SICC 2016 business strategy case

12016 SICC CASE COMPETITION MAY 25, 2016

THE ROAD TO VALUESTRATEGIC ANALYSIS FOR FORESIGHT AUTO

2016 SICC CASE COMPETITION 2

ALLISON NOEL

SAPNA HEGDE

CODYBECKER

RJNIEWOEHNER

RADY SCHOOL OF MANAGEMENTUC SAN DIEGO


THANK YOU TO OUR SUPPORTERS!


OPPORTUNITYCREATING VALUE AND MAKING A DIFFERENCE

colleague father friend


Establish a partnership with Mobileye to leverage expertise, market power, and OEM contacts

Seek strategic alignment with OEMs and other Tier 1 & 2 vendors

Continue to innovate on stereo vision expertise while monitoring evolving market trends

RECOMMENDATION

OPPORTUNITY FOR FURTHER GROWTH

1.

2.

3.

+ approx.$ 1.3 Billion

ANNUAL REVENUE

WITHIN 5 YEARS OF REACHING PROFITABILITY


TABLE OF CONTENTSIndustry analysis and trends

Company analysis

Strategic alternatives

Marketing plan

Risk factors

Financials

Summary

7

ADAS INDUSTRY DEVELOPMENTERAS OF AUTOMOTIVE SAFETY TECHNOLOGY

1950-2000

Ph 2

Ph I

ADASSAFETY & CONVENIENCE

2000-present 2016-2025 2025+PARTIALLY

AUTONOMOUS AUTONOMOUS

Zzz


ADAS INDUSTRY TRENDSGROWTH AND DIRECTION

KEY DRIVERS OF GROWTH• Technological breakthroughs• New business models• Consumer interest penetration• Regulatory mandates• UN Decade of Action for Road Safety• Vision of autonomous driving

ATTRACTIVE MARKET, RIPE WITH

OPPORTUNITY

2015 2016E 2017E 2018E 2019E 2020E$0$10$20$30$40$50$60$70$80$90

ADAS INDUSTRY GROWTH ($ BILLIONS)analyst estimates

Strategy Analytics TechNavio ABI Research


COMPANIES ACTIVELY PURSUING ADAS

ESTABLISHED EMERGING


FORESIGHT AUTOCORE COMPETENCIES AND DIFFERENTIATING FACTORS

continuingR&D

technology

R&Dsuperior

technology

raising money

hardware agnostic

FORESIGHT IS UNIQUELY POSITIONED TO…

• Deliver differentiated value

• Gain end-user trust• Work with any partner• Remain a strong

innovator


COMPETITIVE THREAT ANALYSISBUYER POWE

R

SUPPLIER

POWER

THREAT OF SUBSTITUT

ES

THREAT OF NEW

ENTRANTSCOMPETITIVE RIVALRY

BUYERS- MEDIUM -

OEMs and Tier1 suppliers are

large and command market

power; many potential partners

Foresight has a unique solution

SUPPLIERS- LOW -

Foresight has reliable access to

human capital and parent company IP

SUBSTITUTES- LOW -

Capabilities of alternatives such as LIDAR, radar,

ultrasonic, and IR are more limited

NEW ENTRY- LOW -

Development of Eyes On involved extensive R&D

leading to patents barrier to entry in the

near term

COMPETITORS- HIGH -

Industry is fragmented

Lots of players

Established partnerships & relationships

THIS INDUSTRY IS INTENSELY COMPETITIVE & REQUIRES ESTABLISHMENT OF KEY RELATIONSHIPS


ANALYSIS OF LEADING STRATEGIES

CRITERIA

#1: PARTNER

WITH MOBILEY

E

#2:NETWOR

K BROADLY WITHIN ADAS

#3SMART PHONE DEV.

MARKETGrowth opportunity

Mitigates competitive risks

FIT Aligns with core competencies/values

FINANCIALSLong-term stability & exit opps.

Guarantee of high financial returns

PURSUE STRATEGIE

S 1 & 2+

MONITOR SMART PHONE MARKET


CONNECTING WITH MOBILEYE

Approach leadership with partnership proposal (VP of Automotive Projects, Advanced Technology, or R&D)

Discuss capability improvement from integration of Foresight software–lower rate of false positives, improved maps based on crowdsourced data, improved tagging, etc.

Seek opportunities to integrate within the party’s current OEM customer base

1.

2.

3.


PRIORITIZING T1 PARTNERS TO NETWORK WITHTIER 1 SUPPLIER SOFTWARE PARTNER

+

+ in-house

PRIORITY

in-house

high

high

medium

medium

medium


Trend: OEMs and Tier 1s are looking for & investing in start-

ups

Action: Connect by getting involved with accelerators and

incubators they participate in (e.g., speak at events)

Clean Tech Open Sponsor list

“Israel itself is a hotbed for innovation, Buczkowski said. Ford has scouts there on the lookout for new technologies”

“Buczkowski cited Mobileye”

CONNECTING WITH OEMs & TIER 1s


PRIORITIZING T2 PARTNERS TO WORK WITHTIER 2 SUPPLIER DESCRIPTION PRIORITY

high

high

high

medium

Strong and well established OEM relationships; lacks stereo vision

Strong mobile presence; reference design expertise; looking for differentiation

Strong expertise in facial recognition and real-time feedback

Preference for open source


Trend: Chipset vendors are looking for differentiation and

value-add

Action: For example, talk with Qualcomms

Advanced Optional Software Group

CONNECTING WITH TIER 2s

18

MARKETING PLAN

2016 SICC CASE COMPETITION

NURTUREMARKET

IDENTIFICATION

CREATE SALES OPPORTUNITIE

SPOSITION

Highlight uniqueness:• No false positives• Depth perception• Hardware agnostic• Military heritage• All-weather

