. MammOptics Private practice purchasing decision tree

271. MammOptics Private practice purchasing decision tree Private practice Faster adoption rate Attractive value proposition ✔

272. MammOptics Business Model Canvas 2 of 4 Strong clinical data Training Maintenance Product Development IP Clinical trials FDA Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive Hospitals (Capital Spending Committee) Leading doctors 3rd party manufacturers Distributors Research Hospitals Pioneering Doctors Hospitals OB/GYNs PCPs Direct Sales to doctors IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item

273. MammOptics Business Model Canvas 2 of 4 Strong clinical data Training Maintenance Product Development IP Clinical trials FDA Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive Hospitals (Capital Spending Committee) Leading doctors 3rd party manufacturers Distributors Research Hospitals Pioneering Doctors Hospitals OB/GYNs PCPs How do we get to our customer? Need sensitivity and specificity Direct Sales to doctors IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item

274. Getting to our customer The world of direct sales and medical marketing

275. MammOptics Interviews Breast Cancer Advocacy Groups Be Bright Pink Jennifer Glover Dr. Cindy Woo Dr. Jags Powers Dr. Aaron Shuvkan OB/GYNs Katrina Bell Tanay Dudhela Jed Hwang Medical Sales FDA/Clinical Trials Phyllis Whitely Carl Simpson

276. MammOptics Marketing

277. MammOptics Marketing Strong influence on doctors via ACOG Standard of Care Strongly influenced by KOLs Access to ACOG by former member

278. MammOptics Marketing Researchers with strong peer recommendations Researchers conducting important clinical trials Outsourced survey research Researchers with numerous publications

279. MammOptics Marketing Focus on prominent journals Need two big publications Choose KOL as Principal Investigators (PI)

280. MammOptics Marketing Effective method for educating doctors Workshop must be approved by ACOG Doctors required to attend workshops Taught by objective medical experts

281. MammOptics Marketing ACOG Annual Clinical Meeting Opportunity for feedback from doctors Miami Breast Cancer Conference

282. MammOptics Marketing Trusted information source for patients Access to media outlets Critical opinion leader for technology adoption

284. Direct feedback from doctors

286. No customer feedback

288. MammOptics Pricing Strategy Equipment Lease model Per-use model Consumable Cost of the device $50,000 $5,000 $5,000 $25,000 Service per year $3,000 $10,000 0 0 Per-use fee 0 0 $50 0 Consumable 0 0 0 $20

289. MammOptics Pricing Strategy Approved by customers and investors Equipment Lease model Per-use model Consumable Cost of the device $50,000 $5,000 $5,000 $25,000 Service per year $3,000 $10,000 0 0 Per-use fee 0 0 $50 0 Consumable 0 0 0 $20

290. MammOptics Customer Workflow Current market Insurance Mammography Radiologist Hospital Administration Technician ACOG ACS Doctor specialty committee

291. MammOptics Customer Workflow Current market But what would happen if we replace mammography? Insurance Mammography Radiologist Hospital Administration Technician ACOG ACS Doctor specialty committee

292. MammOptics Customer Workflow Insurance Mammography Radiologist Breast Radiologists Hospitals Technicians Loss of jobs Eliminates loss leader Puts emphasis on biopsies Loss of jobs Hospital Administration Technician ACOG ACS Doctor specialty committee

293. MammOptics Customer Workflow Insurance Mammography Radiologist Hospital Administration Technician ACOG ACS Doctor specialty committee

294. MammOptics Customer Workflow Insurance Mammography Radiologist Insurance ACOG/ACS Same cost as mammography ($140) Reduced number of biopsies ($1000) Improved healthcare (mammography weak technique) Hospital Administration Technician ACOG ACS Doctor specialty committee

295. MammOptics Customer Workflow Insurance Mammography Radiologist Hospital Administration Technician ACOG ACS Doctor specialty committee

296. MammOptics Customer Workflow Insurance PCP OB/GYN Mammography Patient Radiologist Hospital Administration Technician MammOptics Doctor specialty committee ACOG ACS

