Green Chilies, LLC

Business Plan

TiE YOUNG ENTREPRENEUR Meera Nair

Business Plan Competition Avvinash Radakrishnan
TiE-Boston Saniya Shah
Presented on May 16 2009

Green Business, Green Earth, Green Chilies.

Green Chilies. LLC
Green Chilies. LLC

1. Executive Summary

Green Chilies. LLC was formed in February 2009, by three business-

oriented students, with the goal of providing low cost television
products while making the world more environmentally friendly.

The Product
We noticed three discrete trends and events that are taking place
currently. They are:

1. Flat screen computer monitors are fast replacing old bulky

Cathode Ray Tube (CRT)-based monitors. Both these products
have high image resolution. Cheaper and lighter LCD flat screens
take up less space. These features are driving the trend.

2. Electronic-waste (e-waste) has become a formidable problem

that is damaging the environment. Presently, it costs about $5-
20 to dispose a computer monitor. Each CRT monitor contains
caustic chemicals and more than a pound of lead.

3. Over-the-air transmission of TV is changing from old analog

technology to digital ones in the US, like SDTV and HDTV, with
higher image quality. By June 2009, all TV transmissions will be
changed over. Although there are converter boxes available in
the market, the image quality is limited to that of a common
analog TV.

We saw an opportunity for a product that addresses all three issues

with one solution. We created GreenTV.

GreenTV is a converter box that generates HDTV images on a regular

computer screen. Computer monitors have a comparable image
resolution of HDTV and is standardized globally. They are independent
of any regional TV video formats such as PAL, NTSC, and SECAM. This
aspect makes them usable all over the world.

GreenTV can offer a new use for old CRT monitors that are otherwise
discarded. This can reduce e-waste and offer inexpensive HDTV.

GreenTV takes the input from an SDTV/HDTV Antenna, Cable Box or

Regular DVD or BluRay player. It generates high definition XGA output
that can be displayed on any common computer monitor. The audio

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Green Chilies. LLC

can be heard using external speakers or headphones. It also has a

remote to control for standard TV operations.

We are in the process of filing a patent for this product concept.

Market
Target Customer:
We are focusing on three kinds of customers.
• Environmentally Conscious Customer (Cause-Driven)
• Technologically Conscious Customer (Curiosity-Driven)
• Price Conscious Customer (Value-Driven)

We believe that the first two customer types are early adopters and
will buy them early for cause or technical curiosity. This will help us
build revenue fast and early. We also think that the first time TV
buyers, e.g. Teenagers will also be happy to buy GreenTV to have an
inexpensive TV in their room.

The Market Size:

California Waste Management Board (CIWMB) estimates that about 6
million CRT monitors are being disposed in California alone and
approximately 100 million CRT monitors are being disposed in the US.
We estimate that about 40% (40 million units) are still in working
condition. In our estimate 20% of them can be converted to
DTV/HDTV. This gives us a potential customer base of 8 million. We
are planning to sell GreenTV, the converter box, at an average price of
$40. This makes the total market size worth $320 million in the US
alone and many folds more globally.

Sales Channels:
We plan to start selling through our own online company store and
other online stores like Amazon.com to our tech savvy early adaptors.

Our indirect channels are:

• Cable / Satellite companies: OEM the technology to increase
their HDTV penetration
• City recyclers: Reuse discarded CRT monitors by offering those
to low income citizens
• Non-profit organizations: CRT waste can be reduced globally by
partnering with NGOs. Developing countries will face the e-waste
problem soon and GreenTV can be one of the solutions.

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Green Chilies. LLC

Competition:
1. Manufacturers of low-end HDTVs - An HDTV costs minimum of
$400. GreenTV is only a fraction of that cost.
2. DTV converter manufacturers – DTV (SDTV) have lesser resolution
than HDTV and are only for the US market;
3. Competition from those who may copy our product - We are in the
process of filling a patent for this technology to protect our intellectual
property

Financial
The Green Chilies is seeking 1 million dollars for our first round of
financing. We anticipate that this funding will allow the company to
engineer the product, implement our marketing, and sales plans, and
establish a manufacturing channel. We plan to make a profit by the
second year.
Estimated revenue and profit information for the first three years is
summarized below.

