NanoSQUID

SQUID sensors for everyday applications.

April 11, 2014

Contents
1 Executive summary 2 Product idea 2.1 Opportunity denition 2.2 Customer Benet . . . 2.3 Product visualisation . 2.4 Development progress . 3 5 5 5 6 6 7 7 7 8 8 8 9 10 11 11 12 12 12 13 13 13 14 14 15 15 15 16 16 16 17

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3 Management team 3.1 The start-up team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Additional personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Marketing 4.1 Market segments and market size 4.2 Unique selling proposition . . . . 4.3 Target market and customers . . 4.4 Competitors . . . . . . . . . . . . 4.5 Market size and growth . . . . . . 4.6 Marketing Strategy . . . . . . . . 4.7 Pricing . . . . . . . . . . . . . . . 4.8 Place . . . . . . . . . . . . . . . . 4.9 Promotion . . . . . . . . . . . . . 5 Business system and organization 5.1 Business activities . . . . . . . . . 5.2 Organizational arrangement . . . 5.3 Location . . . . . . . . . . . . . . 5.4 Patent . . . . . . . . . . . . . . . 6 Realisation schedule 6.1 Starting . . . . . . . . . 6.2 Preparing research . . . 6.3 Research and Marketing 6.4 Testing and Marketing . 6.5 Revenue . . . . . . . . . 7 Risks

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8 Financing 8.1 Cost Expenditures . . . . . . 8.2 Pricing Policy . . . . . . . . . 8.3 Revenue Assumption . . . . . 8.4 Funding . . . . . . . . . . . . 8.5 Ownership and Stock Option . 8.6 Worst to Best Scenario . . . . 8.7 Exit Strategy . . . . . . . . . 8.8 Realization Strategy . . . . .

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Authors Martijn Bakker Maaike Rump Chris Wouters Simon Pietersen Adi Abyoga

s1340921 s1368761 s1354620 s1381911 s1232991 2

Executive summary

What? Following Moores Law, the trend is that electronics gets faster and faster. At the moment this holds for processors and memory but not for the receptional sensitivity of communication devices, like mobile phones and laptops. Furthermore, the trend is also that the requirement for access to dierent frequency bands ever increases. A mobile phone in the past only had access to the GSM network, now it also needs to access GPS, Wi, 3G, 4G, HSDPA and Bluetooth. Many of these protocols operate at dierent frequencies and in order to keep the receptional quality high, it is necessary to include several dierent antennas in the mobile device, which are all lling valuable physical space inside the device. The solution is straightforward and arises from physics. Instead of the receiving the electric eld, you can measure the magnetic eld, which is interchangable in the reception of electromagnetic radiation. There are several advantages related to this. Firstly, one magnetic sensor is capable of receiving all signals for which there used to be an array of dierent antennas, saving space. Secondly, using a newly developed SQUID (Superconducting Quantum Interference Device) -sensor it is possible to detect signals with a lower intensity than possible using regular antennas that are used currently by the consumer electronics industry. How? The SQUID-sensor that will be used in our design is a result of a PhD thesis by Matthias Schmeltz. We are going to acquire a license for the patent, currently owned by IPHT Jena, for which he performed his doctoral research. As IPHT Jena is not in the same market segment as we are, it will be an easy negotiation for a license. We get to use their technology and they get additional income from another market segment with minimal work involved. Concurrently with acquiring the license we are going to start the research on the integration of the sensor in a single chip including all required supporting circuitry. Secondly, the research will focus on implementing a cooling solution for the sensor, for which we found promising technology from the group of M. ter Brake at the University of Twente. After a year of research by master students and experts in the eld, we will outlicense our product, including the license from IPHT Jena, to consumer electronics manufacturers, as they already have the scale capabilities for high-volume production of integrated circuits. As we start generating revenue and prots, we will keep up the R&D in order to remain ahead of possible competitors. This allows us to sustain our position in the market in order to keep improving our product and branching out to other applications: sensors in scientic devices or the optimization of multiple sensor to serve as a 3D position detector.

Where? The market for magnetic sensors consists of two main segments, consumer electronics and the automotive industry. The demands for accuracy and sensitivity in the automotive segment are low, the sensor has to work and has to be cheap. For this reason we chose to focus on the consumer electronics market. This market demands high accuracy sensors for a variety of purposes: compasses, position sensing and, using our SQUID sensor, the reception of radio waves for communication purposes. Who? Our management team consists of 5 people. The CEO of the company is Martijn Bakker. He knows most about all the dierent aspects of our technology and works in a structured and organized manner so it is easy to understand by others. As COO we have Maaike Rump. She is responsible for the short term planning of the company and making sure that the communications with suppliers and researchers are running smoothly. Her skills in planning, organizing and practical thinking help immensely and furthermore she is very dedicated to everything she does. In the marketing management we have Chris Wouters and Simon Pietersen. This combo is very good at spotting trends, anticipating and coming up with a proper reaction. Next to their analytical skills they are also very good at improvising when things do not go exactly as planned. Together they fulll the position of CMO. Lastly, in charge of the nancial part of our company, we have our CFO Adi Abyoga. He is very experienced with bookkeeping and understands the importance of maximizing nancial eciency like no other. Financing We realize that since our business model will be using a high technology based, we will need a lot of initial investment. We estimated around 1,000,000 euros will be needed in the rst year, this consists of 600,000 euros that is funded by us, and we are going to nd investors to cover up the rest of initial investment. In total, the shares is divided almost evenly, with 60 % for us and 40% for the investors with a total of 1,000,000 shares. We believe that this will result in a very protable since in the third year, we assumed that we will have a net income of 1,709,698 Euros with 1.7 euros earnings per share, and 0.4 dividends per share.

