The majority of hearing-impaired individuals who use hearing aids or receive cochlear implants expect to hear well. However, many patients continue to struggle to hear in real-world settings due to incorrect device settings. Audiologists and speech therapists need a hearing test that accurately predicts how well individuals can hear in a realistic environment after receiving a medical device. This is particularly important for children, as early intervention improves learning outcomes. Without intervention, the cost of special education for a child with hearing loss is estimated at $420,000, resulting in a total lifetime cost of around $1 million per child. In adults, untreated hearing loss can lead to job loss, emotional distress, and cognitive disorders. Considering that life expectancy is increasing, an individual could experience hearing loss for half of their life.
Pure tone hearing tests evaluate hearing loss but cannot predict understanding in a real-world environment or assess whether a second implant or hearing aid would improve a patient’s hearing. Auris Solutions addresses these needs by providing software-based hearing tests that assess hearing in realistic settings. Our tests help clinicians optimize device settings and recommend additional devices. Proper device settings can greatly improve the emotional and mental well-being of patients. We believe that our tests will become a mandatory part of audiology clinics’ hearing test portfolio.
Our first product, CRISP (Children’s Realistic Intelligibility and Speech Perception), computerizes the analysis of hearing test results, allowing clinicians to control sound presentation, store and analyze results, and engage children in interactive testing.
Auris Solutions is seeking $250,000 to implement our marketing strategy, cover startup costs, and support the business development plan for current and future products.
1.1 Objectives:
– Implement a business model to achieve and maintain a gross margin of 75% or higher.
1.2 Mission:
Auris Solutions, LLC is an innovative provider of hearing loss diagnosis solutions. Our products are more rapid, reliable, and efficient than competitors. We prioritize planned growth, profitability, and meeting our customers’ needs to optimize shareholder value and gain worldwide recognition in the hearing industry.
Our values include:
– Corporate Responsibility: Participating in community events.
– Ethical Standards: Conducting business based on sound ethical principles.
– Compassion: Reaching out with openness, kindness, and concern.
– Respect: Honoring the wonder of the human spirit.
– Excellence: Expecting the best from ourselves and others.
– Stewardship: Responsible use of resources.
– Community: Cultivating relationships that inspire service.
1.3 Keys to Success:
At Auris Solutions, our goal is to provide customers with the best products and services. Our success relies on:
– Building the right management team.
– Establishing awareness of the Auris brand and product offerings.
– Implementing a sales strategy and managing barriers to entry.
– Executing a successful marketing plan.
– Providing customer support for products after purchase.
– Launching new products on time.
– Establishing quality processes.
– Properly managing purchasing based on customer needs.
– Reducing the need for in-house inventory and overhead costs.
– Setting marketing budgets and managing accounts receivable.
– Implementing a program to manage customer satisfaction by shipping and delivering products on time and effectively responding to customer complaints.
Auris Solutions is an early-stage company using proprietary technology and scientific knowledge to create systems solutions for the hearing care industry. Our products enable hearing care professionals to test hearing loss, assess the benefits of cochlear implants and hearing aids, and evaluate cognitive deficits in individuals with developmental disabilities and mental retardation.
The need for quick and accurate hearing tests is crucial for audiologists and speech therapists, especially for children with cochlear implants or hearing aids. Early intervention can reduce learning difficulties and potential costs to society. Additionally, lack of early intervention for adults can lead to job loss, emotional distress, and cognitive disorders, considering the potential lifespan.
The CRISP test, a proprietary hearing test developed by Auris Solutions, solves the problem of assessing speech understanding in realistic environments. The test does not require FDA approval and is ready for the market. Auris Solutions has other products in development, enhancing software testing solutions for the hearing care industry.
2.1 Start-up Summary:
Auris Solutions’ start-up costs include legal services for operating agreements, software development, sales and marketing expenses, and licensing costs. Start-up expenses include the exclusive licensing of patented software from the Wisconsin Alumni Research Foundation (WARF).
Start-up Requirements
Legal $20,000
Stationery etc. $5,000
Sales & Marketing $30,000
Licensing to WARF $20,000
Insurance $5,100
Rent $9,000
Property & Equipment $20,000
Travel & Conferences $24,000
Website $20,000
Software Development $50,000
Other $0
Total Start-up Expenses $203,100
Start-up Assets
Cash Required $46,900
Other Current Assets $0
Long-term Assets $0
Total Assets $46,900
Total Requirements $250,000
Company Ownership
Auris Solutions plans to be a privately-held, Limited Liability Corporation, with Dr. Plauger as one of the owners and the key driver of research and new product development. To attract talented management, a stock option pool not higher than 45% of the total shares will be created. See the table below for an ownership breakdown.
