D.C. Veritas Week 6: Pivot + Channels

D.C. VeritasWeek 6: Pivot + Channels

Pivot – Why not residential

WHY NOT RESIDENCIAL:• Unpredictable wind speeds for each individual home• Despite cost savings, solar still wins due to other

variables• Per unit offset not sufficient given size tradeoff• High customer acquisition cost.

Why Lamp Post !

WHY LAMP POST:• Electricity cost is a “Hair On Fire” issue for cities. • “I can either fix potholes and storm drains or keep

paying $800,000 a year for electricity.”- Public Works Director Rick Moshier – Santa Rosa

• City wide distributed energy grid• Market best suited for Vertical Axis Wind• Visibly local electricity generation• Market size at least 13 million city street lights

The Problem

Channels – Direct SalesDirect sales

• Door to door is not the best method for this product• Face to face events – Home Garden shows, Home

Improvement expos• In house sales force not necessary• Profit for channel of 15-20%• Direct mail marketing targets customer profiles – land

requirement, income level, electricity price

Outsource vs Own sale force• Motivated sales person is looking to make $80K - $100K per year• With $700 profit margins, and 20% commission off profit, a full-

time sales person would need to make 571 units sales per year• Outsource sales force makes more sense to reduce overhead.

But will need one full-time sales manager to train and coordinate rest of sales force

Channels – Direct Sales

Manufacture& Materials Overhead + Customer Acquisition Cost + Profit

End

Con

sum

er

OutsourceDirect Sale

RevenueList

Price

Source: Mark Leslie, Stanford GSB

$1,350 $4,750 $250

Channels – Large Retail Store

Large Retail stores need VOLUME they are generalists.

Experience with solar panels show that $900 solar panels are too expensive.

This channel is only useful to generate leads. Floor sample may be useful to gauge public interest.

Manufacturer carries all the risk. The retail store has no stock and manufacture provides sales person.

OVERALL: Is not the right channel !!

Customer Lifetime Value

Customers

Customer Call

Center

5 Year Warranty

10 Year Warranty

Monitoring System

After Warranty Maintenance

Customer Rebuy/

Recommendation

Turbine Price US 6100Profit per turbine sale US 492Profit per with extended warranty US 617

Profit per with additional maintenance US 523

5-yrs Plan

“New” Business Plan Canvas

Will provide unique retrofit wind turbine for street and highway lamps. This will allow cities to reduce costs and environmental impact with a green alternative that is more economical and more aesthetic than competitors. For lighting companies, add a visual green alternative to their lighting portfolio for less money than our competitors. For Utilities - reduce energy demand, provide green alternatives to fulfill Renewable Energy Portfolio standards and offer faster payback than other alternatives.

Cities, Lighting Companies, Utilities

Direct sales to the city or utility, and forming long term relationship for maintenance and replacements.

The Utility currently handles maintenance on its lamp posts. They would continue to handle the maintenance on these retrofitted lamp posts after the first 5 years. For the first 5, we would handle any maintenance. After 5 year warranty, customer will need to call for service and be charged for additional service. Customer can purchases extended warranty option, which will cover maintenance package.

Revenue generated from selling the product and extended warranty or maintenance service to any of these customer segments

Key resource is our intellectual property in having a cheaper manufacturing process. Need some $600K of capital to start manufacturing and distributing 500 turbines the first year (estimate $1000 per unit manufacturing costs + $1000 for customer acquisition). Year 2 will need approximately $500k for operations. Will need endorsements by environmental groups, public utilities, city council permitting department.

Form partnerships with local governments and understand more fundamentally, the nature of their problem with electricity costs, and community aesthetics. Also understand the bidding and approval process associated with getting a city to purchase a product like this. Understand what barriers exist to getting something with moving parts approved for residential streets. Ongoing relationship and continued communications with city council members to inform members about our product.

Working with environmental groups will be important to push for regulations and publicity that favor installing wind turbines on street lamps. Bird and wildlife groups for similar reasons. City councils to establish regulations. Light manufacturers and installations to make successful bid on project. Installation/Maintenance workers, electricians for additional additional installing workforceCost-driven model where we can provide inexpensive but quality product to customers. Cost will be dominated by manufacturing costs and customer acquisition costs. May consider in-house leasing option, if upfront costs is large obstacle for customer and sufficient funding obtained.

QUESTIONS ?