2
2.1

Product idea
Opportunity denition

In many elds there is a need for accurate sensing of electromagnetic radiation for wireless communications: remote controls, mobile phones and wi-receivers. Currently, these communications devices are housing a multitude of antennas necessary for capturing all incoming transmission frequencies, which all take up physical space in the device. However, using a single antenna results in an undesirable decrease in sensitivity. From physics we know that magnetic elds cause electric elds and vice versa. As such, it suces to measure the magnetic signals instead of the electric signals captured by the antenna in order to receive the data for the communications device. That is where our opportunity comes in. Communication device manufacturers are trying to add more and more ways of receiving data: GPS, Bluetooth, WiFi, 3G, 4G, HSDPA and other protocols. Using our new magnetic sensor chip, we can capture all these signals, using one antenna and with a higher sensitivity than currently possible with a standard array of dierent antennas.

2.2

Customer Benet

Our product uses a new generation of SQUID sensor (Superconducting Quantum Interference Device). This new development allows us to replace the high frequency receiving part of a communication device by a single chip, saving the space of the antenna array and improving the sensitivity. This allows for two things. Either the device becomes smaller with the same capabilities or the device becomes more powerful or valuable if the saved space is used for other purposes, like a battery of larger capacity, more memory or a faster processor. Space is very limited in mobile devices and as such very small, yet very high quality components are paramount. Furthermore, due to the increased sensitivity the reception range of the device will increase, again contributing to a higher value of the nal product.

Figure 1: Would you want your phone to look like this?

2.3

Product visualisation

(a) Sensor core

(b) Chip package

(c) Main market

Figure 2: The product as seen from dierent levels The gures show the three main views on our product. First, gure 2a shows a picture, made by an electron microscope of the technology responsible for the actual detection. As we zoom out (gure 2b), we see our nal product: a chip with the sensor core from gure 2a and all supporting electronics integrated. Next, in gure 2c you can see our main market: consumer electronics and then especially communication devices like smartphones and laptops.

2.4

Development progress

The feasibility of the SQUID sensor as magnetic sensor has been shown in the PhD thesis of M. Schmeltz. In the thesis he developed a sensor on the microscale and he then used the sensor to measure the conductivity of the ground for the detection of minerals and other disturbances in the soil. There is one main area on which we need to focus in our R&D period. The sensor used in the thesis was cooled to 4 Kelvin using liquid helium in order to work properly. As mentioned by J. Flokstra, the sensor is also capable of working at higher temperatures (77K, liquid nitrogen). However, this raises the rst problem. We need to do on-chip cooling because it is not feasible to repeatedly pour liquid nitrogen over the sensing chip. There have been promising developments at the group of M. ter Brake at the University of Twente which will allow us to cool our SQUID sensor without an external application of liquid nitrogen or helium.

3
3.1

Management team
The start-up team

Figure 3: Organizational chart The CEO of the company is Martijn Bakker. He knows most about all the dierent aspects of our technology and works in a structured and organized manner so it is easy to understand by others. Maaike Rump is responsible for all the operations of the company, hence COO. Her expertise is planning and organizing which makes her cut for the job. Marketing research is done by Chris Wouters and Simon Pietersen. This duo has excess to analytic skills, work fast and neat and can improvise when necessary. These traits are well combined as they are team players. Our CFO is Adi Abyoga. He has experience with bookkeeping and always looks forward to learning new things that improve his work.

3.2

Additional personnel

In addition to our workforce we are going to hire master students to research and design the cooling mechanism. They can do their master project with us, which also gives us a nancial advantage. For them it is an attractive opportunity because it will be a multidisciplinary project which combines electronics, thermodynamics and mechanics. The design team will have the challenge to create a working chip which is easiest and cheapest to produce.

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4.1

Marketing
Market segments and market size

The market for highly sensitive single-chip magnetometers can be divided in the following segments.

40%

45%

10% 5%

Automotive industry Consumer electronics Healthcare Homeland security and defense

Figure 4: Estimation of the market size of the dierent segments in the magnetic sensor market. Based on market research from Markets and Markets (2011) The market segment for consumer electronics is one of the main segments in the market for magnetometers, next to the automotive industry. The consumer electronics segment mainly consists of smartphones, home electronics and computing applications. The automotive segment the magnetic sensors improve drivers safety and engine eciency. The automotive applications do not require sensors with a very high sensitivity, which is something our product does oer. For this reason we decide to focus on the consumer electronics market as we do not want to waste the potential and strength of our technology. Alongside this, the total market is growing fast (as seen in gure 5). Furthermore, from table 1, we deduce that the main increase in the market is coming from our target segment, the manufacturers of consumer electronics which are in need of magnetic sensing (smartphones, laptops etc.). This allows us to expand and increase revenues very quickly.