Owners % Ownership
Company Locations and Facilities
Auris Solutions is temporarily located in the Big Building in Madison, Wisconsin. As revenues grow, additional space will be sought to accommodate employees. The current facility could serve for shipping purposes.
Products
To summarize, the CRISP test is:
– A method and system for clinically evaluating speech intelligibility in children with a link to the audiology clinic.
– A rapid and reliable method and system for testing children’s speech intelligibility to determine auditory factors contributing to their level of intelligibility.
– A method and system for simulating a child’s normal classroom environment to assess the effect of competing noises on speech intelligibility.
– A method and system for testing the spatial release from masking potential of competing noises relative to a target word source and the child’s location.
– A computerized system to enhance control, storage, and analysis of results, and to facilitate interactive engagement with the child.
The CRISP test enables audiologists to offer better service, generating additional revenue. Audiologists typically charge between $35 and $200 per test. The beta version of CRISP is currently used by audiologists, speech therapists, and researchers in clinical trials for cochlear implants. These professionals provide valuable feedback on software functionality and ease of use. Key beta-test audiologists include:
– Jane R. Madell, Ph.D., Director: Hearing and Learning Center, Beth Israel Medical Center [Proprietary and confidential information removed.]
– Patricia Chute, Ph.D., Mercy College [Proprietary and confidential information removed.]
– Richard Tyler, PhD., University of Iowa [Proprietary and confidential information removed.]
In addition to these key beta-test sites, the CRISP test is being beta-tested in various clinics across the United States, including Texas (four clinics), California (three clinics), Alabama, New Mexico, Wisconsin, and Michigan. Feedback from these sites will be incorporated into Version 3.0 of the CRISP test.
Testimonials
Auris Solutions has received overwhelmingly positive feedback regarding the CRISP test from beta-test sites. Dr. Richard Tyler describes CRISP as a well-designed, easy to use, and clever test that provides valuable information. Dr. Jane Madell highlights that there is no other test like it available on the market today. Dr. Patricia Chute praises CRISP for being very easy-to-use and for delivering more rigorous scores than any other test on the market. This feedback confirms that the CRISP test effectively addresses the problem faced by audiologists and speech therapists.
Product Description
The CRISP test evaluates a child’s ability to understand speech in the presence of competing noise or words. It measures the extent to which each child benefits from spatial separation of target and competing sounds. The child responds to the target word by selecting a picture representation from several choices, providing an interactive aspect to the test. Animations and feedback engage the child and serve as positive reinforcement. CRISP adapts the sound level of target words based on the child’s responses. The test records the child’s responses in a results database, which can be further analyzed and customized by the user. A computerized system controls the test, analyzes the data, and engages the child.
The set-up requires an amplifier, a sound level meter, a minimum of two speakers (distanced 3 ft minimum from the patient), and a computer system with at least Windows 98 to perform the CRISP software test. Testing should take place in a professional soundproof audiology booth, which is already a standard component of all audiology clinics. The software price range is $2,000 to $2,500.
The Industry Analysis (section 4.3, below) contains a discussion of hearing tests that attempt to mimic a realistic environment. These tests, however, are primarily designed for adults. A summary of how the CRISP hearing test differs from other available tests is detailed in the table below:
Test:
– Purpose
– Age at which can be used
– Problems with these tests
Connected Speech Test:
– Measure sentence’s intelligibility in “babble.”
– Can’t be used with children
– Can’t evaluate masking signals
– Doesn’t provide speech reception thresholds or percent correct scores for signal to noise ratio
Hearing in Noise test:
– Measure sentence’s intelligibility in speech-shaped noise. Does not use speech or other types of noise sources.
– Adults; Children ages 8 and older
– Can’t be used with children
– Can’t evaluate masking signals
– Doesn’t provide speech reception thresholds or percent correct scores for signal to noise ratio
Speech in Noise Test:
– Speech in noise for adults. Fixed signal to noise ratio.
– Can’t be used with children
– Can’t evaluate masking signals
– Doesn’t provide speech reception thresholds or percent correct scores for signal to noise ratio
Word Intelligibility by Picture Identification (WIPI):
– Speech in young children.