Year 1 Year 2 Year 3

Number of Units
Sold 7,000 75,000 250,000
Unit Price (Average) $54.99 $49.99 $39.99
Total Revenue $384,930 $3,749,250 $9,997,500

Future
We will introduce GreenTV in the USA in the first year. We plan to
distribute this product globally, as this product will adapt to any
standard computer monitor.
We plan to outsource the manufacturing, work with distributors, have
more OEM/licensing revenues and remain focused on building more
Green products.

Management Team
Saniya Shah President (Finance)

Avvinash Radakrishnan VP Operations (Engineering, Sourcing)

Meera Nair VP Sales & Marketing (Distribution

channels)

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Green Chilies. LLC

2. Company Summary

Goal
The Green Chilies’ goal is to build a company that offers a line of
environmentally friendly products, while sustaining an enjoyable
atmosphere for our employees and creating healthy returns for our
investors.

Mission:
Our mission is to create a profitable product that reduces e-waste
through the method of reusing old computer monitors by converting
them to an inexpensive, easy-to-use, high-definition television.

Company Summary:
Green Chilies is an LLC which was founded by Saniya Shah, Meera
Nair, and Avvinash Radakrishnan. For the start-up of this company we
are seeking one million dollars of Venture Capital funding. This capital
will cover the company’s manufacturing, marketing, and initial
engineering costs of the first product. We estimate that this initial
investment along with the revenues from sales will cover our expenses
for the first year of the company.

The company will first open in Nashua, NH and expand as needed.

Company Start-Up Costs

Operating Cost for First Year

Compensation $400,000
Marketing Cost $400,000
Distributor/ Sales Commissions 20.00%
Commissions Paid $76,986
Administration cost $2,400
Legal Fees $20,000
Office Rent $18,000
Insurance $10,000
Office Expenses $12,000
Shipping @ 3% of Cost $4,200
Product development cost $175,000
Manufacturing Setup cost $50,000
Total Operating Expenses $1,168,586

This table shows the first year operating expenses. Most of these high
operating costs will be reduced in the following years after the start up
phase.

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Green Chilies. LLC

3. Product Description

GreenTV is an HDTV converter box that can transform a computer

monitor into an HDTV. It is inexpensive compared to a small HDTV
available in the market. It is very easy to install and flexible to use.
The basic technologies required to develop this product are all
available, and there is no significant technology barrier. This box will
have a XGA outlet so it can be hooked up to a computer monitor. It
can also accept inputs from BLU-ray and DVD players. A HDTV or
SDTV antenna can also be directly connected to GreenTV. It can offer
the same image quality as a HDTV. A pair of external speakers offers
hi-fi audio. It can also accept headphones for personal listening.

GreenTV will be designed to meet safety standards such as UL and

FCC.

It doesn’t need a computer to operate. We only plan to sell the

converter box, not the computer monitor.

A block diagram of the product is shown below.

CRT
Monitor

SDTV/HDTV XGA OUT

Antenna IN GreenTV

Headphones OUT

DVD IN

HDMI IN Speakers OUT

Remote
Control

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Green Chilies. LLC

Resolution of different TV formats:

1080p: 1,920x1,080
720p: 1,280x720
480p: 852x480
NTSC: 648 x 486
XGA: 1024 x 768 and more

This shows that a common CRT monitor has comparable image

resolution as an HDTV.

Competition
Our main competitors are HDTV manufacturers. Today, a small HDTV
costs about $400. Compared to that GreenTV is very inexpensive.

DTV converters can also be one of our competing products, however,

DTV converters use current TV’s that don’t have a high resolution. Also
these DTV converters with NTSC TVs can only be used in the US. The
Government currently pays $40 for every converter box. That is going
to end in July. After that the price of these converter boxes could
increase.

We expect others to compete with us by copying GreenTV’s conversion

technology. To address this, we are in the process of filing for a
patent. We also plan to establish GreenTV as an environmentally
friendly, inexpensive HDTV early through marketing, so that it is
harder for our competition to catch up.