4.2

Unique selling proposition

There are a lot of devices with a multitude of receiving elements. However, all of these sensors have not yet been combined into a single chip which reduces the use of space inside the device. Our chip can receive every frequency up to the gigahertz range. 8

Table 1: Consumer Electronics Company Shares in the Netherlands 2007-2011 Company Apple Computer Benelux BV Nokia Nederland BV Sony Nederland BV Samsung Electronics Nederland BV Koninklijke Philips Electronics NV Panasonic BV Hewlett-Packard Nederland BV HTC Nederland BV Research in Motion Ltd Acer Computer BV LG Electronics Benelux NV Dell BV Packard Bell BV Toshiba Benelux BV AsusTek Computer Inc Microsoft Nederland BV Others Total 2007 2008 2009 2010 2011 3.0 4.4 5.1 7.1 11.0 9.3 9.5 9.0 12.6 9.5 8.7 9.6 10.0 9.7 8.8 5.9 4.4 4.4 4.9 8.6 7.4 7.4 7.1 7.2 7.0 4.3 4.3 4.3 4.2 4.1 5.7 5.5 5.6 4.7 4.1 0.1 0.2 0.8 1.6 4.0 0.0 0.2 0.7 1.5 2.3 1.7 2.2 2.4 2.2 1.7 1.4 1.5 1.4 1.5 1.6 1.3 1.4 1.8 1.3 1.2 1.5 1.6 1.7 1.6 1.2 1.4 1.5 1.2 0.9 0.8 1.0 1.1 1.2 0.7 0.7 0.5 0.5 0.5 0.5 0.5 46.6 45.2 39.2 40.9 33.1 100.0 100.0 100.0 100.0 100.0

Furthermore, by using multiple magnetic sensors it is possible to accurately determine positions from the magnetic eld strength, for example coming from a magnetic stylus. This allows for three dimensional input for electronic devices. After we entered the market, our main concern in marketing is that we stay ahead of our competitors. We need to keep an eye on what our competitors are working on, and of course that our R&D and accomplishments has that cutting edge which provides us that unique selling proposition. In order to keep having this opportunity, we always have a large team working on research and development. After we have entered the market, we also have to start looking out for even newer companies entering, as it could be expected that new companies can take our technology as example. We need to have our patents strong, and our technology fresh.

4.3

Target market and customers

We are aiming for larger companies, that produce laptops/PCs at a large scale. That means that our company will be a business to business company. The businesses are purchasing a signicant amount of licenses for the production of sensors, as they produce a large number of devices. 9

109 7 Units 6 5 4 Year 2010 2012 2014 2016

Figure 5: Demand in units: Market growth of magnetic eld sensors as estimated in a research from Markets and Markets (2011) We consider the following companies high-end laptop and smartphone manufacturers (in other words, our target customers): Apple Computer, Sony, Samsung Electronics, HTC and LG Electronics. However, large companies have a tendency to distrust technology not originating from their own research facilities. For this reason, as a start, we focus on smaller companies.

4.4

Competitors

The company Honeywell has a Magnetic Sensor division. They sell sensors in all those dierent segments. Therefore this is one of our competitors. We have an advantage over this company since their 3-axis magnetometers have larger dimensions (approx. 70 cm3 ), compared to our product (approx. 0.5 cm3 or smaller), which is more practical for example when implemented in a smartphone. Another competitor is Memsic. This manufacturers products have a lot of noise and therefore not suitable for implementation in smartphones or laptops. Moreover, none of these sensors use a SQUID, which is much more accurate and have a much larger bandwidth than the magnetoresistive measurement technique used by the existing sensors. This makes it have new applications, compared to the existing sensors. Due to the accuracy, it can be used as a position sensor of the stylus of a touchscreen, making 3D detection possible. There are other companies developing magnetic sensors, but they are in dierent areas. For example Inneon, they are mostly selling magnetic sensors for automotive applications, and only components of similar products.

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4.5

Market size and growth

The market we are aiming at involves large companies as mentioned. We are primarily aiming at laptop-companies, our chip can be used for. For example, the Wi-Fi receiver on the laptop, and other appliances. We are not aiming at smartphones as of yet, because we think the technology is a long way before we can implement such a small cooling device, capable of cooling our chip. This is because a cooling system is more dicult to produce when it is smaller, this is because a very low temperature is needed. We do want to get into the market for smartphones after we have bloomed in the laptopmarket. The market size of the market we are aiming at can be easily estimated, since it is very clear how many companies there are on the laptop market. After some research we found that there around 20-25 large laptop/PC companies. We estimate that there should be around 20 more that are not large enough to nd globally. That means that we estimate there to be around 40 potential customers, at any time. The time-factor is important because these companies will keep releasing new laptops, and we want them to buy our product for every model they release. This means that we need to achieve a good reputation. As mentioned, the market keeps evolving and renewing, this is positive because whenever we are exceeded by a competitor we will get a new chance. Breaking into the market is, however, dicult. It is also important that after we have broken in to the markets, we stay there as the go-to company for our customers. We have to make sure that we have good relations with our customers. Our predictions according to the market growth are based on dierent levels. On micro-scale, we expect that our product is a valuable addition to consumer electronics. We expect that the market will keep growing, as this innovation has broad applications, in which our R&D will maintain a big player. On meso-scale, we can already see that this market is vastly growing, as its potential is being discovered by dierent companies, and the need for, for example wi- receivers, is growing. On a macro-level this market is not as much impacted. This is because it is a component of a larger electronic device. We do however take into account that this technology can be used for dierent applications. As a broad innovation as ours can be implemented in a lot of technologies.

