Business Plan

Executive Summary

1. The problem and your solution. Equipment for building the infrastructures of communities is expensive, is designed for obsolescence, and relies on external inputs of energy and resources. We are bulding open source, low-cost, lifetime design equipment that is easy to maintain and modify using local resources. We are building a Lego set for real infrastructures - to cater to the needs of Cultural Disruptives.
2. Market size and growth opportunity. The population size of customers is about 0.1% of the developed world population - the Cultural Disruptives - approximately 1M people in the developed world. This is a small subset of the 2.5% population of Innovators in Roger's graph of Innovation Diffusion. The product market values for the 50 GVCS technologies is significantly more than $1T per year, as seen in GVCS Market Size for established industries. Thus, the market value of production from product sales only is $1B/year, and this is not to mention derivative value generated from products related to the GVCS (such as consrtruction services, agricultural products, energy and fuel production, etc.)
3. Your competitive advantage. Our competitive advantage is open source, continuing innovation - which is endorsed by crowd support. We produce low cost (4-8x cheaper than industry standards) and we typically have 1-year primacy as developers of products before we train our competitors. Training competitors increases our social capital with foundations and other supporters. Our positioning as a disruptive market force provides us with Social Capital, such as True Fans ($6k/month currently), unsolicited donations from foundations, and visibility in the media. Our competition includes established industries for the 50 GVCS machines. Another competitive advantage is lifetime, modular design - which adds a factor of 10 value in longevity, and adds value by allowing the user to maintain and fix the machines without expensive repairmen.
4. Business model. Our customers are small entrepreneurs - such as builders, farmers, or others who are interested in DIY productio of their living and working environments. Our development collaborators are Replicators. The sale price of the CEB Press is $9k, and the build cost is $4-5k in a Collaborative Production business model. We demonstrated economic feasibility in 2011 by clearing $25k in product sales, and we have several product requests per month without having begun advertising. Our sales strategy is leveraging our Social Capital such as the TED Talk, publishing through our social media and networks, speaking engagements, and media channels. Our current development program revolves around streamlining production to producing one machine per day with 8 people, with 4 production runs per month, to net $16-20k per month to fund staff. The other part of the business model training competitors (Distributive Enterprise) and securing non-profit sector funding from foundations and individuals. To do this, we are setting up a hybrid for-profit/non-profit organization. We will transition to replication focus after the 50 technologies are developed by 2016.
5. Executive team. Marcin Jakubowski, Ph.D., Executive Director and Founder, TED Fellow, Shuttleworth Fellow; Aaron Makaruk, Director of Development, Co-Founder of Youth on Record before joining OSE full time in in Nov. 2011; Cameron Colby Thompson, Board of Directors, OSE Treasurer. Serial entrepreneur, founder of Honest Policy.
6. Financial projections and funding.

• • 2012 - $500k in funding; Developing Collaborative Production funding of $20k/month by December;
  • 2013 - $80k/month Collaborative Production funding goal, mid-year. 2013 goal: $18k/month from True Fans; total 2013 earnings of $500k + $1M in foundation funding; 2013 milestone of full establishment of organizational infrastructure (24 staff) supported fully by Collaborative Production. Needs Education Curriculum for cross training + Master Fabricator.
  • 2014 - Continuing bootstrap funding; full parallel development of 6 prototypes per month; organizational stabilization towards education and replication program development if budget above $1M. $1M in production/True Fans + $4M in foundation funding. Accelerated quality of documentation, prototyping, testing with budget over $1M bare minimum.
  • 2015 - Continuing funding along similar lines - extension of 2014. Addition of replication/branding/training program development. Total $5M funding.

Body

Do at least first 7 of these -

1. Value proposition.

Industrial machinery is typically expensive and value-engineered (planned for obsolescence) – as part of a paradigm of short-term profit on both the side of the machine producer and machine user. This has a centralizing, get-big-or-get-out effect where it is difficult for communities to operate as resilient economies. Our solution is producing low cost, lifetime design machinery that meets or exceeds industry standards, and to provide enterprise support for local economic production of essential goods (food, energy, housing, technology). Our solution is like Lego blocks but for life-size machines - retaining simplicity of design, transparency, scalability, modularity, and user-serviceability to reduce operating and maintenance costs. This reduces barriers to entry to productive enterprise, enabling economic autonomy on the scale of communities.

The target customers are twofold. First is the buyer of our equipment, who is typically an entrepreneur or DIY producer. The benefit to the entrepreneur/DIY producer is lowered barriers to entry to enterprise, as well as reduced operating and maintenance costs because the machines are designed to be user-serviceable and they typically operate on local fuel or feedstocks, such as biomass pellet fuels with the modern steam engine.

The second target customer is the Cultural Disruptive. There is a number of such people who view the GVCS as a potent solution, while refusing to take on just any standard job. (should do a market survey to gauge interest - based on economics of a training model.) The benefit to the Disruptive is a lifestyle investment in a viable career path as a disruptor within a dedicated community that is highly aligned with a lifestyle of Intrinsic Motivation.

