MBA 115 – Entrepreneurship 2020
Assessment briefing
Assume that you are a high net worth individual with prior experience of investing in early
stage ventures. You currently have ample liquidity and a diversified portfolio of 24
Seed/Series A investments. The capital invested in this portfolio represents under 10% of
your net worth.
You wish to act as a co-investor on the Syndicate Room
platform by making an EIS (Enterprise Investment
Scheme) investment of £100,000 in a single business.
Tom Britton*, a CJBS MBA alumnus and SR co-founder, sends you three promising early
stage investment opportunities:
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•
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TC Biopharm
Mayku
Digital Therapeutics
Write a 3000-word report which should address the following:
1. The criteria you will use to assess the opportunities.
2. An evaluation of the strengths and weaknesses of each proposal. What are your
primary concerns about each opportunity?
3. What further data and information would you seek prior to making your decision?
4. Giving reasons, which one of the three (if any) you would choose to invest in?
Guidance:
a) These are real investment cases, all of which successfully raised money. There
is, therefore, no ‘right or wrong’ answer. Instead, we are most interested in how
you approach the problem, and the tools and techniques you use to guide your
analysis and decision making.
b) You should assume that your primary goal is to maximise your ROI over a period
of five years
c) Please do not, UNDER ANY CIRCUMSTANCES, contact the companies,
investors or Syndicate Room for additional information.
*The course leaders express their thanks to Tom for his invaluable assistance in the
preparation of this assignment case.
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MBA 115 – Entrepreneurship 2020
TC Biopharm
Equity offered
Capital required
Pre-money valuation
27.27%
£3,000,000
£8,000,000
Intro Video: TC Biopharm interview
Website: https://www.tcbiopharm.com/
Founded in 2013 TC Biopharm Limited (“TCB”) has developed a clinical therapy called
ImmuniCell® which harnesses the body’s own immune system to fight cancerous tumours.
Every person has gamma delta T cells as part of their immune system – they are one of the
key powerhouses that help fight illness. Using a proprietary process, TCB isolates and
expands patients’ own gamma-delta T cells to better attack tumours.
Existing clinical data has demonstrated evidence of safety and efficacy (data from studies
carried out in Japan and a number of small-scale, ad-hoc, uncontrolled studies).
This data has allowed the company to rapidly progress to Phase II/III clinical studies,
bypassing Phase I studies, and thereby removing a significant amount of clinical and
commercial risk. TCB-sponsored clinical studies have already commenced at cancer
‘centres of excellence’ in Glasgow, Edinburgh and Southampton, with further sites in the EU
and USA scheduled to commence trials in late 2016 - maximising opportunities for robust
clinical data to support efficacy targets.
TCB has a large addressable market and, based on independently prepared information,
estimates annual EU revenues of between £100m and £500m five years post launch
(depending on lead cancer indication).
Whilst the current ImmuniCell® treatment is a patient-specific ‘personalised medicine’, TCB
has a pipeline of second-generation products with the potential to treat larger numbers of
cancer patients. This pipeline provides a cost-effective way for TCB to partner with
pharmaceutical companies to target significant patient populations.
Commercialisation
ImmuniCell® represents a benefit for payers and health authorities over current standards of
care due to enhanced clinical benefit and a potentially significant reduction in adverse
events. TCB is actively engaging with clinicians to ensure significant uptake through clinical
studies and beyond and has established a dialogue with payment bodies to ensure a robust
framework for commercialisation and reimbursement.
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MBA 115 – Entrepreneurship 2020
There are two main elements of risk: clinical and commercial. Clinical risk is being mitigated
through the design of the clinical trial as an ‘adaptive’ trial, looking at a number of patients
across 3 separate tumour types; traditional clinical trials tend to focus on one tumour type.
TCB is planning to progress the most promising tumour type on conclusion of Phase IIb
clinical studies in late 2016. Commercial risk is being mitigated, as a pre-revenue company,
by establishing an extensive capital strategy for fundraising in conjunction with Narec Capital
as the Company’s lead financial advisor, and by pursuing partnerships with leading,
healthcare focused venture funds and investment banks.