4.6

Marketing Strategy

It is important that our product is safe, and easy to assemble. In order to stay ahead of the competition we need to keep developing and improving our product. The market we are trying to enter is a fast changing market with erce competition. Based on the knowledge of our competitors we can determine a good price, and have a strong unique selling point. We want to sell the license, and leave production to the company. There has to be a reason for the consumer to decide on our product. The market segment that we are aiming for already has this kind of products, which means that our promotion needs to be strong. A potential customer is not going to look for our product, we 11

have to bring it to them. Since we are aiming on large laptop/PC companies, we need to stand out at trade fairs and customer visits. This type of advertising is more expensive than for example advertisement on television, but this is the only way for us to obtain a good reputation and become known. That means that we have to obtain good customer relations, and personal connections to potential customers, and this can only be obtained face-to-face. And as is the standard in the current economy, we need a good clear website for potential customers.

4.7

Pricing

The price we ask for the license we oer is based on multiple factors. First of all, we have a price for our technology license that comes from the cost expenditures, the total of costs expenditure per month is around 79,000 euros, so well take the 25 % of it, then the price for our technology license becomes 20,000 euros. Second, we have also royalties, for the sake of pro forma, we decided to have a 0.5 euros or 50 cents per product. Based on the volume of the market of consumer electronics, the sales are very large, and if every end products use our chip, 50 cents of royalties are good. A company is not going to switch to our product if it does not oer a signicant benet. More exact information about the pricing of our product can be found under 8.2.

4.8

Place

The internet is our distribution channel. We need to be easy to reach. Our website is automatically our businesscard. After we have promoted at fairs or companies, the rst thing that potential customer will do is visit our website. Our website stays up-todate informing visitors about our new accomplishments and goals. This includes our R&D goals, so potential customers know what we are working on. This is of course limited, since we do not want to expose our projects to full extend, keeping potential competitors in mind.

4.9

Promotion

To promote our product, we are going to attend trade fairs, exhibitions and customer visits. A good rst impression attracts potential costumers. In order to make a good impression, we have a strong presentation of our product. Our website makes us approachable online.

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5
5.1

Business system and organization

Business activities

Figure 6: Our business system Our company focuses on developing a cooling system for SQUIDS on a chip. Then we license the technology to companies who want to use our technology in their product, which will be our source of income. The total business system is shown in gure 6 The rst step is to do research in the eld of cooling on small scale. The NanoLab at the university of Twente provides the cleanroom and other equipment to do the research. Companies that want to use our technology will pay a license fee to gain access to the design and also a royalty on every chip that uses the licensed design. This royalty is agreed upon in the license contract. The distribution of our technology is dierent from distributing a real product. The product is a design, which we license to another party. As soon as the contract is signed the easiest way (and cheapest) to get the technology to the partner company is digitally.

5.2

Organizational arrangement

The organization is arranged as can be seen in gure 3, section 3. Collaborate work is important and so the communication is informal and the leadership is participative, everyones input is valued in making decisions. Also performance will to be praised to 13

achieve our goals, but also to create a challenging environment where people can grow in their area of specialty. This all to establish a company that is successful and where employees enjoy their work.

5.3

Location

The company is based at the Kennispark of Enschede, Hengelosestraat 705. It is close to the University of Twente where the NanoLab of MESA+ is located. Furthermore our legal form is bv because being not liable for the companies nances personally is more important than choosing the cheapest legal form.

5.4

Patent

In the development of our new technology, we focus on the patent of our product. Our company makes prot with licensing the technology, so it is fundamental to protect the intellectual property we are working on. Before we le for a patent, we are going to sign a contract with IPHT Jena. They hold the patent for the SQUID magnetometer (WO 2004015436 A1) that is still valid and contains the technology we want to use. Subsequently we are going to research and develop the cooling system for a SQUID device on a chip. When the research has reached a certain point (see section 7) we will be working together with the University of Twente on the patent application. They will provide attorneys to help with the legal formation of the patent. In return they are the owners of the patent until we have nancial stability or when we need the patent they would want a compensation in equity. As soon as we have nancial stability (see section 9), we buy the patent rights from the University of Twente. The ling for a patent takes longer then a year. Therefore, all employees have to sing a condentiality agreement (NDA) to prevent any publicity of our technology and designs before the patent is granted.

14

Realisation schedule

Our venture consists of 5 stages, starting the company, preparing the research, doing the research and the marketing, testing the product and marketing and lastly the most important stage of any company, generating revenue and nally becoming protable.