1. Target market.

The target market includes product sales, organizational development, and trainees. Because of our significant cost advantage of 4x lower price than industry standards, we aim to sell a number of brick presses - to village builders and other entrepreneurs. The demographics are typically adults 20+ in age - startup individuals and seasoned professionals(50+) who appreciates the need for low-cost, lifetime-design, human-serviceable machines.

The recruting part is more difficult. We are looking for a team of lifestyle investors. As stated in the Strategic Plan.

The trainees will be those people who upon completion of the GVCS by 2016 can begin their 2-year, crash-training curriculum for Civilization Construction. This demographic is undetermined, and we will need to take a survey to assess the parameters by which individuals would be willing to participate - cost, duration, skill set, training method, resource access.

1. Sales/Marketing.

We need 4 product sales per month in 2012 and 16 in 2013. Our social networks and media presence should cover this. Otherwise, recruiting of our team should be performed through standard recruiting channels - but focusing on cultural creative internet media.

1. Production. How do you produce your product or service? Common choices include manufacturing in-house, outsourcing, off-the-shelf parts. The key issues here are time to market and cost.
2. Distribution. How do you distribute your product or service? Some products and services can be sold and distributed online, others require multi-level distributors, partners, or value-added resellers. Decide whether the product is local or international.
3. Revenue model. See Top 10 Business Models How do you make money? The key here is to explain to yourself and to investors how your pricing and revenue stream will cover all costs, including overhead and support, and still leave a good return.
4. Cost structure. What are your costs? New entrepreneurs tend to focus only on product direct costs, and underestimate marketing and sales costs, overhead costs, and support costs. Test your projections against actual published reports from similar companies.
5. Competition. How many competitors do you have? No competitors probably means there is no market. More than ten competitors indicates a saturated market. Think broadly here, like planes versus trains. Customers always have alternatives.
6. Unique selling proposition. How will you differentiate your product or service? Investors look for a sustainable competitive advantage. Short-term discounts or promotions are not a unique selling proposition.
7. Market size, growth, and share. How big is your market in dollars, is it growing or shrinking, and what percent can you capture? Venture capitalists look for a market with double-digit growth, greater than a billion dollars, and a double-digit penetration plan.

Financial Model

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1. Focus on headcount. Outside of marketing programs, the basis for all cost in Internet software is headcount. Just figure out whom you’ll hire and how much you’ll pay and you can’t go far wrong.
2. Plan slow, run fast. The most likely scenario is that you won’t be able to hire engineers fast enough, and that revenues will come more slowly too. Investors expect their money to drive artificially accelerated growth rates, but signing up for that sometimes just blows a company up before you’ve had a chance to figure everything out. At least in the financial model, give yourself as much time to grow as you can.
3. Run top-down sanity-checks. To estimate what a company is likely to spend each year, try doubling the average salary and multiplying it by the number of employees. A 100-person company might spend as much as $15 million per year.
4. Forget economies of scale. The biggest whopper is that a business will magically become more efficient as it grows. If you really believe this, just walk into the headquarters of Amazon or eBay. Bureaucracies grow. Salaries float away. Straining to make a model work, I always forget that per-employee costs rise every year.
5. Admit that revenues are a mystery. If you don’t have any revenues yet, you can’t say what they’ll be. The point of a model is to prove you can make money if people buy your product, not to insist that they will. By developing different scenarios based on different levels of demand, you can later calibrate hiring and spending according to which scenario fits reality best.
6. Build from building blocks. Nearly every model is the sum of smaller units. In Redfin’s case, our unit is a market like the San Diego real estate market, which we plan to grow to a certain size in a certain number of months, hopefully returning a certain amount of profit to the overall business. We can then gauge whether the model works by just looking at whether San Diego works, and then asking, “Now what if we had twenty San Diegos?” For another company, it may be a user-created website, with so many page-views and so many ads, or it may be the productivity of a single salesperson, with a million dollars in quota per year.
7. Take out “hope.” Think about what is most likely to happen, so that a bookie would say you’re as likely to out-perform the plan as under-perform it. Generally speaking, “hope” is not a strategy.
8. Flag your assumptions. Rather than burying your assumptions in Excel formulae, call them out in a separate tab of the workbook, so that you have a control panel for adjusting the model. This is especially important if you plan to share your model with potential investors.
9. Hit $100 million in revenues within five years. The premise of most venture investments is the possibility of generating ten-fold returns in five to seven years, which is hard to do if you spend $5 million to build a $25 million company.
10. Keep market-share under 20%. Most startups reach a jillion in projected revenues by assuming that the business grows by leaps and bounds for five years. Since there’s a natural limit on growth, be ready for the question: “What would your market-share be in year five?” If it’s over 20%, take the jillion-dollar projection down a notch. Even a hit like iPod doesn’t have 20% market-share. You’ll be lucky to come close to 20% of any market.