– Can’t be used with younger children (3-4)
– Can’t test speech in noise or spatial separation between speech and noise (binaural hearing)
– Can’t evaluate masking signals
– Doesn’t provide speech reception thresholds or percent correct scores for signal to noise ratio
– Has a limited number of uses
Northwestern University:
Children’s Perception of Speech
(NU CHIPS)
– Speech in young children
– Can’t test speech in noise or spatial separation between speech and noise (binaural hearing)
– Can’t evaluate masking signals
– Doesn’t provide speech reception thresholds or percent correct scores for signal to noise ratio
– Has a limited number of uses
Barriers to Entry Against Competition:
Auris Solutions’ CRISP hearing test system is protected under United States patent #6,584,440: Method and System for Rapid and Reliable Testing of Speech Intelligibility in Children. The patent was granted on June 24, 2003. The invention was disclosed to the Wisconsin Alumni Research Foundation of the University of Wisconsin at Madison (WARF); The Company is currently negotiating the terms of an exclusive licensing agreement with WARF. In addition, CRISP, as well as any name for each future system, are secured under trademarks. We believe that the patent as well as the trademark will provide significant barriers to entry with respect to competitors copying the CRISP hearing system and method.
Auris Solutions’ Challenges:
There are two main challenges Auris Solutions needs to address when formulating its marketing strategy:
Establish brand equity – Because the CRISP hearing test is a new product introduced from a new company, the test and company will have no brand equity established in the marketplace. It will be important to establish a brand name as soon as possible through different marketing efforts. This weakness will be mitigated through advertising in an effort to increase awareness. However, within the hearing care industry, credentials are key, as stated above. Therefore, with CRISP, brand equity problems will also be mitigated through Dr. Plauger’s own credibility and status within the hearing healthcare industry.
Overcome reasons not to buy the test – Many audiologists and speech therapists use audiometers for hearing tests and stop there. The problem with this is that the healthcare professional will not know how well the patient will hear in a realistic environment following surgical implantation of a cochlear implant or fitting of a hearing aid. It will be important to demonstrate to these audiologists how the CRISP hearing test can offer additional functional benefits to complement the use of the audiometer. In addition, it will also be important to make the healthcare provider aware that administering the CRISP hearing test will be a revenue generator. This will be mitigated through our integrated marketing communications plan.
In addition, within the hearing care industry, credentials are key; researchers, such as Dr. Plauger, who have deep industry experience and knowledge, are very well respected. This has enabled them to develop an extensive network of contacts within the industry. Therefore, products that such researchers develop have more credibility due to the researcher’s own brand equity, in terms of the underlying basis of trust and respect that has already been painstakingly established over many years. Therefore, with Auris’ current and future systems solutions, a key barrier to entry is through Dr. Plauger’s own credibility and status within the hearing healthcare industry and the significant learning curve advantage of developing such a comprehensive test.
Sales Literature:
Once funding has been secured, we will spend no more than a month in developing a comprehensive company brochure, software demos, and a CD case for our first product. The brochure will describe our company, its product offerings, and other product information for the same target customers. We will also incorporate the same brochure into our web page.
Technology:
Auris Solutions’ CRISP hearing test system is protected under United States patent #6,584,440. The technology involves a method and system for testing the speech intelligibility of a child by providing a set of target sounds as words in the presence and absence of competing sounds of various types. This analysis allows for the evaluation of the effects of competing sounds on the speech intelligibility of a child. The test includes interactive aspects, where the child responds to target words by selecting a picture representation of the word. The sound level at which the target words are presented may vary adaptively according to the child’s responses. The test can be repeated with different target words and competing sounds, and the child’s responses are recorded in a results database. The test can be administered, data analyzed, and the child engaged through a computerized system.
Future Products:
In addition to CRISP, Auris Solutions has several other products in the pipeline that will create a diversified portfolio of software testing solutions for the hearing care industry. The new products are listed below, with current timelines.
Products Ready to be launched by 2005:
– Minimum Audible Angle (MAA): This test measures the smallest change in the position of a sound that can be reliably discriminated. It can be used to assess the benefits of having two cochlear implants, two hearing aids, or one of each, for both children and adults. This product will be ready for launch in 2005, and targeted to the same customer segments as the CRISP test. A price range has been established between $800 and $1,000.
Products in the Pipeline:
– CRISP Junior: A variation of CRISP for children of ages ranging from 2 to 3 years old.
– Sentence Materials: A variation of CRISP where the child repeats the sentence heard instead of responding to pictures on the screen.
– Echo Suppression: A test to assess the ability of the auditory system to process sounds in the presence of echoes. It can be used in children and adults.
– ERISP Test (Elder’s Realistic Intelligibility and Speech Perception): A variation of CRISP for hearing tests used by the elderly population. It assists in determining the degree of hearing loss, ability to hear in noisy environments, and benefit of a hearing aid or cochlear implant.
– Children with developmental disabilities (DD) and mental retardation (MR): Measures of hearing being developed to assess sensory and cognitive deficits in children and adults with DD and MR. These tests would provide tools for evaluating and differentiating between affected individuals and insight into development of appropriate tools for rehabilitation and training.