Figure 7: Our path to revenue.

6.1

Starting

We start with arranging the required space for our company and make sure all the legal matters are in order, for instance claiming our company name and registering ourself as a BV. Moreover, during the starting phase we will establish contacts to the university of Twente in order to facilitate our upcoming research and researcher candidates. This phase will last three months.

6.2

Preparing research

After the initial three months have passed, we will focus on the preparation of the research. This involves getting permissions from the Mesa+ institute to do our research there and more importantly, getting Masters students who are willing to do their nal project as a research project whilst getting paid for doing so. Furthermore, we will arrange the materials required to do the research and set up the contracts with the researchers who will be employed by our company. The length of this phase is variable, as it depends on recruiting people. However, we expect that this phase will also last approximately three months. If this planning comes true, we will be able to start the actual research in september 2014, at the beginning of the new academic year 2014-2015.

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6.3

Research and Marketing

During this stage, our researchers prepare an on-chip cooling method. Another area of research will be the practical capabilities of the SQUID sensors included in a chip, which are still cooled externally. This allows us to focus both on the improvement of the product whilst still developing one of the parts of the product. Of course, as soon as we have any improvement over the current SQUID system, we patent it. During the research phase, alongside the task of guiding the research, the board prepares the market. We already have the working specs of the sensors cooled externally (by liquid nitrogen or helium) and because of this we can start contacting the relevant companies which are going to be our customers (companies producing consumer electronics, like Samsung, Lenovo and Apple). We are going to show them our progress (protected by our patents of course) and ask them whether they see possible improvements which would be useful in their specic case of business, which would only improve our product further and eventually, it would improve their products as well if they start producing the chips under our license. As research is inherently uncertain, it is impossible to state a xed length of the research peroid, the only option we have is to carefully monitor the research progress and if the progress in the research is not enough, we can opt for more researchers to speed up the process. We aim to have the main research stage last 12 months, up to September 2015.

6.4

Testing and Marketing

Afterwards, when we have a working on-chip cooler, we are going to conduct further research into the exact specications of the chip which has been designed in the previous stage. Again, this information (after being patented) is corresponded to the potential customers to allow them to provide feedback which both improves our product as well as the product they are going to receive. This phase will last three months, up to December 2015.

6.5

Revenue

Lastly, when we have a fully functional chip of which all specications are known we are going to license out the construction process to the customers with whom we have been in contact with already. If the schedule so far comes true, we will be able to start getting revenues in January 2016.

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Risks

Insucient starting capital As a starting company, you do not have the nancial strength yet to support all the research and the setting up of the legal form. If the funding is not enough (see section 9) to start the company, we are going to look for partner companies who develop the product with us or we are going to cooperate with the University of Twente to become a spin-o company. Partner companies are preferred because of their knowledge supply that comes with the partnership. Being a spin-o company means losing shares to the University of Twente, so those can not be oered to potential employees or investors anymore. Research does not nd an applicable solution The problem that we are going to solve is the cooling mechanism. When nding a solution to a problem there is always the risk of not nding the preferable solution or the time needed to nd the desired solution is longer (than predicted in section 7). If the master students have not been able to nd a solution that is applicable, we are going to hire a PhD student. We do it this way because master students can solve this problem, only they have less experience in lab work than PhD students and are therefore cheaper to hire. To prevent that our idea reaches competing companies before we have the patent, we work with NDAs (see section 5.4). Every month the research is extended is going to cost what is calculated in Table 3 plus an additional payment of approx. 1500.- for the PhD student because they are more expensive than master students. Insucient interest in our market segment The prot of the company is completely based on the licensing procedure. When laptop manufacturers are not interested we are going to focus on another market segment (other segments are in section 4). This is the same procedure as when suddenly a competitor enters with a cheaper (alternative) product. Research location unavailable There is a risk in cost and availability of the NanoLab at the University of Twente. We are dependent on the equipment and cleanrooms available there to do our research. However, there are more cleanrooms in the Netherlands.

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Financing

In this section, the nancing analysis is explained, for a further use of decision making of our company. A good analysis will lead to a sustainable growth of our company. The section is divided into several subsections: protability, revenue assumption and sales projection, cost statement, subsidies, nancing, realization strategy, and appendices that include the balance sheet, income statement and others.

