Question1 A) The EndoNav value proposition in OTS product are Improving Ease of use: Simplify the navigation and

reduce the force required to move the

scope through the intestine. Eliminating and Reducing Sedation: Device remove sedation and in some cases if it

could not remove but reduce the sedation. That will reduce not only the complications but also the cost associated with the procedure. The device will make easy to learn the procedure. In comparison to the conventional

device that takes up to 1,000 procedures before make the physician proficient. Improve the Throughput of the procedure. Reduce the time of difficult procedures that will help health centers manage their

variability easily. B) EndoNav has not many competitors rather it has no competitor who is offering that kind of

device. Since OTS devices reduce the risk associated with the procedure that will help EndoNav in getting Regulatory approval. EndoNav has a target market of teaching hospitals, where barriers to entry are very low, where getting a feedback is easy. EndoNav also planned to target HMOS, who are early adopters of new technology. C) As far as fund raising strategy is concerned they need to focus on Pitching first then go for

business plan. They should reduce the time-to-market span. They need to focus on bootstrapping the finances required to get in to the market. So that they can go to angels rather then VCs. EndoNav need changes in its investor presentation in different aspects. One is It should not put too much information in the presentation. Dont put too much technical details in the presentation. EndoNav needs to follow 10/20/30 rule. Means ten slides, Twenty minutes and 30

point font. EndoNav should ensure that the plan is properly integrated with the real-world knowledge, with less jargons and list of potential customers to whom investors can call.

Question2 The summary of the revenue and gross margin expected for 2006-2008 are shown below.
Table1 Cost of Each Device $ Retail Price $ Number of Procedures Revenue $ COGS $ Gross Margin $ 2006 72.50 150 9444 1,416,600 684,690.00 731,910 $ $ $ $ $ 2007 72.50 150 93891 14,083,650 6,807,097.50 7,276,553 $ $ $ $ $ 2008 72.50 150 267344 40,101,600 19,382,440.00 20,719,160

Question 3. A) In order for Jaime Vargas to successfully launch the over the scope (OTS) device with funding from angel investors, he must make sure that he is making effective and efficient use of his people resources. This means that having a large staff may not be ideal, to minimize cost, Vargas may need to retain multi talented individuals that are experienced in more than one function of business operations. As a partner, Kenneth Kelley is able to bring an array of skills to the table. His previous career as a consultant at McKinsey & Company as well as his experience in dealing with biotech and medical device start ups, is going to be a key asset to the business side of EndoNav. It is also noted in his resume that he won the Finance club annual portfolio contest at Stanford's B-school. With these combined skill sets, he could temporarily be responsible for the task of Director as well as CFO. Other talents Endonav will need to retain include product engineers, quality engineers, technician and clinical coordinator all will be crucial to the eventual roll out of the OTS device. It is also mentioned in the case that

EndoNav had carefully protected its intellectual property (IP) since its inception, therefore legal counsel will continue to be a crucial part to sustaining its advantage. Assuming production of the OTS is in progress, marketing talent will need to be retained with the goal of raising awareness for the OTS with the end goal of making this device an industry standard. The required personnel mentioned is mandatory to insure the proper finished product to me introduced to the market.

B) Until the OTS device is introduced to the market and generating revenue, a portion of management can be eliminated for the initial phase. Without a revenue generating product most of management would not have business to manage. It is important that what resources the firm does have are devoted towards the manufacturing, quality control and marketing during the initial phase when the product hits market. Cutting back on management personnel will greatly enhance the firm's ability to fund other priorities since salary accounts for 20.57% of the total annual expense.

C) If funding were to be obtained through an angel investor, the case mentioned the possibility of raising up to $650,000, a substantially smaller figure than the original investment requirement of $6 million. To address the absence of skills and resources, severe cost cut backs will need to take place. Cost reduction in tooling, molds and dies as well as management will be necessary , given these are the largest expenses. As a result of cut backs, the product may take longer than expected to reach the market. D) With a $650,000 angel investment, EndoNav is unlikely going to be able to continue with operations after the first year. Making it through the first year will be a problem. We revised the projected to best fit this expense, Product development expenses were kept the same, however we cut all the other line items by 2/3, getting us to a 2004 projected expense of $568011.67 If EndoNav were to receive another round of investment from angel or venture capitalists they will need to have made progress in their market release

milestones. It will be very difficult to attract further investment by just completing the functional test stage, however there is not enough cash to burn through the second quarter with current expense projections. Following our revised plan in exhibit 11, we cutback on projected expense, capital, and human resource for each of the milestones. Assuming cut backs in all human resource functions except product design engineers we think we can support up to 4 quarters and keep up with those 4 mile stone accomplishments. By completing these first 4 mile stones, we believe we will have proven enough progress for another round of investment.

Quetsion4 a. If the company can raise $650,000 If the company can only raise 650,000, the expected timeline will be the second quarter in the first year and the milestone will be the in-vivo animal studies and 510(k) submission. However, with only 650,000 the company even cannot complete the animal study, which is one of the most important benchmarks for the business plan. Without animal study, the company will not able to do human study, not to mention the fully marketable product. b. If the company can raise $1,000,000 If the company can raise 1,000,000, the expected timeline will be the third quarter in the first year and milestone will be the pilot clinical build and 510(k) approval. With one million dollars fund, the company is able to complete animal studies and move ahead to do human studies, another important level of the business plan. But this amount of fund is still not sufficient enough to totally support the human studies. The company needs additional fund to complete the human studies, and all the other following market studies.
Question 6

Since we cant know the exactly how many shares the funder owns in the pre-money valuation stage, we use the notes from the question to calculate the ownership percentage and valuation. The funders ownership accounts 45.83% and the angel investors ownership account for 54.16%. Please see excel spread sheet. Question 7 Please refer to the attachment.