297. MammOptics Customer Workflow Insurance PCP OB/GYN PCP OB/GYN Mammography Mammography Patient Patient Radiologist Radiologist PCP OB/GYNs Patient MammOptics Increased revenue More complete patient care Improved healthcare Comfort Revenue Hospital Administration Technician Hospital Administration Technician MammOptics MammOptics Doctor specialty committee ACOG ACS

298. MammOptics Customer Workflow Insurance PCP OB/GYN Mammography Patient Radiologist Hospital Administration Technician MammOptics ACOG ACS Doctor specialty committee

299. MammOptics Business Model Canvas 3 of 4 Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA Publishing Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive Leading doctors Key Opinion Leaders 3rd party manufacturers Distributors Breast Cancer Foundations ACOGACS OB/GYNs PCPs Direct Sales to hospitals Distributor IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Capital Equipment Sales and disposable item Per use fees

300. MammOptics Business Model Canvas 3 of 4 Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA ReimbursementPublishing Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive Leading doctors Key Opinion Leaders 3rd party manufacturers Distributors Breast Cancer Foundations ACOGACS OB/GYNs PCPs Learned how to reach the customer How do we build a company based on this? Direct Sales to hospitals Distributor IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Capital Equipment Sales and disposable item Per use fees

301. Building the company The backstage of a medical device company

302. MammOptics Interviews Stanford StatisticsSteve Axelrod Marga Ortigas-Wedekind FDA Clinical Trials Nick Mourlas Don Archambault Manufacturing Shannon Bergstedt Ali Habib Reimbursement Venture Capitalists Dana Mead Bill Starling Doctors/Sales Dr. Aron Shuftan Jed Hwang Michael J. Nohr

303. MammOptics Partners Manufacturing Choose manufacturing facility close to home

304. DSP RFIC Photo probe Disposable head MammOptics Manufacturing Partner I.I.T.Y.I.W.H.T.K.Y 9 Inches ~5 lbs 75% gross margin Discounts for Revenue Model COGS $4-5k per unit

305. MammOptics Technology I.I.T.Y.I.W.H.T.K.Y

306. MammOptics MammOptics Partners Partners Manufacturing Reimbursement Manufacturing Difficult to get coverage for new product.

307. MammOptics Reimbursement Partners Insurances CPT Codes $75-$150

308. MammOptics Partners Manufacturing Reimbursement 510K vs. PMA Largest cost Biggest financial risk FDA Clinical Trials

309. MammOptics Clinical Trials Stage 1 Pilot trials Feasibility Comparison with mammography 50 patients $600K 6 months 12/4/2009

310. MammOptics Clinical Trials Stage 2 Interim trials Prove superior safety-efficacy & sensitivity Stage 1 Pilot trials 500 patients $7.2M 6 months 15 months 12/4/2009

311. MammOptics Clinical Trials Stage 2 Interim trials Stage 3 FDA pivotal trials Stage 1 Pilot trials FDA class II, 510(K) w/ trials Focus on superiority & economic end-points 1500 patients $20.5M 6 months 15 months 24 months 12/4/2009

312. MammOptics Clinical Trials Stage 4 Post-market studies Stage 2 Interim trials 2000 patients $26.8M Stage 3 FDA pivotal trials Stage 1 Pilot trials Specific Cat III CPT/ACP Codes Market traction 6 months 15 months 24 months 24 months 12/4/2009

313. MammOptics Clinical Trials Stage 4 Post-market studies Stage 2 Interim trials $26.8M Stage 3 FDA pivotal trials Stage 1 Pilot trials $7.2M $600K $20.5M 6 months 15 months 24 months 24 months 12/4/2009