8.1

Cost Expenditures

Salary is based on the website we found, http://www.iamexpat.nl/career/main/environment, which is 2500 euro a month, 1770 euro including taxis. For the working hours, according to Dutch law, you should not work more than eight hours per day or 40 hours per week. Depending on the industry, a maximum of nine hours per day and 45 hours per week could be the case, but no one is allowed to work more than 2.080 hours a year. Consequently, the average working week in the Netherlands is approximately 40 hours. Facilities are divided into three parts. One is the oce, which costs around 300 euro. This oce is located at the Hengelosstraat. Another one is the NanoLab, which costs around 26280. Lastly the supplies for R&D which we estimated to be around 10,000 euro. The price is unpredictable and we know that the research instruments in the NanoLab are expensive to be rented. This is of course also including the materials. We divided the additional costs into several factors. First of all, traveling costs are put at 1,000 euros. It is mainly the result of renting cars and gas, taxi, or train. Second, insurances are based on website of https://www.undutchables.nl/working-en-living-inthe-netherlands/working-for-undutchables/health-insurance, For the basic insurance, you pay a premium to the insurance company. This is known as the nominal premium. This nominal premium generally costs about 1,100 euro per annum [year] per person. For children under the age of 18, the standard insurance (basisverzekering) is free of charge. We have 9 people, in 12 months, so 1 month will only incur 825 euro. The licensing is around 10,000 euro since we dont know the price of license that we are going to buy from IPHT Jena. We assume that we have dierent kinds of payment after we have negotiated. We either have to pay royalties each month based on sales, starting from 1 to 5% and decreasing to 0.5%, or a lump sump payment. Both results in a total of 10,000 euro. Marketing is also put around 10,000 euro, since its not only the advertisement and promotion, but also renting tools for marketing, which are variable costs. This is already doubled from our rst estimation because marketing always escalates beyond expectations. So in total we will have costs of expenditures in 1 month of 79605 euro. Another thing that we have to take into account is patenting our technology. We are

18

going to have university to patent our technology, and let them have shares of 10%, but then the fund is completely funded by university. University focuses on the protecting the idea.
Monthly Costs Assumption Facility costs R&D, License, Patent Total salaries (including taxes) Marketing (including online presence) Other (utilities, communication, travel, taxes) Total expenses Technology License Year 1 36580 10000 21200 10000 1825 79605 (in euro) Year 2 37311.6 10000 26200 10000 1825 85336.6 Year 3 38057.8 10000 31200 10000 1825 91082.8

Table 2: Monthly Costs Assumption

8.2

Pricing Policy

Pricing of the product is determined by two factors, the added value of end product (chip) and also the costs expenditures we made. Looking to our competitors which has similar product but dierent technology, the chip costs around 635 euros, then we assume that our customers will sell the chip less than that, for example 50 cents, then it will have an added value of 634.5 euros. This is further explained in the marketing section in the pricing section. Furthermore we also have a x price of our license costs of 20,000 euros, or 25 % of the costs expenditures, and its because we have now two streams of revenue, so putting a xed price of the license, will also be covered up by the royalties. Our term of contract for the license ranges from 1 year term to 5 year term. Every term start on the eective date of the order and shall continue for that period that has been agreed on. If your Program License does not specify a term, the Program license is perpetual and shall continue unless terminated as otherwise provided in the Agreement.

19

Costs Expenditures per Month Personal Administrative and Finances Sales and Marketing R&D and Production Facilities Rent(Bureau) R&D Supplies Rent(NanoLab for research) Additional Travel Insurances Licensing Marketing Total without Production Costs License Costs

(in Euros) NanoSQUID Number of Personnel 4000 2 7200 3 10000 4 300 10000 26280 1000 825 10000 10000 79605 79605

Table 3: Cost of all the expenditures needed to develop the technology

8.3

Revenue Assumption

Theoretically, our companys revenue will be zero at the beginning since we focused on the R&D in the rst year. Hence, we mainly get our revenue from the investment of investors such as business angels. After we successfully make a patent out of the technology, our product will be sell to several companies that has lower shares rst in order to position our company in the market share. Our next revenue stream will come from the royalties based on how many sales our consumers generated which is already explained in the pricing policy section. Continually, the number of sales will grow with a growth of 10 % a month. Based on the prot and loss statement, we will have break even point in the middle of the third year.

8.4

Ownership and Stock Option

Based on the income statement, we analyze that our company is going to be protable since it will earned 1,709,698 euro over 3 years ended 17 June, 2016 Our initial investments will have a 60 % shares while investors will have 40 %, with the dividend paid in the third year 0.4 euro per shares.

20

Prot and Loss Statement for the growth rate of 5 percent per month 79605 0 -79605 -23881.5 -55723.5 -111447 -167170.5 -222894 -278617.5 -334341 -390064.5 -445788 -501511.5 -557235 -612958.5 -55723.5 -55723.5 -55723.5 -55723.5 -55723.5 -55723.5 -55723.5 -55723.5 -55723.5 -23881.5 -23881.5 -23881.5 -23881.5 -23881.5 -23881.5 -23881.5 -23881.5 -23881.5 -23881.5 -55723.5 -668682 79605 0 -79605 79605 0 -79605 79605 0 -79605 79605 0 -79605 79605 0 -79605 79605 0 -79605 79605 0 -79605 79605 0 -79605 79605 0 -79605 79605 0 -79605 955260 0 -955260 -286578 -668682

