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Entrepreneurial Finance Final Project Report
BU.233.730.85
NASA Technology: Lotus Dust Mitigation Coating
May 2016
Professor Jim Liew
Group 8
Baozheng (Michael) Ge
Weijia(Victoria) Liu
Ting-Chih (Ting) Wang
Qiurong (Sunny) Zheng
Jieqi Zhu
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TABLE OF CONTENT
I. EXECUTIVE SUMMARY
II. BUSINESS DESCRIPTION
BUSINESS OPPORTUNITY
BUSINESS OVERVIEW
MISSION
III. PRODUCTS AND SERVICES
PRODUCTS
SERVICES
PACKAGING
INTELLECTUAL PROPERTY
IV. ORGANIZATIONAL STRUCTURE
V. MARKET POSITIONING
COMPETITIVE ANALYSIS
DIFFERENTIATION
VI. BUSINESS OPTIMIZATION
STRATEGY & TACTICS
VII. FINANCIAL FORECAST
ESTIMATED EARNINGS
BUSINESS MODEL ASSUMPTIONS
5-YEAR PROJECTIONS
VIII. APPENDICES
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I. Executive Summary
Our Start-up company, named Repello, aims to cooperate with NASA and apply Lotus Coating
Technology to more industries, especially Military and Transportation. With an approximately 0.5
million raising capital, our mission is to convert the Lotus Coating into protective surface of
automobiles, ships or airplanes that are normally exposed in a harsh environment.
Water-resistant, lightweight and durable as our coating product is, it derives several effective ways
for transportation protection, military use and construction use.
● For transportation, Lotus Coating helps large ships, speedy automobiles, flying aircraft
maintain effective anti-contamination and super-hydrophobic. Our product offers high
durability, dust-repellant and anti-corrosion layer protection.
● For military, coating helps get rid of dust and keeps soldier’s weapons, vehicles and marine
appliances clean and effective under any extreme circumstance.
Targeted at Transportation, Military and Construction industry, our addressable market is
estimated to have $1.45 billion at value due to high volume users worldwide, increasing demand
for cleanness and sustainable environmental development. To optimize company’s business model,
we outsource Marketing Division and hire experts to test the product, upgrade and develop more
advanced techniques.
Forecasted financial statements cover company’s solvency, liquidity and cost distribution. Our
rent, insurance and employees’ compensation are clearly listed and revenue is expected to grow at
modest rate. Profit will increase at? %percent.
After connecting with scientists, military leaders and estimate market volume, financial analysis,
we are confident about the feasibility of our business plan and future outlook.
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II. Business Description
Business Opportunity
No matter how things are going to change, cleanness is always one of the biggest concerns that
people brought to themselves. We cannot deny that all the human beings around the world are
consistently seeking some new ways to prevent themselves from being too hard to clean an object
as they have always been. Sometimes, it costs people a lot amount of time and money to do the
cleaning for certain stuff such as automobiles, airplanes, cruisers and even military equipment.
People always wonder whether there is a revolutionary way to get the cleaning process done in an
effortless manner for those stuff that is costly to be cleaned and undoubtedly, here the day comes.
Business Overview
Our company, named Repello, has come up with exciting idea about helping people save their time
and money to clean the objects like automobiles, airplanes, cruisers and military equipment. We
utilize the innovative material that is developed by NASA Goddard Space Flight Center to further
develop our own products. This kind of material is called Lotus Nano-Textured Coating modeled
after the self-cleaning, water-repellant lotus leaf. It disallows buildup of dust, dirt, water, and more
on surfaces. This coating, has been successfully tested on painted, aluminum, glass, silica, and
some composite surfaces, could aid in keeping medical assets clean. Since NASA developed this
material for NASA’s exploration program, Lotus coating could be applied to spacecraft radiators,
solar arrays, spacesuit material, visors, and any other type of lunar-exploration tool, is a very
promising technology that could keep the highly tenacious dust from adhering to spacesuits and
other critical spacecraft surfaces. Apparently, the coating can survive the harsh lunar environment
and minimize moon dust from accumulating on astronauts, their gear, and external
spacecraft/habitation surface.
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Mission
Our company’s main mission is to convert the Lotus coating into the protective surface of large-
scaled stuff that are usually exposed in a harsh environment in our daily lives. Things like
automobiles, airplanes, cruisers and military equipment are all in our target market. We aim to
provide our customers with a cost-effective and lightweight method for addressing the dust or
water problem that requires low maintenance.