Engineering and Sourcing:

We are planning to outsource engineering this product. This is because
we currently lack the expertise. It will faster to outside experts to
complete the design. We plan to outsource the design to a company
that specializes in the field of TV and video technologies. We will hire
two engineers to interact with this company through the design phase.

We plan to manufacture our product by first outsourcing to local

contract manufacturers because of a initial low volume. Once the
volume increases, we will outsource the manufacturing in places like
China and Taiwan, with companies like Foxconn.

We do expect GreenTV will last for at least five years since there is
ample supply of CRT monitors in the world. We have not planned our
future products after GreenTV, but it will most likely be in Green
technologies.

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Green Chilies. LLC

Proof of Concept:
We have created a working model using modules available in the
market today. This prototype captures DTV over-the-air transmission
and displays on any XGA monitor. Currently this only supports NTSC
quality picture. HDTV quality can be achieved with the real GreenTV.

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Green Chilies. LLC

4. Market Analysis and Summary

We calculated our market size based on the number of CRTs that can
be reused. According to CIWMB California (www.ciwmb.ca.gov)
disposes about 6 million CRTs. About 100 million CRT monitors will be
discarded in the US over the next few years. 40% of discarded
monitors are still functional and in our conservative estimate about
20% of them can be reused as TVs. This gives us a market size of 8
million CRTs just in the US. If we take this worldwide, this could
approximately be 10 times more, or 80 million CRTs per year.

We are projecting to sell about 8 million pieces over three years.

Customer Profile
Our customer base consists of these three kinds of people:

• Environmentally Conscious Customer (Cause-Driven): People

who are educated and are concerned about environmental
issues. They are willing to go the extra distance and pay more
for a cause that can save the environment. We consider them
early adopters.
• Technologically Conscious Customer (Curiosity-Driven): These
customers are technologically curious early adopters. As part of
the technical community, they tend to be owners of surplus CRT
monitors. They tend to try new products that make technical
sense.
• Price Conscious Customer (Value-Driven): These customers are
looking for low-budget or second HDTV in their homes. They
tend to be those who cannot afford a large HDTV, but want HD
quality experience. They tend to wait for the product to mature,
be proven, and at lower price. We plan to target the youngsters
who want to buy a TV for their room, as well.

We plan to start by offering GreenTV to these early adopters. We

believe that these customers will buy them early to support
environmental cause, technical curiosity or for their inexpensive first
TV. This will help us build revenue fast and early.

In the first year have a three-phase approach to our sales strategy.

Phase 1: We are planning to sell a conservative number of about 500

pieces nationally through the distributors and sales channels. This
phase will enable us to market the environmental theme to the news

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Green Chilies. LLC

media to attract more early-adopters. This phase will last for three
months.

Phase 2: We plan to sell 2,500 pieces because we are targeting the

general public, in addition to the early adopters. This phase will last for
three months.

Phase 3: We plan to sell 4,000 units by creating more awareness.

After the first year, we will sell at an accelerated pace.

Phase 4: We expect to sell about 75,000 units in the second year by

expanding globally. This will include OEM deals with local Cable and
Satellite providers along with the distributors in various countries.

After this phase we will offer GreenTV globally at a lower price. We

expect to sell 250,000 pieces in developed and developing countries.

There are several industry participants in the home TV space. Some of

them could be potential competitors, but others could be partners for
Green Chilies.
• DTV converter manufacturers such as Apex, SanSonic & RCA
• TV manufacturers such as Vizio, Sony, Samsung;
• Internet television such as Hulu.com and Netflix; and
• Video delivery companies such as Verizon and Dish network.

The primary obstacle in our product’s expansion is that people may

just want a large screen HDTV compared to the use of bulky CRTs.

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Green Chilies. LLC

5. Marketing Strategy and Implementation

The way for us to penetrate the market as fast as possible is by selling

GreenTV through both indirect and direct channels.

Our direct channels are:

• The Green Chilies website: This would be our primary and least
expensive channel for sales; and
• Online retailers: We would sell our product through websites
such as Amazon and buy.com.