Protecting Market Share
Since commencing operations in February 2014, TCB has built a MHRA approved, GMP
compliant cleanroom and laboratory facility outside Glasgow. It has implemented robust
quality systems and recruited a team of 30 highly skilled staff across a variety of disciplines
including production/manufacturing, clinical, quality control, quality assurance, research and
development and commercial.
Having scaled operations at a very impressive rate for the sector, TCB can claim to be one
of the UK and Europe’s leading cell therapeutics companies. Market share is being protected
by an established regulatory pathway through clinical studies (with Phase I trials already
completed) to product launch, together with protection of the company’s intellectual assets,
knowledgeable staff base and interest from the company’s extensive network of clinicians
who are interested in using the product.
There are significant barriers to entry for other companies to move into the space. At an
infrastructure level, there are few facilities which have the required regulatory authorisations
to manufacture Advanced Medicinal Therapeutic Products (ATMPs), the quality systems in
place to manufacture cell therapies or the experience to work on cell therapy manufacture.
Intellectual Property
TCB has a wide range of intellectual assets, including:
1. A robust portfolio of three patent families protecting TCB’s pipeline manufacturing process
(all currently being applied for).
2. An exclusive in-licensed patent (WO2010001599) from Medinet, Japan, for Europe and
North America.
3. An exclusive European supply of culture specific media from their media partner.
In addition to this, the company has a range of other intellectual assets including process
know-how, trademarks, domain names, a robust quality system and a significant amount of
staff experience and knowledge in manufacturing their product.
The TCB team believes that this range of protections will make it very difficult for incumbents
in the market to replicate TCB’s technology or processes.
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MBA 115 – Entrepreneurship 2020
Team
Dr Michael Leek - CEO
Michael has 30 years’ experience in regenerative medicine, during which he progressed 10
different cell-based products from the laboratory into clinic. As co-founder, he was jointly
responsible for moving Intercytex from a pre-clinical research company, to an AIM-listed
biotech with several cell therapy products in the clinic.
Angela Scott - COO
Angela has 37 years in oncology research and regenerative medicine, was part of the team
that cloned ‘Dolly the Sheep’, and has designed, built and commissioned several GMP
manufacturing facilities. She manufactured product for the UK’s ‘first-in-man’ stem cell trial
(PISCES – ReNeuron) and has held MHRA -MIA and -IMP licenses for several cell therapy
products.
Exit
TCB anticipates a public listing on Nasdaq in H1, 2018. This strategy is being executed in
conjunction with the Company’s lead financial advisor, Narec Capital Limited.
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MBA 115 – Entrepreneurship 2020
Mayku
Equity offered
Capital required
Pre-money valuation
28.00%
£1,400,000
£3,600,000
Intro video: Mayku interview
Website: https://www.mayku.me/
Founded in 2015, Mayku was created to help people make incredible things with beautiful
tabletop machines. The FormBox, their first product, is aimed at the $44bn craft market. It
gives independent creators the power to make short runs of professional products from
home – as simply as baking a cake.
Mayku have already sold to more than
3,000 people in 74 countries and the
number keeps growing. These sales led
to £1.2m in revenue for 2018.
Customers include Nike, NASA, Nestlé
and other large enterprise customers as
well as schools, chocolatiers, craft
businesses and families. Their ultimate
aim is to have every creative person
around the world using their products to
bring their ideas to life from home.
Customers to date include families,
schools, chocolatiers, craft businesses
and even large enterprise customers.
The product seems especially useful to small businesses as it substantially reduces the cost
and time to produce product moulds and develop new products. Customers are social and
share content about what they have made, encouraging others to purchase or make similar
products themselves.
In 2020 Mayku plan to launch a more affordable FormBox. This will be followed with the
FormBox Pro in 2021 - A much larger more powerful machine for power users and
professional customers. This will be priced at £1299 and provide a ‘huge’ margin.
After this Mayku aim to launch the CarvBox - a desktop carving machine that enables users
to download templates and carve them out of natural materials like wood, copper, foam and
even chocolate.
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MBA 115 – Entrepreneurship 2020
They have high profile reviews from the Financial Times and the online crafting community.
They have an impressive corporate client list already using their products. They had a
Kickstarter campaign- 1,745 backers pledged $588,775 and fulfilled all orders before they
started trading.
The product is still considered new to the market; alternatives are far more costly and time
consuming to produce the same result.