Market Analysis Summary:
The US hearing care industry includes over 105,000 practitioners (94,000 speech pathologists, comprehensive and 11,000 audiologists) providing hearing care products and services. This market class includes specialists that offer services to hearing-impaired patients, including hearing rehabilitation, advanced audio-diagnostic services, and industrial and preventive audiological services. The CRISP test is expected to be offered to patients by all three service segments.
Typical Hearing Test Process:
1. The patient or family makes an appointment with an audiologist or speech therapist at the hospital or independent audiology clinic.
2. The patient is tested for hearing using a tone test delivered through an audiometer.
3. Based on the collected results, the clinician makes a clinical assessment of the individual’s ability to hear, and may administer additional tests such as a tympanogram or brainstem auditory evoked response.
4. The clinician then makes a recommendation for a hearing aid or cochlear implant.
5. After installation, the settings on the medical device are adjusted based on trial and error.
Where Does the CRISP Test Fit into the Hearing Test Process?
The CRISP test allows clinicians to make specific adjustments to the hearing aid or cochlear implant that optimize the patient’s ability to hear in the real world. It can also assess the benefit of adding another hearing device. The test fits in after step 5 of the typical hearing test process. Clinicians can charge for this service.
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Audiologists 21% 11,000 13,310 16,105 19,487 23,579 21.00%
Speech Pathologists 21% 94,000 113,740 137,625 166,526 201,496 21.00%
Total 21.00% 105,000 127,050 153,730 186,013 225,075 21.00%
4.2 Industry Analysis
Auris Solutions’ product offerings fall under the healthcare industry category, with a Standard Industry code (SIC) 8099, and secondarily as part of the electromedical equipment industry, with SIC 3845. Even during economic downturns, these markets have remained sheltered from decreased spending. [1] Worldwide market growth for medical equipment and products is estimated to be 12% as of 2003. U.S. companies are benefiting from sales of new technology products, which are currently commanding a significant price premium. We feel that Auris Solutions’ product offerings will benefit from these trends, as CRISP is a highly technical product, and it appears that the market will support a price premium.
[1] Standard & Poor’s Industry Review, 2003.
4.2.1 Industry Participants
Companies in the hearing-care-testing industry generated approximately $200M of sales in 2003, [1] and the market is expected to grow in the range of 21% to 35% annually. Based on our research, there are only 3 dominant players in this industry; collectively, they possess 52% of the market share:
– HearUSA (29.5%)
– Bio-Logic (13%)
– National Hearing Centers (9%)
None of Auris Solutions’ products will compete directly against the current hearing test techniques, products or services offered by the above companies. Thus the Company is an attractive potential strategic partner or acquisition target for the above listed companies.
[1] D&B Million Dollar Database (search of SIC 8099 limited to hearing care products)
4.2.2 Competition and Buying Patterns
Direct competitors of the Company include companies that offer software-based hearing tests instead. We performed a thorough search using proprietary market research software and found only a few companies that would compete directly against CRISP, although no companies offer products comparable to the CRISP test. The results of our search are shown in the table below.
Competition Analysis
Company Test Cost Benefit Problem
Speech in noise (SIN) 12 one-minute tests for estimating signal/noise (SNR) loss with high frequency emphasis (HFE) to assess SNR loss and HFE/low-pass filtered list to assess hearing aid effectiveness in noise Not ideal for children and can’t quickly calculate hearing threshold.
Scaled down version of SIN. Used to determine how much hearing aids help patient to hear; uses calibrated signal/noise ratio Not ideal for children and can’t quickly calculate hearing threshold.
Can use in your own home Does not mimic real-world. Not designed for children.
Pilot-Game Hearing Test Tests hearing and speech using a CD game Pure tone. Does not mimic real world.
For home use and clinical use. Used with Windows. Pure tone only. Does not mimic real world. Not made for children.
Hearing aid fitting software Helps to assess hearing aid regimen. Does not mimic real world. Not made for children.
A typical private audiologist or hearing care professional sees approximately 10-12 patients per day. These professionals purchase related hearing products based on reliability and the perceived benefits for their patients. Based on our research, hearing care clinicians are relatively price insensitive because they want to offer the best possible care for their patients. In addition, our preliminary research revealed that hearing care professionals often purchase from $500 up to $20,000 in related software/systems for conducting related hearing loss tests. In addition, these individuals frequently become aware of new products from direct mail advertising, journal publications, web searches and company websites, conferences & trade shows, and direct sales.