The indirect channels are:

• Cable and satellite companies: They have already reached the
houses that we would want to get to and they have the right
setup to distribute, install, and support our consumers. Our goal
is make OEM or reselling deals with them;
• Computer monitor recyclers: These companies collect e-waste
for processing, mainly in developing countries. They charge to
accept e-waste from customers. Instead of breaking the CRTs,
they can offer functioning CRTs and GreenTV to customers as a
complete HDTV;
• Non-Profit organizations: They can buy our product and
distribute it to low-income communities or to developing
countries. This enables reuse of a CRT monitor and give
someone an HDTV who otherwise cannot afford it.

Promotional Strategy

To promote our product we will use a variety of tactics.

• Viral marketing – We will write blogs and information on the
discussion groups to get this in to various discussions. We also do
email marketing campaign. We think these are the fastest way to
reach millions of techies, youngsters and environment friendly
customers at a low cost.

• Press releases – We will get the product news out by press

releases and get articles published in relevant magazines.
• Focused advertising – We will also do some online and print
advertising:
• Targeted magazines – Consumer Report, PC Magazine
• Google Adwords
• News Groups, Facebook, Twitter, LinkedIn

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Green Chilies. LLC

• Webinars, Seminars – We will start giving webinars and

seminars with the industry analysts.
• Tradeshows – We plan to exhibit or visit trade shows like TV,
Home Entertainment, Green Camp etc.
• Company/Product listing on various sites – We will list Green
Chilies/GreenTV list at Green sites like EcoFactory.

Pricing Strategy
A 17-inch HDTV costs about 400 dollars. To create an HDTV with a
CRT monitor, we could price it at about $55. We feel that a $55 HDTV
will be very attractive at almost one-eighth of the price. We did a
market survey by independently asking several people. The average
acceptable price from our market survey was approximately $60.

President Obama’s Green policy could reimburse $40 to every GreenTV

similar to the DTV conversion boxes. GreenTV will also qualify for this
and it will make the cost of the purchase quite a steal.

Sales Strategy - Phase 1: Cause Before Cost

We focus our marketing toward the early adopters, especially the
Environmentally Conscious Customer. We focus on these consumers
because they are willing to try new “toys” and give us a kick-start. Any
sales to these people along with our integrated marketing programs
will give us visibility, marketing value, positive word of mouth and
overall a good branding. We will promote our sales through
environmental and technological companies, such as EcoFactory,
Brookstone, Radioshack, and Best Buy, and, of course, our website.
Slowly, we transition to Phase 2.

Sales Strategy – Phase 2: Where Price Really Matters

Even though we start Phase 1 as an awareness and acceptance phase.
Phase 2 is about volume. We’re catering to a different crowd now. Our
pricing has to appeal to a new kind of customer – first time TV buyers.
There are low income families and youngsters looking for a TV in their
room.
Sales Strategy – Phase 3: Increase Volume
In this phase we are planning to sell through distributors and retailers.
We will provide aggressive commissions to our internal sales staff of
5% and a 30% commission for distributors.

Sales Strategy – Phase 4: Going Global

By this stage, our second year, we would’ve established the product in
the US. But to go further, we may have to take a different strategy. At

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Green Chilies. LLC

this point, the prices have to be low and our profitability must be
stable, because now, we’re selling in higher volumes. We will find
international distributors and OEM partners. Our goal is to work with
cable and satellite provides and have them OEM GreenTV technology
in their box. This will help us reach millions of households faster and
without any shipping and support costs.

Distribution Strategy
We will distribute our product through these channels:
1) Our website
2) International Distributors
3) Environmental companies and recycling centers.

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Green Chilies. LLC

6. Risks and Exit Strategy

Some of our risks are:

• Slow acceptance of our product by the market: We will have to
have strong marketing campaign and periodically review the
price to increase the acceptance.
• Lack of funding: In case we do not succeed in acquiring venture
funds, we will have to consider bootstrapping with very low
starting funds.
• Similar Products: There could be another product with similar
features. We are in the process of filing for patent to avoid this
problem. We will have to be watchful of similar products in the
market

Our exit strategy is acquisition by another business – TV, Cable or

Satellite companies. We are hoping that our OEM partners will acquire
us. The advantage about acquisition is that we can get multiple
companies bidding. We could merge our company with other related
companies and become one company, or we could go public.