314. MammOptics Clinical Trials 12/4/2009

315. MammOptics MammOptics Partners Partners Manufacturing Reimbursement Financial timeline Funding FDA Clinical Trials

316. MammOptics MammOptics Financial / Operations Timeline 2016 2012 2013 2014 2015 2017 2018 M&A / IPO $50 MM Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q3 Series D $35 MM $40M Series C $30.5 MM $30M $20M Cash Reserve Series B $9 MM $15M Series A $3.5 MM $10M $5M Financial timeline System Initialize Launch Regulatory / Clinical Marketable Product Proof of Concept Second Release Beta Prototype Design Milestones 1st Release Test 2nd Release Test Beta-Version Testing Laboratory Prototype Publication Publication Clinical Results Post-Market Clinical Studies Pilot Studies US Pivotal Clinical Trials Clinical Milestones US Interim Trials Non-Specific Codes Provisional Patent IRB / IDE Specific Codes (Cat. I CPT / APC) Cat III CPT FDA – Class II – 510 (k) with Clinical Trials Regulatory/ IP Milestones Application and System Patents Initial Product Launch IC and Processing Patents Technology Licensing 145 12/4/2009

317. MammOptics MammOptics Financial / Operations Timeline 2016 2012 2013 2014 2015 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q3 $40M $30M $20M Cash Reserve $15M $10M $5M Initialize Proof of Concept Design Milestones Clinical Milestones Provisional Patent Regulatory/ IP Milestones Technology Licensing 146 12/4/2009

318. MammOptics MammOptics Financial / Operations Timeline 2016 2012 2013 2014 2015 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q3 $40M $30M $20M Cash Reserve $15M Series A $3.5 MM $10M $5M System Initialize Proof of Concept Beta Prototype Design Milestones Beta-Version Testing Laboratory Prototype Pilot Studies Clinical Milestones Provisional Patent Regulatory/ IP Milestones Technology Licensing 147 12/4/2009

319. MammOptics MammOptics Financial / Operations Timeline 2016 2012 2013 2014 2015 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q3 $40M $30M $20M Cash Reserve Series B $9 MM $15M Series A $3.5 MM $10M $5M System Regulatory / Clinical Marketable Product Beta Prototype Design Milestones Beta-Version Testing Laboratory Prototype Pilot Studies Clinical Milestones IRB / IDE Regulatory/ IP Milestones Application and System Patents IC and Processing Patents 148 12/4/2009

320. MammOptics MammOptics Financial / Operations Timeline 2016 2012 2013 2014 2015 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q3 $40M Series C $30.5 MM $30M $20M Cash Reserve Series B $9 MM $15M $10M $5M System Regulatory / Clinical Second Release Design Milestones 1st Release Test Publication Pilot Studies US Pivotal Clinical Trials Clinical Milestones US Interim Trials IRB / IDE Cat III CPT Regulatory/ IP Milestones Application and System Patents IC and Processing Patents 149

321. MammOptics MammOptics Financial / Operations Timeline 2016 2012 2013 2014 2015 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q3 Series D $35 MM $40M Series C $30.5 MM $30M $20M Cash Reserve $15M $10M $5M Launch Regulatory / Clinical Second Release Design Milestones 2nd Release Test Publication Publication Clinical Results US Pivotal Clinical Trials Clinical Milestones US Interim Trials Non-Specific Codes FDA – Class II – 510 (k) with Clinical Trials Regulatory/ IP Milestones Initial Product Launch 150 12/4/2009

322. MammOptics MammOptics Financial / Operations Timeline 2016 2012 2013 2014 2015 2017 2018 M&A / IPO $50 MM Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q3 Series D $35 MM $40M $30M $20M Cash Reserve $15M $10M $5M Launch Regulatory / Clinical Design Milestones Publication Post-Market Clinical Studies Clinical Results Clinical Milestones Non-Specific Codes Specific Codes (Cat. I CPT / APC) FDA – Class II – 510 (k) with Clinical Trials Regulatory/ IP Milestones Initial Product Launch 12/4/2009