The product is made in China, to keep costs low. Quality control has been impeccable with
a less than 0.33% failure rate (industry average is above 2%). Co-founder Ben slept on the
factory floor when they set up their production line ensuring every single step had strict
procedures for testing and quality checking. Their supply chain manager is a Chinese native
and is in direct communication with every party involved with the supply chain. Further,
Mayku have all the necessary documentation to shift suppliers if needed.
Additionally, Mayku has a syndicated group of London based hardware start-ups that all
work with the same contract manufacturer. This gives them the purchasing power and
negotiating power of a much larger company.
The Team
The team has experience across the board with all areas covered, with several members
having previous entrepreneurial experience. They have impressive academic and
professional resumes and come across as a strong team that is easy to work with.
Alex Smilansk CEO
His background is in design, engineering and digital product strategy. After a brief stint
studying Economics at UCL, he started his career in business development at Visa Europe
in 2008. He then went on to study Design & Innovation at Goldsmiths and Queen Mary's
University in London.
Before starting Mayku Alex worked at a series of design agencies before going on to lead
the strategy team at Mint Digital - an award-winning start-up studio in London. Whilst there
he led the development of multiple digital products for large corporates and start-ups as well
as launching a number of in-house ventures.
Benjamin Redford CPO
Previously worked as a designer for Saatchi and Saatchi and then Mint digital where he
worked on some incredible projects including:
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Founded and manufactured Projecteo: the mini Instagram projector. Stocked in
Moma design store and Collette Paris. https://www.getprojecteo.com/
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MBA 115 – Entrepreneurship 2020
•
Designed and prototyped Olly and Polly - the web connected smelly robots. Won the
Young Inventor of the Year award and trended worldwide on Twitter for three hours.
http://www.ollyfactory.com/
•
Worked on Foldable.me and Sticky9 before it's sale to PhotoBox. https://sticky9.com/
Exit
Mayku plan to exit via a trade sale in 4-6 years to a large craft conglomerate or industrial
machines business. We expect to sell at a minimum of 5X annual revenue - Circa £100m.
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MBA 115 – Entrepreneurship 2020
Digital Therapeutics
Equity offered
Capital required
Pre-money valuation
20.41%
£400,000
£1,560,000
Intro Video: Digital Therapeutics interview
Website: https://www.quitgenius.com/
In 2017 Digital Therapeutics raised £400k from Angels and SyndicateRoom at a £1.56m premoney valuation.
Launched in 2015, Digital Therapeutics aims to address the rising cost of preventable
chronic diseases with the use of cost-effective, evidence-based digital therapeutic
interventions.
Digital Therapeutics’ first product, Quit Genius, seeks to address the largest cause of
preventable morbidity and premature mortality worldwide: smoking. Tobacco use results in
nearly 6m deaths per year worldwide, predicted to rise to more than 8m by 2030.
Digital Therapeutics is backed by Merck & Co and Telefonica, the Quit Genius app has been
accessed by 9,510 users, and the company has been featured in a number of global media
outlets. Following Quit Genius’ launch to the Apple App Store, the app was featured for four
weeks on the front-page by Apple’s editorial team as a result of its unique value proposition.
The Team
Digital Therapeutics’ management team boasts three qualified doctors from Imperial College
London. CEO Yusuf Sherwani and COO Maroof Ahmed bring prior experience in founding
companies and they – along with Sarim Siddiqui, Chief Medical Officer – have co-authored a
number of peer-reviewed academic publications.
CTO Tim Closs has over 20 years’ experience developing commercial software and has
spent more than a decade acting as CTO in various start-ups. Developing the software are
senior developers Lucas and Diego, together bringing almost 30 years of relevant
experience to the team.
The product
Across the four-stage programme, smokers engage daily with a mix of animated video clips,
audio sessions, interactive exercises, quizzes and a range of evidence-based mindfulness
exercises. The app uses data on user’s smoking habits, triggers and motivations for quitting
as a means of matching them to their own unique journey, helping to recreate the patienttherapist relationship on a digital platform.
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MBA 115 – Entrepreneurship 2020
The user experience employs the company’s novel and evidence-based application of
gamification to make it more engaging. In Digital Therapeutics’ view, Quit Genius represents
a completely new system of care using a combination of data science and AI techniques to
deeply understand a user’s thoughts and smoking patterns, helping them achieve long-term
abstinence by delivering therapy personalised to their own triggers and motivations.