79605 0 -79605

-23881.5

-55723.5

Year 1 Total Expenses Revenues Prot Income taxes(credit) Net prot (Accumulated prot) 0 20000 0 0.5 14 85336.6 66143 -19193.6 -5758.08 -13435.52 -699853.1 -708637.9 -712340.6 -710453.1 -702385.6 -687554 -8784.72 -3702.72 1887.48 8067.5 14831.642 -3764.88 -1586.88 808.92 3457.5 6356.418 9558.4278 22302.998 -665251 0.5 15 85336.6 72787 -12549.6 0.5 16 85336.6 80047 -5289.6 0.5 17 85336.6 88033 2696.4 0.5 18 85336.6 96861.6 11525 0.5 19 85336.6 106524.66 21188.06 0.5 20 85336.6 117198.03 31861.426 0.5 21 85336.6 128890.33 43553.729 13066.119 30487.61 -634763.3 0 0 0 0 0 0 0 20000 20000 20000 20000 20000 20000 20000 20000 0 0.5 22 85336.6 141795.86 56459.261 16937.778 39521.483 -595241.9 0 0 0 0 0 0 0 0 0 0 20000 0 0.5 23 85336.6 156032.55 70695.948 21208.784 49487.163 -545754.7 0 20000 0 0.5 24 85336.6 171640 86303.402 25891.021 60412.382 -485342.3

-55723.5

0 240000 2400000

20,000.00 0

Technology License Price of Technology License Sales of End Product Royalties

0.5 13 85336.6 60000 -25336.6

1024039.2 1285953.03 261913.826 78574.1478 183339.678

-7600.98

-17735.62

Total Expenses Revenues Prot Income taxes(credit) Net prot (Accumulated prot) 3 20000 286 0.5 26 91083 226551.34 135468.34 40640.503 94827.84 -310104.8 -199367.3 110737.57 128321.12 -71046.16 47458.958 54994.764 27 91083 249279.53 158196.53 28 91083 274398.88 183315.88 29 91083 301904.87 210821.87 63246.56 147575.31 76529.143 0.5 0.5 0.5 374 374 374 462 0.5 30 91083 332156.06 241073.06 72321.917 168751.14 245280.28 20000 20000 20000 20000 3 4 4 4 5 5 20000 462 0.5 31 91083 365425.86 274342.86 82302.858 192040 437320.28 6 20000 550 0.5 32 91083 402244.55 311161.55 93348.464 217813.08 655133.37

-686417.6

6 20000 550 0.5 33 91083 442953.95 351870.95 105561.29 246309.67 901443.03

7 20000 638 0.5 34 91083 487874.5 396791.5 119037.45 277754.05 1179197.1

8 20000 816 0.5 35 91083 538019.5 446936.5 134080.95 312855.55 1492052.6

9 20000 906 0.5 36 91083 593303.3 502220.3 150666.09 351554.21 1843606.8

64 240000 2403207.64

20000 0 0.5

21 Table 4: Prot and Loss Statement and Sales Forecast

10 20000 1169 0.5 11 12 20000 1432 0.5 14 20000 1958 0.5 15 20000 2286 0.5 17 20000 2636 0.5 18 20000 3008 0.5 20 20000 3861 0.5 22 20000 5217 0.5 24 20000 6989 0.5 1059 0.5

Technology License Price of Technology License Sales of End Product Royalties Year 3

25 91083 205953.9 114870.9

1092996 4420066.22 3327070.22 998121.067 1977394.95

34461.271

80409.632

Total Expenses Revenues Prot Income taxes(credit) Net prot (Accumulated prot)

-404932.7

27 20000 10403 0.5

29 20000 14407 0.5

220 240000 284 720000 2652.39789

Technology License Price of Technology License Sales of End Product Royalties

20000

8.5

Funding

The following pictures of calculations and predictions of expenses and revenues, income statement and balance sheet are pro forma in accounting term and based on the percentage of growth we predict to be. During the expected time frame we expect high investment in facilities (we would increase more facilities, and that would means extra rental cost) , equipment, and employees especially if we are planning to expand and grow our company. For initial investment, we will have 2 stages. The rst and second quarter needs to be covered by our initial investment from several investors, for example business angels. The rst stages is 500,000 euro, 400,000 euro covered by investors, and 100,000 will come from us. Second stages will also need another 500,000 which will be covered by several banks. Because we know that bank wont invest in high risk company, so if we divided into several banks, each of them will only have to invest 100,000 euro to 150,000 euros instead of 500,000 which has more solvability for each bank.
End of month 1 of Year 1 Assets Cash and/or Account Payables Total assets Liabilities Loan payable Equity Owners contributions Business Angels Investors Retained earnings(decit) Total owners equity Total liabilities and owners equity End of Year 1 End of Year 2 End of Year 3

450000 450000 500000 50000 200000 200000 0.00 50000 450000

32740 32740 525000 100000 200000 200000 32740 132740 32740

242459 242459 551250 100000 200000 200000 242459 342459 242459

2858410 2858410 578812 100000 200000 200000 2858410 2958410 2858410

Table 5: Balance Sheet

22

Cash Flow for Standard Version 1 2 3 4 5 6 7 8 9 10 11 12

NanoSQUID Annual Total

-79605 -1000 -80605 -80605 -80605 -80605 -80605 -80605 -80605 -80605 -80605 -80605 -80605 -80605