4.3 Target Market Segment Strategy
We plan to engage these potential customers principally through referrals, trade shows, publications, direct advertising, and a small regional sales force. The Independent Speech Therapists and Audiologists segment, as well as birthing hospitals (non-HMO), are most likely to buy our products based on their superior functional benefits and potential for new revenue generation by charging end-users for per test runs. Additionally, some audiologists and speech therapists will be motivated to buy CRISP based on the intangible benefits of feeling confident about their audiology clinic’s services, if they are offering the most comprehensive and innovative tests available to market.
In preparation for our marketing efforts, we have created a full contact list for all of our targeted customers. In addition, although we will initially focus on customers in the U.S., we will consider an opportunity to grow abroad upon international patent approval. [1] Indeed, just recently, MED-EL, [2] an Austrian cochlear implant manufacturer, approached Auris to build an alliance with Auris in order to create the German version of CRISP. Another company in South Africa has requested to become a beta test site, and an Afrikaans version of CRISP is currently in development.
[1] Auris Solutions has applied for patent approval in Europe and Asia.
4.3.1 Market Trends
Every day, 33 babies are born in the U.S. with profound hearing loss, with another 66 babies born with partial hearing loss. This makes hearing loss the number one birth defect in America. Consequently, nearly every state in the U.S. has recently passed a law requiring that infants be screened for hearing loss. [1] It is estimated that if children with hearing loss do not receive early intervention, special education for a child with hearing loss will cost an additional $420,000 in special education costs, and has a lifetime cost of approximately $1 million per child to society. [2] The costs to society of untreated hearing loss are estimated to amount to $56 billion per year in the US, and $92 billion per year in Europe. [3] For adults, lack of early intervention can lead to loss of jobs, emotional distress and even the inability to cope with cognitive disorders such as Alzheimer’s. This is important since hearing loss can begin as early as age 50. In addition, since life expectancy can nowadays realistically reach to age 90 and beyond, an individual could potentially be affected by hearing loss for half his/her entire life. Additionally, as baby boomers reach retirement age, the number of Americans with hearing loss is expected to reach nearly 60 million by 2030. Consequently, hearing care providers have a growing need for tests that will assess hearing in a realistic environment in order to provide effective intervention.
Technological advances – As technology evolves we will see advances in the way hearing tests are conducted. For instance, Starkey Laboratories, a hearing instruments developer, is launching what it claims is the first Web-based hearing check. It is doing so because it believes such a move would drive hearing aid sales. [4] This online hearing-test method asks prospective customers to answer a series of questions before listening to different tonal sounds. Once this individual has been checked, they are given a diagnosis and, if required, a recommendation to seek professional assistance. However, this test and similar ones are merely methods devised by hearing aid manufacturers to assist consumers to perform preliminary self-diagnoses, with the ultimate goal of encouraging the individual to seek the help of a hearing professional.
Laws and Regulations – Another important development within this market is that audiologists are now able to offer their services directly to Medicare beneficiaries. Previously, Medicare required that beneficiaries with hearing loss or balance disorders obtain a physician referral before seeing an audiologist. However, as of January 1, 2004, Medicare now recognizes audiologists as autonomous health care providers. This is the result of the introduction of the “Hearing-Health Accessibility Act of 2003” (S. 1647) by the U.S. Senate. We believe that this regulation will enable audiologists to increase customer traffic. Consequently, these audiologists will continue to search for more accurate and faster ways to serve their customers. For example, the CRISP hearing test contributes to speeding the testing process to 2-3 times faster than current ones (i.e. HINT test).
Nearly every state in the U.S. has recently passed a law requiring that infants be screened for hearing loss. [5] Screening and monitoring infant and childhood hearing loss is a growing concern as children with hearing loss often have slowed development with speech and lack of early intervention can be very costly. Consequently, these laws have generated an overall increased awareness and increased efforts to test and monitor children with hearing loss. Based on these trends, we believe that Auris Solutions’ CRISP will be an integral part of monitoring the ability of children to hear and learn in a realistic environment.
Employment Growth – In order to keep up with the increased hearing testing in infants and children, our research indicated that the number of speech-language pathology positions and audiology positions are growing by 39% and 45% respectively, from 2000-2010,[6] making these professions among the fastest growing in the country, ranked among the top 30 out of 700 professions. This is an important trend, as speech-language pathologists and therapists and audiologists make up our primary customers.
[1] Murphy, L. “New Laws a Boon for Diagnostic Firm: Bio-Logic Focusing on Hearing Tests.” Crain’s Chicago Business: 60, Sep. 27, 1999.
[2] http://trfn.clpgh.org/shhh/Factsheet.html#r1
[3] Source: Better Hearing Institute in the USA (http://www.hear-it.org/page.dsp?forside=yes&area=138)
[4] Hearing test goes online; New Media Age: 10(1), July 18, 2002.