Customers
Quit Genius’ end users are individuals looking to quit smoking, who own a smartphone and
are familiar with the process of downloading apps.
The company’s B2B customers can be divided into the following three categories:
1. Employers/brokers
In the UK alone, smoking costs employers approximately £8.7bn a year in lost productivity,
and significantly more in insurance premiums for businesses offering health plans. With
health and wellness benefits widely recognised as central to optimising employee
engagement, Digital Therapeutics believes Quit Genius would help achieve this by providing
a cost-effective digital service on a subscription basis.
Digital Therapeutics has secured partnerships with Perkbox, a HR benefit platform with
300,000 employees and LiveSmart, a B2B health assessment service. The company is also
in discussion with large corporates including O2, MSD UK and Facebook.
2. Healthcare payers
Quit Genius delivers a service that adds value to both public and private healthcare payers,
empowering patients to take control of their health whilst also reducing long-term health care
expenditure by £4,876 per smoker, according to the company’s calculations.
Digital Therapeutics is in discussion with private health insurers AXA PPP, with respect to
launching pilots in Europe and Bupa, and with respect to a pilot in the UK. Similarly, the
company has also engaged with the NHS and Local Authorities with a view to launch in
Medway and Southwark in 2018.
3. Pharmaceutical companies
Digital Therapeutics believes that the opportunity to mine and extract value from Quit
Genius’ data is significant. The global market for nicotine replacement therapy (NRT) is
expected to reach $21.8bn by 2024. Quit Genius aims to unlock unique product insight via
digitally collected patient-reported outcomes measures, be configured for targeted
messaging to smokers considering NRT, and achieve superior quit rates when combined
with pharmacological smoking cessation agents.
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MBA 115 – Entrepreneurship 2020
The company already has an established working relationship with Merck Sharp & Dohme
and is also in discussion with Pfizer, GlaxoSmithKline and Omega Pharmaceuticals, which
have established products in the smoking cessation market.
Monetisation
The default revenue model for consumers and businesses is a monthly subscription fee
priced at £15 per user per month and discounted for bulk license purchases and longer-term
contracts.
For healthcare payer partners, Digital Therapeutics is testing an outcome-based pricing
model which involves a £10 enrolment fee for all users, followed by a £129 success fee if the
individual quits for at least 4 weeks (based on in-app/wearable tracker data). At an
extrapolated quit rate of 35%, the company predicts a total lifetime value of £52 per paying
user.
The model, pioneered by Omada, has proven highly successful in the USA, where it has led
to national adoption of Omada’s Prevent programme for pre-diabetes.
Marketing
Core to the consumer growth strategy is a focus on organic acquisition through content
marketing and SEO efforts. Moreover, a growing critical mass of lead users fundamental to
bolstering the B2B value proposition. The company seeks to reach B2B customers through
direct-to-employer relationships and partnerships with healthcare brokers.
Traction and plans for growth
Since publicly launching in July 2017, the app has seen a consistent 59% week-on-week
user growth. The following month, Quit Genius was featured on the front page of the App
Store during which exposure increased from a baseline weekly average of 1,190 to 4.6m
impressions per week.
Having reached out to Apple, editors commented that they were “impressed by Quit Genius
and its unique customer proposition”. Early data has illustrated a strong baseline retention
and stage completion rate of 73% for onboarded users.
The company has been featured in a number of global media outlets including WIRED,
TechCrunch and Mail Online to name just a few.
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MBA 115 – Entrepreneurship 2020
Exit
Digital Therapeutics believes a trade sale is the most likely exit scenario for the company,
perhaps within the next three to five years. Possible acquirers include pharmaceutical
companies diversifying into software-based clinical interventions, medical device companies
and traditional technology companies diversifying into health-tech (e.g. Alphabet’s Verily and
Telefonica Alpha).
Early discussions with pharmaceutical partners have revealed potential exit opportunities
when the company achieves key milestones, such as clinical validation, adoption by
healthcare payers, UK/USA market traction and the applicability of Digital Therapeutics’
underlying technology to new disease areas.
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