III. Products and Services
Products
Industry: Military and Defense
Repello provides powerful technology solutions to improve the protection for the soldiers. Our
lotus coating technology maintain effective anti-contamination and super-hydrophobic even under
extreme environments the soldiers might face during their missions. Our technology provides high
durability and stability against vacuum and radiation, which are never available from other existing
technology. The durability of coating enlarges its flexibility to apply to different military service,
including Army, Navy, and Air Force. Our coating helps prevent the soldiers’ devices and
equipment from dust, liquid and humidity. Our low cost and long lasting coating help the military
reduce repair and maintenance cost and enhance readiness by avoiding malfunction of military
vehicles, aircrafts and vessels.
● Marine
Salt water corrosion is the main damage for vessels traveling in the ocean. Our resistant and
durable coating provides better water repellency and reduce salt water corrosion. For
submarine, the visibility is critical to the Navy. The glass coated by our technology prevents
dust and salt sticking to the glass, enhancing the visibility under the water. Moreover, the
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coating makes the vessels easier to clean, which is more environmentally-friendly by reducing
the use of chemical cleaners.
● Vehicles
The super-hydrophobic coating technology repel the water, mud, dust and debris from
periscope, windshield, and viewports of military vehicles, maintaining the clarity even in the
rain or driving on the muddy road. In addition to these features, the transmittance of our
coating also reduces the light reflecting and glint from windshields.
● Aircraft
The visibility of the aircrafts is the key factor influencing the performance of the air force. The
basis mission for the air force is to land the aircraft on a moving aircraft in the middle of the
ocean, where is usually in a storm. Under constraints of high speed and the requirement of the
stealth, fighter jets do not possess windshield wipers to help maintain the clarity of aircraft
canopies. Our transparent and durable super-hydrophobic coating is the ideal solution to repel
the water and dust from aircraft canopies in the severe weather.
Industry: Automotive/ Performance Racing
Repello’s second product line is in performance racing. Racing often makes automobiles to
withstand extreme conditions, this is quite similar to what lotus coating was invented for - extreme
space conditions. Its durability is very promising. When lotus coating is applied to sports cars, it
will withstand hot gas released from the engines. Also when on the road, it will repel water, dust
from blocking the view of the racer.
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Services
Industry: Military and Defense
Our worker will go to the military base camp where all the military ships, vehicles and aircrafts are
located once the appointments are made. Our workers will ensure the coating is applied properly.
With the high confidentiality of the military, the lotus coating can also be bought straight from our
manufacturer and be applied at their own cost.
Industry: Performance racing
We plan to distribute our products to various auto customization factories, and incorporate lotus
coating to major racing car brands such as Ferrari, Bugatti, Porsche, McLaren etc.
Packaging
Our lotus coating is sold in barrels which is easy to be distributed because customers can buy the
barrels and apply on their own or make a request to be applied by our professional workers.
Intellectual Property
We will purchase the patent of lotus coating from NASA at a cost of $10,000 annually and
continue to renew the patent. This way we are able to use this technology however we want.
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IV. Organizational Structure
V. Market Positioning
Competitive Analysis
The global nano coatings market demand was valued at US$1.45 billion and with a healthy 24.7%
CAGR during the forecast period, the market will grow more than three times its worth in 2012.
North America is the major region for nanocoatings market. The nano coatings market is
segmented into five types: anti-fingerprint, anti-microbial, easy-to-clean & anti-fouling, self-
cleaning and other. It is expected to show high growth owing to evolving environmental protection
regulations and standards to boost future growth of nanocoatings.
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Self-Cleaning is the major type of nanocoatings accounting for around 25% of the market in 2013,
followed by Easy-to-clean & Anti-fouling nanocoatings. Self-cleaning held the major share in the
nanocoatings value market in 2013 and would remain the largest shareholder till 2019. The easy-
to-clean & anti-fouling nanocoatings held the second largest share for the nanocoatings market
value, and projected to grow with a healthy CAGR, from 2014-2019.
Differentiation
Nano coating is not a new technology. However, under this situation, our product still has its
advantages.
First of all, our products are positioned as high technology and high valued market lines. Nano
coating is already widely used in low technology line such as wall paintings which are not our
target market.
Our target customers are in the high end of the industry. NASA technology keeps our products as
durable and stable. Our products can endure hostile environment since this product is investigated
in the astronautics requirements. Different from existing products, our products can keep
automotives’ glasses clean for a long time. We are able to serve automotives and other products
which have some concerns in high pressure and high temperature.
VI. Business Optimization
Efficiency gains are measured by the relationship between earnings and costs. Lower costs and
higher profit can always add value to the firm, which means company realizes gains in efficiency.