[5] Murphy, L. “New Laws a Boon for Diagnostic Firm: Bio-Logic Focusing on Hearing Tests.” Crain’s Chicago Business: 60, Sep. 27, 1999.
[6] BLS, November 2001-Monthly Labor Review
4.3.2 Market Needs
The majority of hearing-impaired individuals that use hearing-aids or that undergo surgery to receive cochlear implants expect to hear well. However, the reality is that tens of thousand of patients continue to experience severe difficulty hearing in the real world, away from the clinical setting. This is primarily due to a clinician incorrectly adjusting the settings on the medical device. Consequently, there is a large need by audiologists and speech therapists for a hearing test that can quickly and accurately predict how well individuals, with either a cochlear implant or a hearing aid, can hear in a noisy “real world” environment following installation of the medical device. Such a test is especially important for children, as early intervention can reduce slowed learning. It is estimated that if children with hearing loss do not receive early intervention, special education for a child with hearing loss will cost an additional $420,000 in special education costs and result in a lifetime cost of approximately $1 million per child. [1] In adults, hearing loss can begin as early as age 50 and lack of early intervention can lead to loss of jobs, emotional distress and even cognitive disorders. In addition, since life expectancy can realistically reach to age 90 and beyond, an individual could potentially be affected by hearing loss for half of his/her lifetime.
Pure tone hearing tests, which require audiometers and sound proof booths to deliver the tone, are currently used to evaluate hearing loss. These tests evaluate fundamental hearing loss, but cannot predict how well an individual will understand words and sentences in a realistic environment. Current tests also cannot asses whether or not a second cochlear implant or second hearing aid would significantly improve the hearing of a patient. This is important to patients and their families as cochlear implants and hearing aids cost approximately $40,000 and $5,000, respectively, and are often not covered by insurance companies.
Key Benefits of Auris Solutions’ CRISP Test for our Target Market
Based on our analysis of the industry, competing tests, and competitors, the key benefits to audiologists that the CRISP hearing test can offer are listed below.
– Can be used with young children
– Allows for 4 different types of noise sources that evaluate different types of masking signals
– Can quickly calculate speech reception thresholds, or percent correct scores for signal to noise ratio. This process is considered intellectual property and is presently patented to the Wisconsin Alumni Research Foundation (WARF).
– Tests patient’s performance hearing speech in noise
– Mimics Real-world environment
– Can be used an unlimited number of times
– Can help to fine-tune hearing aid settings
– Tests cochlear implant efficacy
– Can help to fine-tune and evaluate the effectiveness of a cochlear implant + hearing aid
For the patient, this is anticipated to become a must-have test, since it will more accurately refine his/her hearing device settings and optimize the patient’s hearing in a noisy environment. After spending nearly $5,000 for a hearing aid and/or more than $40,000 for a cochlear implant, the patient would likely expect that s/he would be able to utilize his/her hearing device to its utmost capacity in all real-world situations such as a ballgame, a concert, a cocktail party, and especially the workplace or classroom setting. Additionally, this test will also determine the efficacy of a second cochlear implant or hearing aid, or the benefits of a combination of the two. The differences between the optimal and non-optimal setting of the hearing device for the patient is stark; it can mean the difference between having emotional and mental problems associated with hearing ineffectively and the ability to enjoy a worry-free life.
Hearing Aids – The CRISP hearing test will allow audiologists to make recommendations for a hearing aid regimen; that is, specific recommendations with respect to microphone direction and noise suppression. The test can also assess whether or not a patient needs one or two hearing aids. Hearing aids typically cost $5,000 each, so this is an important decision for many patients, especially since many insurance companies do not cover this device.
Cochlear Implants – The CRISP hearing test can help with recommendations about whether a hearing aid is needed in one ear, given that there is a cochlear implant in the other ear. The test can also assess whether or not the patient needs two cochlear implants. This is a very important decision as cochlear implants cost about $25,000 on average.
Audiogram results – Sometimes an audiogram is normal, but the patient still has poor speech and understanding. Auris Solutions’ CRISP hearing test can pin-point whether or not this problem is related to competing noises or the location of noises, which may help the patient develop better speech and understanding.
Additional revenues for hearing care providers – The CRISP hearing test will also allow hearing care professionals to charge for administering the CRISP test. Typically, hearing care clinics and hospitals charge $35 to $200 per test. Therefore, we believe that audiologists and speech therapists will view this test as a value-added product.
Auris Solutions’ sales projections include launching CRISP (June 2004), MAA (2005), and ERISP (2006). Our goal is to attain sales above $11,000,000 in 5 years.