323. MammOptics MammOptics Financial / Operations Timeline 2016 2012 2013 2014 2015 2017 2018 M&A / IPO $50 MM Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q3 Series D $35 MM $40M Series C $30.5 MM $30M $20M Cash Reserve Series B $9 MM $15M Series A $3.5 MM $10M $5M System Initialize Launch Regulatory / Clinical Marketable Product Proof of Concept Second Release Beta Prototype Design Milestones 1st Release Test Beta-Version Testing 2nd Release Test Laboratory Prototype Publication Publication Post-Market Clinical Studies Clinical Results Pilot Studies US Pivotal Clinical Trials Clinical Milestones US Interim Trials Non-Specific Codes Provisional Patent IRB / IDE Specific Codes (Cat. I CPT / APC) Cat III CPT FDA – Class II – 510 (k) with Clinical Trials Regulatory/ IP Milestones Application and System Patents Initial Product Launch IC and Processing Patents Technology Licensing 152 12/4/2009

324. MammOptics Business Model Canvas 4 of 4 Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA Reimbursement Publishing Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive KOLs 3rd party manufacturers Distributors Breast Cancer Foundations ACOGACS Clinical trial designer OB/GYNs PCPs Direct Sales to hospitals Distributor Online IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Per use fees

325. MammOptics Business Model Canvas 4 of 4 Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA Reimbursement Publishing KOLs 3rd party manufacturers Breast Cancer Foundations ACOGACS Clinical trial designer Earlier detection Non invasive Price Accuracy Immediate Results OB/GYNs PCPs Final iteration of our business model But… need to think about the big picture… Direct Sales to hospitals Distributor Online IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Per use fees

326. MammOptics Business Model Canvas 1 Strong clinical data Training Maintenance Product Development IP Clinical trials FDA Hospitals Leading doctors 3rd party manufacturers Distributors Radiation-free Earlier detection Non invasive Pioneering Doctors Hospitals Direct Sales to hospitals IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item

327. MammOptics Business Model Canvas 2 Strong clinical data Training Maintenance Product Development IP Clinical trials FDA Hospitals Leading doctors 3rd party manufacturers Distributors Research Hospitals Radiation-free Earlier detection Non invasive Pioneering Doctors Hospitals Direct Sales to hospitals IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item

328. MammOptics Business Model Canvas 3 Strong clinical data Training Maintenance Product Development IP Clinical trials FDA Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive Hospitals (Capital Spending Committee) Leading doctors 3rd party manufacturers Distributors Research Hospitals Pioneering Doctors Hospitals Direct Sales to hospitals IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item

329. MammOptics Business Model Canvas 4 Strong clinical data Training Maintenance Product Development IP Clinical trials FDA Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive Hospitals (Capital Spending Committee) Leading doctors 3rd party manufacturers Distributors Research Hospitals Breast Cancer Foundations Pioneering Doctors Hospitals OB/GYNs PCPs Direct Sales to hospitals IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Capital Equipment Sales and disposable item

330. MammOptics Business Model Canvas 5 Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA ReimbursementPublishing Doctors: Earlier detection Price Accuracy Patients: Radiation Free Non-Invasive Leading doctors Key Opinion Leaders 3rd party manufacturers Distributors Breast Cancer Foundations ACOGACS OB/GYNs PCPs Direct Sales to hospitals Distributor IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Capital Equipment Sales and disposable item

331. MammOptics Business Model Canvas 6 Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA Reimbursement Publishing Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive KOLs 3rd party manufacturers Distributors Breast Cancer Foundations ACOGACS OB/GYNs PCPs Direct Sales to hospitals Distributor IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Capital Equipment Sales and disposable item Per use fees

332. MammOptics Business Model Canvas 7 Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA Reimbursement Publishing Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive KOLs 3rd party manufacturers Distributors Breast Cancer Foundations ACOGACS Clinical trial designer OB/GYNs PCPs Direct Sales to hospitals Distributor IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Per use fees

333. MammOptics Business Model Canvas 8 Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA Reimbursement Publishing Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive KOLs 3rd party manufacturers (local) Breast Cancer Foundations ACOGACS Clinical trial designer OB/GYNs PCPs Direct Sales to hospitals Distributor IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Per use fees