-79605 -1000

-79605 -1000

-79605 -1000

-79605 -1000

-79605 -1000

-79605 -1000

-79605 -1000

-79605 -1000

-79605 -1000

-79605 -1000

-79605 -1000

-955260 -12000 -967260

200000 200000 500000 50000 369395 0 369395 13 14 15 16 17 18 19 20 21 288790 208185 127580 46975 -33630 435765 355160 274555 369395 288790 208185 127580 46975 -33630 435765 355160 -80605 -80605 -80605 -80605 -80605 469395 -80605 -80605 -80605 274555 193950 22 50000 -80605 193950 113345 23 -80605 113345 32740 24

200000 200000 500000 100000

Year 1 Operating Activities Operating Activities Net Prot Depreciation Cash Flow from Operations Financing Activities Investment from Investors Business Angels Bank Loan Owners Cash Contribution Increase in Cash Beginning Cash Balance Ending Cash Balance

Annual Total

-17735.6 -1000 -18735.6 -14435.5 -9784.72 -4702.72 887.48 7067.5 13831.64

-13435.5 -1000

-8784.72 -1000

-3702.72 -1000

1887.48 -1000

8067.5 -1000

14831.64 -1000

22303 -1000 21303

30487.61 -1000 29487.61

39521.48 -1000 38521.48

49487.16 -1000 48487.16

60412.38 -1000 59412.38

183339.7 -12000 171339.7

-18735.6 71120 52384.38 25 26 27 28 29 37948.86 28164.14 23461.42 24348.9 52384.38 37948.86 28164.14 23461.42 24348.9 31416.4 30

-14435.5

-9784.72

-4702.72

887.48

7067.5

13831.64 31416.4 45248.04 31

21303 45248.04 66551.04 32

29487.61 66551.04 96038.65 33

38521.48 96038.65 134560.1 34

48487.16 134560.1 183047.3 35

59412.38 183047.3 242459.7 36

Table 6: Cash Flow and Income Statement

80409.63 -1000 79409.63 93827.84 109737.6 127321.1 94827.84 -1000 110737.6 -1000 128321.1 -1000 147575.3 -1000 146575.3 168751.1 -1000 167751.1 192040 -1000 191040 217813.1 -1000 216813.1 246309.7 -1000 245309.7 277754 -1000 276754 79409.63 541460.6 620870.2 714698.1 620870.2 93827.84 109737.6 714698.1 824435.6 127321.1 824435.6 951756.8 146575.3 951756.8 1098332 167751.1 1098332 1266083 191040 1266083 1457123 216813.1 1457123 1673936 245309.7 1673936 1919246 276754 1919246 2196000

Year 2/Month Operating Activities Operating Activities Net Prot Depreciation Cash Flow from Operations Financing Activities Bank Loan Owners Cash Contribution Increase in Cash Beginning Cash Balance Ending Cash Balance

171339.7

Annual Total

312855.5 -1000 311855.5

351554.2 -1000 350554.2

2328949 -12000 2316949

311855.5 2196000 2507856

350554.2 2507856 2858410

2316949

Year 3/Month Operating Activities Operating Activities Net Prot Depreciation Cash Flow from Operations Financing Activities Bank Loan Owners Cash Contribution Increase in Cash Beginning Cash Balance Ending Cash Balance Total Interest Expense Corporate Tax Net Income Earnings Per Share Dividends Per

2858410 2279598 569899.4 1709698 1.709698 0.4

8.6

Worst to Best Scenario

Three scenarios were made for NanoSQUID. These are all based on the sales and marketing strategy for our company. We have set the margin factor to 10 percent prot of the total costs to develop this technology. The standard scenario is already discussed above as it is the most realistic for our venture. In the pessimistic case, rst of all, this holds under the assumption that we have trouble of getting the development of the product, then we would need more time. 2nd assumption is that we also have trouble of getting this patent, and since we also have to give early adoption product to several small companies, we would not have big prot in the 2nd quarter of the 2nd year. Growth rate for all goods stay at 5 percent and after the 2nd year, the growth rate for technology license will stay constant at 1 percent. It is estimated to reach break even point at the beginning of 2nd quarter at year 5. The liability reaches bottom at the end of the 4rd year. In this worst case scenario, we would need a lot more investment. In the optimistic scenario, technology license is expected to have a constant growth, with the beginning of 5 % and 10 % in the rst year, and increase to 10 % and 20 % in the 2nd year. In the 3rd year, it will drop to a constant growth rate of 1 % for technology license, and named user plus will drop to 10 %. In this case, our total net prots exceed two million euros after 3 years. We will reach break even point at the last quarter of 2nd year, which results in our liability becoming positive from the beginning of 3rd year.

8.7

Exit Strategy

This exit strategy solely depends on the current assumption that we made. First of all, if the company has grow into massive multinational company, we are going to negotiate with our investors whether they are still going to invest on our company or not. Many investors wanted their money to get paid soon enough, and that is why, after negotiating, they can decide whether they are still going to continue the investment, or we can buy the whole sales as a founders. We expect, if investors decided to stop their investment, to return the investments in 5 years, this goes under the case of standard and optimistic case. As a founder, we can also decide later and negotiate whether we are still going to run this company or instead selling the whole shares to investors if they want.

8.8

Realization Strategy

The realization schedule can be found in section 6. NanoSQUID will get involved in all the market based on the marketing section, but for further growth and development, we will get involved in every market we believe to be protable.