Capture opportunities in ADAS and partial

autonomous technology

Develop solutions for autonomous

technology

Get involved with

accelerators and incubators

Sustain key long-term relationships

through exceeding

expectations and expanding

product offering

Attend conferences

and tradeshows


RISK ANALYSISPOLITICAL

ECONOMIC

SOCIAL

TECHNOLOGICAL

ENVIRONMENTAL

LEGAL

Low risk:governments interested in

furthering transportation

safetyHigh risk:

intense competition can erode industry

opportunities and profits

Medium risk: consumer

reactions are difficult to

predict, and trust is easily

lostLow risk:

hardware agnostic with superior R&D

and intellectual capital

Low risk: climate change concerns could lower car use, but effect is likely small

Medium risk:Errors could

significantly harm users and lead to

litigation – probability uncertain

FOCUS ON COMPETING AGRESSIVELY TO MITIGATE LARGEST RISK


2019 2020 2021 2022 2023$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

PROJECTED REVENUES ($ millions)

*

PROJECTED 5-YR REVENUES

TOP-DOWN MODEL• Market size: P&S Research; IndustryARC• Foresight share: 0.25% 1.0%• Market growth: 2% (auto industry)

2023REV $1.3B

KEY INPUTS & ASSUMPTIONS

BOTTOM-UP MODEL• Base of installed cars: Frost & Sullivan• ADAS Market growth: IndustryARC• Market share: 0.25% 1.0%• R & D expenses: Mobileye

***

*

*

Top-down model estimatesBottom-up model estimates


FINANCIAL RESOURCES REQUIRED

YearR&D(Mil)

SG&A(Mil)

Data Source

2016 3.5$ 0.9$ Burn rate of $4.4 M/yr2017 10.6$ 2.6$ Burn rate of $13.2 M/yr (tripled from 2016) 2018 31.7$ 7.9$ Burn rate of $39.6 M/yr (tripled from 2017) 2019 28.6$ 27.2$ 2020 59.9$ 59.9$ 2021 127.5$ 127.5$ 2022 174.0$ 174.0$ 2023 216.1$ 216.1$

% of expense based on 2013 Mobileye financial statement


RECOMMENDATION & MILESTONES

Establish a partnership with Mobileye to leverage expertise, market power, and OEM contacts

Seek strategic alignment with OEMs and other Tier 1 & 2 vendors

Continue to innovate on stereo vision expertise while monitoring evolving market trends

OPPORTUNITY FOR FURTHER GROWTH

1.

2.

3.

+ approx.$1.3 Billion

Begin talks with potential partners

Establish POC

Secure first partnership

Y1 – PRODUCT & MARKET FIT Expand offerings

(e.g., AEB)

Y2-5 – SCALESecure additional

partnershipsBecome a top 3 market leader

ANNUAL REVENUE

WITHIN 5 YEARS OF REACHING PROFITABILITY

232016 SICC CASE COMPETITION MAY 25, 2016

THANK YOU!


DETAILED FINANCIALS2015 2016 2017 2018 2019 2020 2021 2022 2023

Total WTP for ADAS features 1,210$ 1,210$ 1,210$ 1,210$ 1,210$ 1,210$ 1,210$ 1,210$ 1,210$ Global base of cars with ADAS (Mil) 25$ 28$ 32$ 37$ 43$ 49$ 57$ 65$ 75$ Total ADAS Revenue (Mil) 29,734$ 34,165$ 39,256$ 45,105$ 51,825$ 59,547$ 68,420$ 78,614$ 90,328$ ADAS Revenue for Camera solutions 6,839$ 7,858$ 9,029$ 10,374$ 11,920$ 13,696$ 15,737$ 18,081$ 20,775$ % of Camera solutions that are Stereo 1% 2% 5% 10% 20% 25% 30% 35% 40%ADAS Revenue for Stereo solutions (Mil) 68$ 157$ 451$ 1,037$ 2,384$ 3,424$ 4,721$ 6,328$ 8,310$ ADAS Market share for Foresight 0.00% 0.00% 0.25% 0.50% 3.00% 5.00% 9.00% 11.00% 13.00%Foresight Revenue (Mil) 0 0 0 0 71.5$ 171.2$ 424.9$ 696.1$ 1,080.3$ % of Revenue spent on R & D 0 0 0% 40% 35% 30% 25% 20%R & D Expenses (Mil) 4$ 11$ 32$ 29$ 60$ 127$ 174$ 216$

% of Revenue spent on S,G & A 0 0 0 38% 35% 30% 25% 20%S,G&A Expenses (Mil) 1$ 3$ 8$ 27$ 60$ 127$ 174$ 216$ Total expenses (Mil) 4$ 13$ 40$ 56$ 120$ 255$ 348$ 432$ EBITDA (Mil) -$ (4.40)$ (13.20)$ (39.60)$ 15.73$ 51.36$ 169.95$ 348.06$ 648.19$


ADAS VALUE CHAINTHREE ROUTES TO THE OEM

software vendor OEM1.

2. software vendor

software vendor3.

tier 1 supplier OEM

SoC vender tier 1 supplier OEM

SICC 2016 business strategy case

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