[Proprietary and confidential information removed.]
We’re confident that once our target market adopts CRISP and they become aware of the quality and reliability of our products, they will be motivated to explore and purchase more of our offerings.
Contents
Sales Forecast
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Unit Sales | |||||
| CRISP | 192 | 346 | 622 | 1,120 | 2,016 |
| MAA | 115 | 207 | 373 | 671 | 1,207 |
| ERISP | 118 | 212 | 382 | 688 | 1,239 |
| DD & MR | 0 | 1,200 | 2,160 | 3,888 | 6,998 |
| Total Unit Sales | 425 | 1,965 | 3,537 | 6,367 | 11,460 |
| Unit Prices | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| CRISP | $2,500.00 | $2,500.00 | $2,500.00 | $2,500.00 | $2,500.00 |
| MAA | $1,000.00 | $1,000.00 | $1,000.00 | $1,000.00 | $1,000.00 |
| ERISP | $2,500.00 | $2,500.00 | $2,500.00 | $2,500.00 | $2,500.00 |
| DD & MR | $0.00 | $1,500.00 | $1,500.00 | $1,500.00 | $1,500.00 |
| Sales | |||||
| CRISP | $480,000 | $864,000 | $1,555,200 | $2,799,360 | $5,038,848 |
| MAA | $115,000 | $207,000 | $372,600 | $670,680 | $1,207,224 |
| ERISP | $295,000 | $531,000 | $955,800 | $1,720,440 | $3,096,792 |
| DD & MR | $0 | $1,800,000 | $3,240,000 | $5,832,000 | $10,497,600 |
| Total Sales | $890,000 | $3,402,000 | $6,123,600 | $11,022,480 | $19,840,464 |
Management Summary
Auris Solutions is currently composed of 4 key individuals.
Chief Scientific Consultant – Sarah Plauger, PhD – Sarah Plauger is the Chief Scientific Consultant. She is a researcher at the Waisman Center and an Assistant Professor at the University of Wisconsin-Madison. Dr. Plauger has over 20 years of experience in the hearing care industry and has published over 27 peer-reviewed articles in industry journals. She also serves as a consultant for the Cochlear Corporation, the Department of Otolaryngology at UC-Irvine, and the Laboratory of Physiology at the University of Oxford, UK.
Software Developer – Gongqiang Yu, PhD – Gongqiang Yu is the software developer behind CRISP. He is a researcher at the Waisman Center under the supervision of Sarah Plauger. Mr. Yu has post-doctoral training and a Ph.D. in Physics from the National University of Singapore. His research focuses on psychoacoustics of directional hearing, with an emphasis on the precedence effect.
Marketing Manager – Kim-Anh To, MBA – Kim-Anh is the company’s marketing manager and co-founder. She has an MBA with a focus on Entrepreneurship/Marketing and a degree in Anthropology from the University of Wisconsin-Madison. Kim-Anh has over 7 years of experience as a small business manager and 2 years of business consulting experience.
Business Manager – Jose O. Rivera, MBA, BSCE – Jose is the company’s business manager and co-founder. He has an MBA with a focus on Entrepreneurship from the University of Wisconsin-Madison and a degree in Engineering from the Polytechnic University of Puerto Rico. Jose has extensive experience in managing multimillion-dollar operations and 2 years of consulting experience developing growth and marketing strategies for companies in Wisconsin.
Upon achieving sustainable growth, Auris Solutions plans to hire additional key employees to further advance the company.
6.1 Organizational Structure
Jose Orlando Rivera, Business Manager, oversees overall business management. All functional operations and their respective managers or employees report directly to Jose Orlando. Kim-Anh To, Marketing Manager, is responsible for marketing and sales efforts. Sales and marketing consultants will report to her. Both Dr. Litovsky and Dr. Yu serve as consultants for the company and will receive professional service compensations when consulting services are incurred.
Jose and Kim-Anh jointly develop business strategy and long-term plans as co-owners. Jose focuses on creating cost-effective strategies and managing operations and resources. Kim-Anh specializes in marketing and micro-management.
6.2 Management Team
Resumes:
José Orlando Rivera
Ruth Y. Litovsky, PhD.
- CRISP Grants to Date
Gongqiang Yu, Ph.D.
[Proprietary and confidential information removed.]
6.3 Management Team Gaps
The significant remaining management gap is a CEO with extensive business and industry experience. Auris Solutions aims to fill this position with the help of external investors. In the meantime, the company’s management has assembled a highly respected team of hearing industry professionals to serve on its Advisory Board and contribute in closing technological and business gaps.