334. MammOptics Business Model Canvas 9 Strong clinical data Training Maintenance Conferences CME courses Product Development IP Clinical trials FDA Reimbursement Publishing Doctors: Earlier detection Price Accuracy Immediate Results Patients: Radiation Free Non-Invasive KOLs 3rd party manufacturers (local) Breast Cancer Foundations ACOGACS Clinical trial designer OB/GYNs PCPs Direct Sales to hospitals Distributor IP Leading doctors Technical Expertise Product Development Clinical trials Operating Costs Marketing Costs Per use fees

335. Personal Libraries

336. Insight: No more bookshelves eBooks+150% YoY ‘10 Printed Books -20% YoY ‘10

337. Version 1.0: Personal Libraries

338. Original Idea: Personal Digital Libraries Import, organize and share thousands of digital papers

339. something-something-something.com Original idea Invincible Business Model: Version 1.0 SHORT TERMResearchers Lawyers Scientists LONG TERMAvid book readers Professionals Import, organize and share thousands of papers FB/TW posts from users you know Company blog, FB, TW, support forums Targeted marketing Product development Constant iteration & testing Libraries, Universities, Research Centers Bloggers and media targeting customer segment Academic Database providers Affiliate program SEO/SEM/SM IE/FF/Chrome App Stores Developers Marketers AWS Infrastructure SEM Eng & Marketing OpEx Affiliate program fees Licensing Subscription fees Ad revenue

340. Here’s What We Did Version 1.0: Personal Libraries

341. Got out of the building

345. Extensive Surveys

347. Extensive Surveys

348. 33,000+ Adwords

350. Extensive Surveys

351. 33,000+ Adwords

352. Compete Review

354. Extensive Surveys

355. 33,000+ Adwords

356. Compete Review

357. Market Sizing

359. Extensive Surveys

360. 33,000+ Adwords

361. Compete Review

362. Market Sizing

363. 50 bloggers

365. Extensive Surveys

366. 33,000+ Adwords

367. Compete Review

368. Market Sizing

369. 50 bloggers

370. 6 Social Networks

372. Extensive Surveys

373. 33,000+ Adwords

374. Compete Review

375. Market Sizing

376. 50 bloggers

377. 6 Social Networks

378. Usability Tests

382. Pipelines Optimize

384. Pipelines Optimize

386. Run away from this customer as fast as possible.

387. Run away from this customer as fast as possible. They don’t want to spend money and will incur infinite support and infinite cost.

389. Pipelines Optimize

392. Pipelines Optimize

394. Negative Margins

395. ECM = BoringNo adjacent pivots worked for the team

396. Version 2.0: Trusted Advice

397. something-something-something.com Original idea Invincible Business Model: Version 2.0 Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel) Developing trusted advice and advisors Web marketing Affiliate partnerships Constant iteration & testing FB/TW posts from users you know Company blog, FB, TW accounts Discover online goods recommended by friends at the lowest possible price from trusted vendors Bloggers and Media targeting customer segment Retail marketing partners IE/FF/Chrome teams Affiliate Program Providers Affiliate program SEO/SEM/SM IE/FF/Chrome App Stores Developers Marketers Content Library Install base Readership base AWS Infrastructure SEM Eng & Marketing OpEx Affiliate program fees Licensing Subscription fees Ad revenue

398. New Hypotheses

399. Here’s What We Did Version 2.0: Trusted Advice

402. Extensive Surveys

403. Landing Page TestsLanding pages tested on affluent, career aged professionals, approximately 70/30 male/female, N=800+

