My Review of a Video Business Plan proposal for a longer lasting smart phone battery, SiNode

SiNode Systems – 2013 Rice Business Plan Competition 

In reviewing the SiNode Systems video, it was very apparent the three person entrepreneurial team was focused on addressing a great need in the market today.  They said all cell phone users can appreciate the “red battery of death” and losing power in one’s cell phone life.  They saw their opportunity was attractive, timely (smart phones have exploded in popularity), durable, and anchored in a product or service (cell phones/smart phones).  They truly are an entrepreneurial firm bringing new products and services to the market.  They address the need for low battery and batteries not being able to store enough energy.  They are solving a problem and have found ways to solve them by developing an alternative to the current cell phone battery solution.  They feel there is a gap in the marketplace for their SiNode product.  They address their plan to partner with other firms to obtain the boost they need to realize their full potential.  The SiNode invention has two patents with exclusive rights and a proprietary method.  They are entering a highly competitive $1.2 billion anodes market where a past Case 123 failed.  Even though they are a small business, they seek to make a large impact.  They have a well articulated business plan with a clear structure in place.

Without using the phrase, feasibility analysis, the entrepreneurial team addressed this analysis.  They spoke about the product and service feasibility.  There is certainly an overall appeal of a longer lasting, stronger, and more flexible battery materials.  The comparable graphite is 370m of energy where SiNole is 3200m of energy with 20% less overhead.  There is intense capital on the front end and high performance technology which has a scalable solution.  This SiNode has been reviewed by numerous Peer Reviewed Journals and has been validated by the Arbon National Labs, the premier battery research institute.  These experts would appear to have the pulse of the potential customers.

The entrepreneurial team discussed their industry/target market feasibility.  They have found their SiNode product can be dropped easily into an assembly line.  Their product is a solution based manufacturing and is scalable and low cost.  The Asian markets make up 70% of their competition.  Samsung and Apple are their two main cell phones.  They will seek to partner with large chemical companies and then partner with battery manufacturers because they are vertically integrated.  Their target market is the (1) military—small scale and high performance. (2) Smart Phone Industry—medium and long run.  Value dual value proposition of charging and capacity.  (3)  Vehicle space—this would be the very long run.

Organizational feasibility analysis was covered as they discussed the expertise of their team.  The inventor of the SiNode is soon to earn his PhD.  They have a tenured Northwestern professor advising them.  One member worked with the Obama Administration in the clean industry sector.  All members of their team had extensive green sustainability expertise.

Financial Feasibility was clearly discussed.  Their revenue and cash flow was outlined.  They expect their revenue will be positive even in year one.  How will they do it?  First, they will sell small batches of materials to battery manufacturers.  Since they own two patents and have exclusive rights to the proprietary method.  Second, they will take advantage of their licensing opportunities with larger chemical companies.  They will seek to leverage the success of their product to their strategic chemical company partners.  Third, they will be able to provide 15x cash on cash return to the earliest investors with 85% IOR with a 5 year time horizon.

They recognize their main competitor is the United Kingdom based Nexium whose strategic chemical company partner is Wacker.  SiNode believes they can beat their performance by three times.

They will launch in three stages.  First they have already raised $200,000 in non-diluted funding to make a proto-type.  Second, they are at Rice University soliciting another $1.5million to put into a smart phone prototype.  Third, they will take their investments and find a partner to manufacture in scale their smart phone.

The SiNode Team was limited in their 15 minute presentation.  It could be argued they did not cover all facets of a business model but many were addressed.  There was mention of many of the common set of attributes in the Barringer/Ireland Business Model Template.  The Core Strategy was mentioned.  The business mission was not explicated stated but their reason for being is to provide a service and improve the life of one’s device battery.  They were able to identify their target market (Military—short term; Smart Phone Industry—medium term; and Vehicle Space—very long run), and product/market scope—address capodes and anodes.  Their Resources will be partnering with chemical companies and using their patents with SiNode technology.  Their technology is similar to graphite but is stronger, supports greater flexibility, and conducting a stable performance.  Their SiNode powder ha a rapid charging time.  Their Financials have been listed previously in this report.  They discuss their revenue stream and financing/funding but little is mentioned about cost structure specifics.  No mention of variable costs, fixed costs, or operating leverage.  Operations is discussed regarding product production in detail.  No mention of how many staff members they will need.  No explicit discussion of their relationships with particular suppliers or development of marketing materials.  Not sure where their headquarters will be located.  Channels of being dropped into an assembly line and having a solution based manufacturing which is scalable and low cost is discussed.  Their key partners will be large chemical companies and battery manufacturers.

The SiNode team has done an Industry and Competitor analysis.  They discuss their industry is a $1.2 billion anodes market.  It is highly competitive but they believe there is competitive space for their company.  They have submitted their results to publicly known Peer Reviewed Journals and their product has been validated by the Arbon National Labs, the premier battery research institute.  Industry, environment, and business trends are clearly analyzed in these journals and at Arbon.  SiNode believes their main competitors are 70% in the Asian market.   Their number one competitor is the United Kingdom based Nexium whose Chemical company partner is German based Wacker.

There is no clear mention of the five forces model.  Not sure who their real threat of substitutes are other than powder graphite.  Not sure if there are other threats of new entrants similar to themselves but with their two patents they are seeking to insolate themselves.  No mention of a rivalry among existing firms other than the mere mention of Nexium being their chief rival.  They did mention they hope to make revenue off of chemical companies in licensing so they may have some bargaining power of suppliers.    No mention of direct buyers nor of bargaining power of buyers. 

The SiNode team had a PowerPoint slide presentation but we are unaware if they wrote a business plan.  It is assumed to be admitted into the Rice University competition they had to create one.  They would be wise in putting it to writing for internal reasons (forces the team to systematically think through every aspect of their new venture) and external reasons (communicates the merits of a new venture to outsiders, such as investors and bankers).  They did not mention by name potential investors nor did they mention who provided their initial $200,000 investment.  Not sure who they were specifically targeting for the additional $1.5 million at Rice University.  We were not made aware of whether or not the founders invested their own money in the plan.  It would certainly be very insightful to know this fact.  Not sure who the Peer Reviewed Journals who reviewed their plan and personally, I have never heard of the Arbon National Labs.  Not sure if this presentation was factitious (did the speaker really almost have his PhD?)  or not.  They sounded very convincing and articulate.   At the point SiNode is at, they should be ready to present a full business plan since they are in need of funding and financing.  It would serve as a blueprint for the company’s operations.

Their verbal explanation was complex and as a non-science person, it was over my head in some ways in regards to the chemical makeup.  I believe they should have better simplified it if I was a prospective venture capitalist.  Overall, they presented well and I really came away impressed with where they stood as a company.  Having two patents made them appear even more inviting and worth one’s time to consider.   Their oral presentation addressed most of the 10 most important questions a business plan should answer except for for the marketing plan.  The question states: “#6: Does the business have a sound marketing plan?”  There is no mention of a marketing plan.  Not sure how they will go about their true sales process.  They discuss how professional journals and Arbon feels about their product but not the general public.  “#10: Are the financial projections completed correctly, and do they project a bright future for the firm?”  We can only assume based on what was verbally presented to us.  We have not had time to run the numbers ourselves to truly evaluate whether these things are so.

Conclusion

If I had the funds, I would take a chance on this company.  Their patents really impress me and they have outlined well how they will compete in their very competitive market.  I would asdk them to simplify the chemistry part for me.  There is a great need they will be meeting and I would like to be on the ground floor of this exciting opportunity.

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