Fan-Gang Zeng, Ph.D. – Dr. Zeng is Research Director in the Department of Otolaryngology – Head and Neck Surgery, and Director of the Hearing and Speech Research Laboratory at the University of California, Irvine. He holds a tenure Associate Professorship in four different departments including Anatomy and Neurobiology, Biomedical Engineering, Cognitive Sciences, and Otolaryngology. Dr. Zeng is internationally recognized for his research in neural prostheses, auditory perception, and speech processing.
Sigfrid D. Soli, Ph.D. – Dr. Soli is currently VP of Technology Transfer and Head of the Department of Human Communication Sciences and Devices at the House Ear Institute in Los Angeles, CA. He has published numerous articles relating to speech and hearing, especially with regards to electrical hearing mechanisms such as hearing aids. Dr. Soli also holds multiple patents related to hearing technology.
Jane Reger Madell, Ph.D. – Dr. Madell is the Director of the Hearing and Learning Center and Co-Director of the Cochlear Implant Center of the Beth Israel Medical Center. She is a licensed audiologist and a fellow of the American Speech Language Hearing Association. Dr. Madell has published extensively on hearing in children.
Mark Clear – Mr. Clear is the CEO of Integrated Media Solutions and has extensive experience in technology and customer service. He has consulted with clients in various industries and specializes in analyzing customer needs and recommending internet solutions to improve business processes.
Personnel Plan
The Personnel Plan outlines the deferred salaries of the principal employees and consultants, as well as the increasing use of outside software consultants in years 2 to 5 as the company develops further products.
[Proprietary and confidential information removed.]
Financial Plan
Auris Solutions is seeking $250,000 in funding to finance the start-up costs. This includes licensing CRISP technology from WARF, making necessary software enhancements, and purchasing capital equipment for future expansion. The funding will also support research and development of future hearing systems. Auris Solutions plans to be a privately-held Limited Liability Corporation.
To attract talented management, the company plans to create a stock option pool not exceeding 45% of the total shares. The ownership breakdown table below illustrates the proposed equity distribution.
Owners
% Ownership
Auris Solutions is offering up to 35% equity stake in exchange for the requested funding of $250,000. The company is also seeking investors with business, management, and industry experience.
The exit strategy for Auris Solutions is a sale of the company within five to seven years, where preferred participating stock investors would be entitled to a double dip provision. The company estimates a potential sale value of 7 to 10 times EBIT in year 5, based on comparable deals in the hearing care industry.
| Proposed Year: | 2004 | 2005 | 2006 | 2009 |
| Investment Amount | $250,000 | $0 | $0 | |
| Equity Share Offering Percentage | 35.00% | 0.00% | 0.00% | |
| Valuation | $714,286 | $0 | $0 | $91,000,000 |
| Investor Exit Payout | $31,850,000 | $0 | $0 | |
| Investor Years Until Exit | 5 | 4 | 3 | |
| Investor IRR | 163.65% | 0.00% | 0.00% | |
| Share Ownership | Year 2004 | Year 2005 | Year 2006 | Year 2009 |
| Founders’ Shares | 100,000 | 100,000 | 100,000 | 100,000 |
| Stock Split Multiple | 0 | 0 | 0 | 0 |
| Stock Options Issued | 20,000 | 0 | 0 | 0 |
| Investor Shares Issued | 64,615 | 0 | 0 | |
| Price per share | $3.87 | $0.00 | $0.00 | $492.92 |
| Options Holders’ Shares | 20,000 | 20,000 | 20,000 | 20,000 |
| Year 2004 Investors’ Shares | 64,615 | 64,615 | 64,615 | 64,615 |
| Year 2005 Investors’ Shares | 0 | 0 | 0 | 0 |
| Year 2006 Investors’ Shares | 0 | 0 | 0 | 0 |
| Total Shares Outstanding | 184,615 | 184,615 | 184,615 | 184,615 |
| Equity Ownership Percentage | Year 2004 | Year 2005 | Year 2006 | Year 2009 |
| Founders’ Equity | 54.17% | 54.17% | 54.17% | 54.17% |
| Option Holders’ Equity | 10.83% | 10.83% | 10.83% | 10.83% |
| Year 2004 Investors’ Equity | 35.00% | 35.00% | 35.00% | 35.00% |
| Year 2005 Investors’ Equity | 0.00% | 0.00% | 0.00% | 0.00% |
| Year 2006 Investors’ Equity | 0.00% | 0.00% | 0.00% | 0.00% |
| Total Equity | 100.00% | 100.00% | 100.00% | 100.00% |
| Investors’ Equity | 35.00% | 35.00% | 35.00% | 35.00% |
| Founders’ & Employees’ Equity | 65.00% | 65.00% | 65 |
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