405. Extensive Surveys

406. Landing Page Tests

408. Extensive Surveys

409. Landing Page Tests

410. Market Research

412. Extensive Surveys

413. Landing Page Tests

414. Market Research

415. Compete Research

417. Extensive Surveys

418. Landing Page Tests

419. Market Research

420. Compete Research

421. Revenue Analysis

422. Two PrototypesInsidely.com wantio.com

424. Extensive Surveys

425. Landing Page Tests

426. Market Research

427. Compete Research

428. Revenue Analysis

429. Two Prototypes

432. Values celebrity trends & friends’ opinions

433. Wants high ticket items at lowest price

435. Hates tedious work

436. Identifies as influencer among friends

439. Version 2.0: Trusted Advice Top ~6M US Influentials (~$9B/year)

440. something-something-something.com Original idea Invincible Business Model: Version 2.0 Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel) Developing trusted advice and advisors Web marketing Affiliate partnerships Constant iteration & testing FB/TW posts from users you know Company blog, FB, TW accounts Discover online goods recommended by friends at the lowest possible price from trusted vendors Bloggers and Media targeting customer segment Retail marketing partners IE/FF/Chrome teams Affiliate Program Providers Affiliate program SEO/SEM/SM IE/FF/Chrome App Stores Developers Marketers Content Library Install base Readership base AWS Infrastructure SEM Eng & Marketing OpEx Affiliate program fees Licensing Subscription fees Ad revenue

441. Here’s What We Found Version 2: Trusted Advice

444. High Conversion43% clickthrough on Top Admissions Books for Stanford MBAs article Compare to 0.5% clickthrough on ads ~100x difference

446. High Conversion

447. Needs Addressed See videos at http://factnote.com/c/e245

449. High Conversion

450. Needs Addressed Super easy to install and use. I really did enjoy it! Great idea! I will keep the extension installed because I do think this is practical! I could see myself using this regularly

452. High Conversion

455. High Conversion

458. High Conversion

465. Life is short, focus on big markets

467. How? Customer Development The Process Narrative Interviews Surveys Videos Prototypes Business Model Canvas Scorekeeping Real-time Feedback Physical Reality Checks Skype Face-to-face

468. We Made Students Blog Their Progress It Changed Everything

469. Interview

470. Photos Videos

471. Surveys

472. Interview & Photos

473. Competitive Analysis

474. Key Findings

475. A/B Test Results

476. Key Question

477. Strategy

478. Business Model Canvas as the Scorecard

479. Carpe Diem www.steveblank.com

480. Customer DevelopmentTesting Your Hypotheses Steve Blank Stanford - School of Engineering U.C. Berkeley - Haas School Of Business www.steveblank.com Twitter: sgblank

481. I Write a Blog www.steveblank.com

482. This Talk is Based On Business Model Generation Four Steps to the Epiphany Lean Startup

483. Customer Discovery Phase 1 - Hypotheses

484. Customer Discovery CustomerDiscovery CustomerValidation Company Building CustomerCreation Stop selling, start listening Test your hypotheses Two are fundamental: problem and product concept

485. Customer Discovery Phase 3 TestSolutionHypothesis Phase 4Verify, Iterate & Expand CustomerDiscovery To Validation Phase 1Author Hypothesis Phase 2Test ProblemHypothesis

486. Customer Discovery

487. Customer Discovery Inside the Building Outside the Building

488. Value Prop 1 Product/MVP Customers Who/Problem Channels Physical/Virtual Value Prop 2 Market Type Revenue Streams Pricing Customer Relationships Get/Keep/Grow Partners Key Resources Customer Discovery Phase 1 - Hypotheses

489. Value Prop 1 Product/MVP Customers Who/Problem Channels Physical/Virtual Value Prop 2 Market Type Long-Term Vision/ Mkt Size Revenue Streams Pricing Customer Relationships Get/Keep/Grow Partners Key Resources Customer Discovery Value Proposition – Product/MVP Product Features/Benefits MVP

490. VALUE PROPOSITIONS what are you offering them? what is that getting done for them? do they care?

491. Testing the MVP Smoke testing with landing pages using AdWords In-product split-testing Prototypes (particularly for hardware) Removing features Continued customer discovery and validation Surveys Interviews

492. Testing the MVP (Web Example) Can you get customers to pay for a product that doesn’t yet exist (or barely does)? Do customers say they have a matching core problem? Landing page test for conversion What’s required to get customers to activate? (prizes, payment) Use customer problem to identify key word list plug into Google search traffic estimator - high traffic means there is problem awareness Drive traffic to site using Google search and see how deep into a registration process customers are willing to go through

