Authentic audio quest for venture capital may 11 1999
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Authentic Audio Quest for Venture Capital May 11, 1999. David Runton Pete Smith Rajashi Runton Renee Savera Rob Michael. Agenda. Introduction to the Audio Market The Alpha Product The Business Plan. Understanding Customer Needs. Attributes Characterization and Evaluation (A.C.E) matrix.

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Authentic audio quest for venture capital may 11 1999 l.jpg

Authentic AudioQuest for Venture CapitalMay 11, 1999

David Runton Pete Smith

Rajashi Runton Renee Savera

Rob Michael

Agenda l.jpg

  • Introduction to the Audio Market

  • The Alpha Product

  • The Business Plan

Understanding customer needs l.jpg
Understanding Customer Needs

Attributes Characterization and Evaluation (A.C.E) matrix

The audio market l.jpg
The Audio Market

  • Brand Recognition is the greatest entry barrier

  • From Porter’s Five Forces Model

    • Industry Rivalry

      • Large, well funded corporations

      • Well known competition

    • Buyer Power

      • Ultimately, Consumers must buy the product

Product concept l.jpg
Product Concept

  • Digital, Digital, Digital

  • Tube Based Circuitry

    • Inherent design enhances even harmonics

      • Desired for warmth

      • Impedance levels allow for “better sounding” components

        Can we find a way to merge the two technologies?

Product design l.jpg
Product Design

  • The Tube Signal Shaper - Alpha Product

    • Tube based preamplifier

    • Designed to work with existing systems

    • Target customer desires for:

      • Natural Sound - Warmth

      • High Quality

      • Clarity/Crispness

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Current Home Stereo System



Compact Disc Player



Stereo Video Source



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Enhanced Home Stereo System

Tube Preamplifier



Compact Disc Player



Stereo Video Source



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Customer Acceptance

  • Customer Testing

    • Processed / Unprocessed Sample Songs

      • Listen for yourself!

    • Preference Ratios

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Customer Acceptance

  • High Quality

    • Scored high

  • Aesthetic Values

    • Brand Recognition

    • High Tech Appearance

    • Scored low - not a surprise

      • No brand recognition

      • Simplistic Front Panel

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Use of Industrial Design

  • User Interface Redesign

    • Human interface considered

    • Functionality enhanced

    • High-Tech appearance addressed

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Market Potential

  • Realistic market potential: 252k units (yearly)

    • Market awareness: 22.5%

    • Level sales

      • Based on 1996 component stereo sales

      • Retail Price: $300

        • 20% markup from wholesale

      • Gross Margin: 49%

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Predicted Sales

  • Bass model for Sales Prediction

    • Based on five years of realistic sales potential

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Authentic AudioMission Statement

The provision of full and natural sound solutions that provide user control and satisfaction within the audio environment.

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Business Form Progression

  • Mature form to focus on Core Competencies

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Supply Chain Configuration

High Volume

Low Volume


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Mature Business Configuration

  • Maintain market focus

  • Create agile competitive advantage

  • Split based on market segments/platforms

    • Pro Audio Division

    • Consumer Division

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Pro Audio Platform

  • Focus on Analog to Digital Link

    • Beta - Bass Guitar Preamplifier

    • Lambda - Professional Microphone Preamplifier







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Pro Audio Platform - Enablers

Engineering Design (Modular Components)

Strategic Partner

Bass Guitar




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Consumer Platform

  • Utilize DSP / Software Modeling

    • Kappa - Car Stereo Preamplifier/Crossover



Technology Enablers

End Products

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Investment Requirements

  • Investment required to provide cash for

    • Alpha Product Development/Production

    • Branding Campaign

  • $4 Million Required

    • $2 Million in 1999

    • $2 Million in 2000

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Projected Cash Flows

  • Rate of Return = 33% NPV (R=15%) = $13.7M

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New Product Schedule/Revenues

Introduction Date

  • Alpha

    - November ‘99

  • Beta

    - October ‘00

  • Lambda

    - October ‘01

  • Kappa

    - December ‘01

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Risk Evaluation

  • Customer Acceptance Risk

    • Survey shows 50% desire

    • But market is very much “preference” based

  • Brand Recognition

    • If not established market potential affected

    • Major partnership required

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Risk Evaluation

  • Startup Manufacturing Risk

    • Successful implementation of Supply Chain

    • Capacity Limits and Cycle Time

  • Schedule Duration Risk

    • Meet introduction dates

      • Product Rollouts planned for Trade Shows

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Immediate Future Actions

  • Alpha Product Production - November 1999

    • Complete device redesign

    • Safety Certification (U.L.)

    • Production ramp-up

  • Start Branding Efforts

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Branding Strategy

  • Partner with a major theatre processing firm

    • Survey results point to perceived value

  • Start major branding campaign focusing on desired attributes.

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David Runton

Pete Smith

Rajashi Runton

Renee Savera

Rob Michael