Our company could optimize business process and lower costs by improving management,
technical processes and financial analysis. The details are as followed:
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● Cost Reduction
Since our company is extending business and is using NASA’s technology, so Marketing
Division could use Outsourcing Team. Some non-core functions could also be divided into
different sections in order to save costs.
● Improved Efficiency and Productivity
We can conduct cross-functional training because in-depth technology knowledge is important
for every employee. Besides, Financial DuPont Analysis could clearly judge company’s
liquidity, solvency, earnings and valuation. The company could use some leverage to expand
business. An internal systematic controller could be developed and the system better connects
with NASA if there is any problem happens to the product. Driven by improved throughout
and accuracy in every chain, company should make the system quick, efficient and integrated.
● Better Management Assessment
Dozens of qualified experts in technology, manufacture and management are needed to help
monitor, evaluate, and identify ways to get efficiency gains. For a start-up business, three core
leaders are necessary and they evaluate the main stream of business by generating innovative
ideas, managing operational process and analyzing financial status. Product consultants and
technical supports should have a combined average ten years in the industry.
Strategy & Tactics
● Goals
With a focus on Transportation, Military, and Construction Industry, the company aims to
make all kinds of appropriate devices resist water, dust and oil, improving their durability and
cleanness. Connected with NASA technology, new research and development on
Nanotechnology could equip modern society with necessary appliances and scientific evidence.
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● Objectives
Based on Nano technology improvement, objective of the company is to dig into more
advanced technology on Nano and apply it in more industries if possible. In addition,
expanding business in foreign countries that are in need of environmental protection, medical
cleaning and military improvement.
● Solutions and Strategies
Our company is dedicated to offering various solutions in different industry, based on specific
features and tailored needs. The main strategies are as followed:
1. Lower Costs
Because it is an existing technology and higher production costs will hinder business
expansion, so the company should minimize costs in developing, selling, distributing and
marketing. Outsourcing is a wise decision and the main focus is to update technology.
2. Product Variety
The Nanotechnology could be extended to many industries including construction, Military
and electronic applications. By extending, the company could find the limits of the product
and improve technology to cater people’s needs.
VII. Financial Forecast
Business Model Assumptions
Revenues and Expenses
Since the Department of Defense has cost $20 billion a year to coating against corrosion on US
military weapon, we assume our sales in the first year to be $2,970,000, nearly 0.01% of total cost
of the Department of Defense. We also expect our sales to grow at 20% in the next five years. The
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largest amount of expenses are employees’ payroll, the rental of equipment, and the utilities. We
plan to hire 10 full-time employees and 10 part-time employees, which cost us totaling $572,000
annually. The rental of equipment and utilities expenses are both $120,000 per year.
Profitability
The gross margin of our products is assumed to be about 45% since our target market is high-class
and the coating technology provides additional value to the customers. The overall operating
expenses is approximate to be 20% of sales, which would be even lower when our business
expands and reach the economies of scale. In the fifth year, total operating expense would decrease
to 15% of sales. The tax rate during next five years is assumed to be 20%. The net income of the
first year would be a loss of $141,402, but we expect to breakeven in the third year.
5-Year Projections
According to our estimation, Repello’s total required funds is going to be approximately $478,000
which includes $365,000 in total fixed asset and $113,000 in total operating capital. Moreover,
from the projection of our first five year net income, we have net income of ($141402) during the
first year and for the following four years, we have consecutively earned positive net income and it
has remarkable increases for every following year. We estimate that we are going to reach our
breakeven point during year 3 which is pretty short period of time. However, our five year free
cash flow has fluctuated a lot where we reached our maximum value at year 3 and then there is a
declining trend for the following two years. This is due to the significant increase in current asset
during last two years. Finally, our enterprise value is estimated to be $1,173,966 with a WACC of
8% and long-term FCF growth rate of 3% and we believe that this value would continue to grow
because the value of total addressable market is deemed to be very large and we are going to
constantly develop and refine our products to penetrate into the market as deeply as possible.
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VIII. Appendices
Figure 1: SEM images of Lotus Leaf
Figure 2: Testing image of Passive Lotus Coating Technology
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Figure 3 Start up expense in year 1
Figure 4 Product line and cost of goods
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Figure 5 Sales forecast of year 1 (monthly)
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Figure 5 Balance sheet year 1 to 3
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Year 1 Year 2 Year 3 Year 4 Year 5
Net income before tax
(141402) 52279 294977 503331 847884
Income tax 0 16416 64693 110909 143345
Net income / (loss)
(141402) 35863 230284 392421 704539
Figure 6 Income statement Summary