493. Testing the MVP (Non-Web) Can you get customers to pay for a product that doesn’t yet exist (or barely does)? Interview customers to make sure they have a matching core problem Set up web site landing page to test for conversion Set up a Lighthouse Customer Program where potential customers pay to get early access to product prototypes

494. Customers Who/Problem Value Prop 1 Product/MVP Channels Physical/Virtual Value Prop 2 Market Type Revenue Streams Pricing Customer Relationships Get/Keep/Grow Partners Key Resources Customer Discovery Customer Segments

495. CUSTOMER SEGMENTS which customers and users are you serving? which jobs do they really want to get done?

496. Who’s The Customer? Consumer End Users, Corporate Customers Pay Multiple Consumers Etc.

497. Market/Opportunity Analysis How Big is It?: Market/Opportunity Analysis Identify a Customer and Market Need Size the Market Competitors Growth Potential

499. How large is the market be (in $’s) if they all bought?

502. How many people have the money to buy the product

503. How large would the market be (in $’s) if they all bought?

506. How many customers is that?

507. How largeis the market be (in $’s) if they all bought?

509. Identify and talk to channel partners

510. Identify and talk to competitorsTotalAvailableMarket ServedAvailableMarket Target Market

512. Demographic

513. Psychographic variables

514. Behavioral variables

515. Channel

516. etc…ServedAvailableMarket Target Market 254

517. Market Size: Summary Market Size Questions: How big can this market be? How much of it can we get? Market growth rate Market structure (Mature or in flux?) Most important: Talk to Customers and Sales Channel Next important: Market size by competitive approximation Wall Street analyst reports are great And : Market research firms Like Forester, Gartner

518. Corporate? Consumer? Business to Business (B to B) Use or buy inside a company Business to Consumer (B to C) Use or buy for themselves Business to Business to Consumer (B to B to C) Sell a business to get to a consumer Other Multi-sided Markets with multiple customers

519. What do they want you to do?Corporate Increase revenue? Decrease costs? Get them new customers? Keep up with or pass competitors? How important is it?

520. What do they want you to do?Consumers Does it entertain them? Does it connect them with others? Does it make their lives easier? Does it satisfy a basic need? How important is it? Can they afford it?

521. Market Type & Ignoring Customers Existing Market? Resegmenting an Existing Market? niche or low cost New Market? When do I ignore customer feedback?

522. Who’s the Customer in a Company? User? Influencer? Recommender? Decision Maker? Economic Buyer? Saboteur? Archetypes for each?

523. MammOptics Hospital purchasing decision tree Hospitals Complex purchasing decision tree. Several saboteours

524. MammOptics Private practice purchasing decision tree ✔ Private practice Faster adoption rate Good value proposition

525. MammOptics Customer Workflow Insurance Radiologist PCP OB/GYN Mammography Patient Technician Hospital Administration Sales representatives Demand Creation Doctor specialty committee ACOG ACS MammOptics

526. How Do Corporate Customers Interact to Buy? Organization Chart Influence Map Sales Road Map

527. Consumer Customer Interactions Do they buy it by themselves? Do they need approval of others? Do they use it alone or with others?

528. Pass/Fail Signals & Experiments How do you test interest? Where do you test interest? What kind of experiments can you run? How many do you test?

529. How Do They Hear About You? Demand Creation Network effect Sales

530. Channels Physical/Virtual Value Prop 1 Product/MVP Customers Who/Problem Value Prop 2 Market Type Revenue Streams Pricing Customer Relationships Get/Keep/Grow Partners Key Resources Customer Discovery Channels

531. Multiple Customer Segments Each has its own Value Proposition Each has its own Revenue Stream One segment cannot exist without the other Which one do you start with?

532. CHANNELS how does each customer segment want to be reached? through which interaction points?

533. OEM System Integrators Direct Sales Force Our Customers Value-Added Resellers (VAR’s) Our Company Dealers Distributors Retail/Mass Merchants Web/Online OEM System Integrators Direct Sales Force Value-Added Reseller Dealers Distributors Retailers/Mass Merchants