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Green Chilies. LLC

7. Financials

Income Statement
Financial Statements Year 1 Year 2 Year 3 Year 4 Year 5

Revenue
Number of Units Sold 7,000 75,000 250,000 500,000 1,000,000
Unit Price (Average) $54.99 $49.99 $39.99 $39.99 $34.99
Total Revenue $384,930 $3,749,250 $9,997,500 $19,995,000 $34,990,000

Cost of Goods
Less manufacturing Cost $20.00 $12.00 $8.00 $7.00 $6.00
(Cost of Goods) $140,000 $900,000 $2,000,000 $3,500,000 $6,000,000

Gross Profit $244,930 $2,849,250 $7,997,500 $16,495,000 $28,990,000

Operating Cost
Compensation $400,000 $920,000 $1,280,000 $1,760,000 $2,450,000
Marketing Cost $400,000 $600,000 $1,000,000 $1,000,000 $1,000,000
Distributor/ Sales Commissions 20.00% 20.00% 35.00% 40.00% 40.00%
Commissions Paid $76,986 $749,850 $3,499,125 $7,998,000 $13,996,000
Administration cost $2,400 $6,000 $18,000 $48,000 $60,000
Legal Fees $20,000 $20,000 $50,000 $75,000 $100,000
Office Rent $18,000 $30,000 $48,000 $72,000 $96,000
Insurance $10,000 $15,000 $20,000 $30,000 $50,000
Office Expenses $12,000 $24,000 $36,000 $36,000 $36,000
Shipping @ 3% of Cost $4,200 $27,000 $60,000 $105,000 $180,000
Product development cost $175,000 $50,000 $50,000 $50,000 $50,000
Manufacturing Setup cost $50,000 $50,000 $50,000 $50,000 $50,000
Total Operating Expenses $1,168,586 $2,491,850 $6,111,125 $11,224,000 $18,068,000

Income
Net Profit before taxes -$923,656 $357,400 $1,886,375 $5,271,000 $10,922,000

Taxes 30% $565,913 $1,581,300 $3,276,600

Net Income -$923,656 $357,400 $1,320,463 $3,689,700 $7,645,400

Compensation
Founders' Salary $240,000 $300,000 $360,000 $450,000
Sales $140,000 $280,000 $280,000 $420,000 $700,000
Marketing $80,000 $120,000 $150,000 $250,000 $400,000
Admin $40,000 $70,000 $200,000 $240,000 $270,000
Engineering $140,000 $210,000 $350,000 $490,000 $630,000

Total Compensation $400,000 $920,000 $1,280,000 $1,760,000 $2,450,000

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Green Chilies. LLC

Cash Flow Statement

Year 1 Year 2 Year 3 Year 4 Year 5

Cash Inflows
Investors Funding $1,000,000
Proceeds from Product
Sales $244,930 $2,849,250 $7,997,500 $16,495,000 $28,990,000

Total Cash Inflows $1,244,930 $2,849,250 $7,997,500 $16,495,000 $28,990,000

Cash Outflows
Operating Expenses
(excluding depreciation) $1,168,586 $2,491,850 $6,111,125 $11,224,000 $18,068,000
Income Tax $0 $0 $565,913 $1,581,300 $3,276,600

Total Cash Outflows $1,168,586 $2,491,850 $6,677,038 $12,805,300 $21,344,600

Increase / (Decrease) in
Cash $76,344 $357,400 $1,320,463 $3,689,700 $7,645,400

Cash, Beginning $76,344 $433,744 $1,754,207 $5,443,907

Year End Cash $76,344 $433,744 $1,754,207 $5,443,907 $13,089,307

Assumptions:

Year One:
• Venture capital of 1 Million dollars is available at the start.
• The unit price in the first year will be $54.99. With the
government stimulus and the early adopters needs, it is justified
to have relatively higher price in the first year.
• Manufacturing will be outsourced to the local companies because
of the low initial volume. The cost of manufacturing will be $20
per unit.
• The cost of product development will be higher in the first year
also because of the need for the design for the product. It will be
$175k.
• Outsourced engineering will need engineers to support and plan
for the future products. We plan total of 2 engineers this year at
$70k each.
• There is a manufacturing set up cost of $50k.

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Green Chilies. LLC

• Shipping cost for the products is estimated at about 3% of the

cost of goods.
• There will be two sales staff at $70k each and one marketing
staff at $80k for focusing on the web based marketing and
looking for the channels.
• Significant money is allocated for the marketing - $400k. This is
to penetrate the market faster. This will be an on going process
and will have result in this year and the following years.
• The total commissions paid to the distributors and internal sales
staff will be at the rate of 20% of the product price. There will be
an administrator for the company administration and sales
support.
• The legal fees are estimated to $20k for the patent costs.

Year Two:
• The unit price will be reduced to $49.99.
• Outsourced manufacturing will be reduced because of the higher
volume. The cost of manufacturing will be $12 per unit.
• The cost of product development will be lower since the base
design for the product is already done. It will be $50k.
• We plan total of 3 engineers this year at $70k each.
• Shipping cost for the products is estimated at about 3% of the
cost of goods.
• There will be two additional sales staff and one additional
marketing staff for focusing on also on OEM and international
markets.
• Significant money is allocated for the marketing - $600k. This is
to penetrate the market faster internationally. This will be an on
going process and will have result in this year and the following
years.
• The total commissions paid to the distributors and internal sales
staff will be at the rate of 20% of the product price. There will be
an administrator for the company administration and sales
support.
• The legal fees are estimated to $20k for the patent costs.
• The taxes are adjusted in this year for the previous year’s loss.

Year Three:
1. The unit price will be reduced further to $39.99.
2. Outsourced manufacturing will be reduced because of the higher
volume. The cost of manufacturing will be $8 per unit.
3. The cost of product development will be lower since the base
design for the product is already done. It will be $50k.
4. We plan total of 5 engineers this year at $70k each.

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Green Chilies. LLC

5. Shipping cost for the products is estimated at about 3% of the

cost of goods.
6. There will be two additional sales staff and one additional
marketing staff at $80k for focusing on also on OEM and
international markets.
7. Significant money is allocated for the marketing - $1M. This is to
penetrate the market faster internationally. This will be an going
process and will have result in this year and the following years.
8. The total commissions paid to the distributors and internal sales
staff will be higher at the rate of 35% of the product price
because of the OEM deals. There will be an administrator for the
company administration and sales support.
9. The legal fees are estimated to $50k.

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Green Chilies. LLC

8. Management Team

Saniya Shah, President:

Saniya has strong leadership skills proven by her organizational skills
and fundraising experience as the president of her student council, and
captain of her soccer, basketball, and lacrosse teams. She knows how
to work well with a team. She has played on sports teams since the
age of five and is an experienced team player. She has a black belt in
martial arts, and she going to graduate in Indian dancing in 2010.

Avvinash Radakrishnan, VP Operations:

Avvinash is an extremely adept and skillful leader. He has proven
these skills by implementing numerous strategies as captain of his
basketball team. His attention to detail has made him the national
championship in the Spelling Bee contest. He has been in team sports
for seven years and is also a good team player.

Meera Nair, VP Sales & Marketing:

From the age of 6, Meera has shown a passion for sales and
marketing, being very persistent year after year with her fundraisers.
Her talents and interests make her a good match for this role in the
company. Creativity, artistic design, and music contribute to her
marketing skills. She also enjoys public speaking and presenting ideas.
Meera is an exceptional leader and team worker, pulling her teams
together for basketball, Future Problem Solvers, and Destination
Imagination and winning prizes at these competitions.

Board of Directors:

We are planning to have people from the entertainment, Green

Organization, Recycling services and other related industry experts on
the board of directors. There will be a five-member board.

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