[MUSIC] Our guest is Boaz Ran. Boaz a co-founder of a startup called ProteOptics. Just to fill our viewers, our students, in a bit of the details, ProteOptics began in around the year 2000. >> Yes. >> It emerged from a scientific laboratory here at the Technion, the lab of professor Steve Lipson, physicist, an expert in optics. Boaz, you were a student in the lab, a doctoral student. And you were instrumental, one of those who took a known technology called surface plasmon resonance. And used it in a unique and creative way to make a very useful and very expensive scientific instrument, with a consumable biochip that identifies 36 different proteins at one time, used by scientific laboratories. Who had the idea of using this in a unique way to identify a protein molecule on top of a biochip? >> Well, that's kind of evolved during the progress of ProteOptics. There were products on the market at that time that used this effect to detect biomolecules. >> Mm-hm. >> We were not the first on that. >> Right. >> But the throughput of these systems was pretty low. You could detect probably four interactions at a time, at most. >> Mm-hm. >> The innovative part of our startup company was that we extended the throughput to 36 interaction points at once. >> This is perfect, this helps me a lot. Because in the theory part of this course, I explain that when you come with a new product, something unique and creative, you have to have something ten times better than what exists. So the previous product that identified four molecules, you could identify nine times more, 36, which is a major, major improvement. So this was the key, I think, the number of molecules you would identify at a given point in time. >> Yes, we actually started with the goal to have a few orders of magnitude more sensitivity then the competitors. >> Right. >> But that didn't go so well and we changed paths to the throughput thing. >> Got it. So, in one of the tools we discuss in this course, we talk about three variables that you need to get a business going to make it successful. You need to create value, high value. You need to have fairly low cost. And then you need to price your product in a way that leaves value with the user, but leaves you with enough profit so that you can invest and build a company. I believe your device originally cost a lot. The price was something like a quarter of a million dollars? >> Even more in the beginning. >> More than that. >> Yeah, more than $300,000 at the beginning. >> Wow, and in a moment we'll show our viewers the machine itself. It looks pretty modest. It doesn't look like a Ferrari. It costs as much as a Ferrari. >> Yes. >> So, how was the decision taken by the parent company to charge a really substantial high price for this product? >> Well, there was a lot of thinking about what will be the target price, at least at the beginning, because later on it's a little bit determined by the market. So the numbers went from 80,000 to half a million and oscillated between the two many times before the produce was launched in 2006. But eventually the market was ready for high-priced product of this kind, because of the competitors which had already a high-quality product on the market which was priced at the $300,000 point of price. >> Okay. >> So we had the market already ready for this kind of price. >> Got it. >> It was known that a good SPR instrument is expensive. And not only because of the technology itself, it's because of the automation in it and the way that the fluids are handled and so on. >> And the software, right? >> And the software, and all the development process is expensive. >> Right. >> And the cost of goods is pretty high. And it is kind of a thumb rule in this high-tech industry that usually the products cost five times the cost of goods. And you have a lot of instrumentation within the device. >> Right. >> A lot of cameras, mechanics, electronics, software, and eventually you have to multiply it by five. >> Got it. >> To get the- >> So one of the things we tell our start-up people is not to under-price their product. Because you signal value with price, and clearly you made that decision here. You have something that's ten times better, so it can be priced accordingly to signal to the market that it has high value. >> Yes, you have to be careful with low prices, from all sorts of reasons. The one that you mentioned, you want the product to have the correct price value. And also if you will underprice it, you will have no margins, because eventually the price would drop, it's always like this. >> Right. >> No products can sustain its high price unless you are the only on the market. >> Right. >> It's rare that this is the case. So you have to leave yourself margins. >> To lower the price. >> To lower the price [CROSSTALK] competition, and- >> And see, sometimes start-ups think, I'll start with a low price, I'll get the foot in the door, and then I'll raise the price. But it's much, much harder to raise your price than to lower it. >> Yes, it's almost impossible to raise the price. >> Impossible. >> The market is unforgiving for these kind of steps, and they will very quickly, if they have the opportunity, jump to the competitors. >> Right, that's an important statement. The market is unforgiving for people who raise prices. >> Well, we all know it, we buy cellular phones. We are not willing to pay even few bucks more if the competitors has a cheaper, unless they have something really competitive with their product. >> So, ProteOptics was started around the year 2000. >> Yes. >> You found a strategic investor, Bio-Rad, the American company, with the matchmaker Dan Vilenski. Bio-Rad was crucial. They invested, initially, a million dollars in your company. >> Yes. >> They gradually increased that. They eventually acquired the company, ProteOptics, wholly in 2006. But their contribution, the contribution of Bio-Rad, was much more than just the money. And we tell our startup people this a lot. An investor's money is important, but what goes with it is sometimes even more crucial. Bio-Rad brought you experience with the marketplace, channels for selling your product, a portfolio of products, and your machine fit perfectly into their portfolio. And they also helped you in your product development. They helped make decisions which way to go in product development, which is crucial. Can you talk a bit about Bio-Rad's role in actually developing your machine? >> Yes, so I think you can divide it probably to main two contributions. Obviously they invested the $1 million. But they gave us a lot of help in other fields, which if we had to sponsor that, that would cost a lot of money. Marketing, surveys, it's always very good to have some guru in the field helping you, checking better instruments, writing papers, I tried this instrument, it's very good. And that costs money, he will not work for free. And that was a part of the money they gave us. They sponsored all sorts of side jobs, if I can say that, that we couldn't afford sponsoring with the $1 million we got. We needed that for mechanical engineering, electrical engineering, and so forth. >> Right. >> So this is one section, having a strategic partner that can carry the load of other stuff. >> Mm-hm. >> Financially. >> Mm-hm. >> And the other thing is professional advice that they could give us, in many cases, for free. People in the company were joining the project, sponsored by Bio-Rad, again, financial support that we didn't have to pay for. But on the other hand, gave us a lot of professional advices, mainly by marketing people who could check the market and give us direction where to go to. Because we were a group of physicists and electrical engineering, we didn't really know our customers at the beginning of this. >> Yep, in academic life when we teach entrepreneurship, we sometimes talk about crossing Death Valley, the Valley of Death. The Valley of Death in America, in Nevada, is a desert where if you try to cross it without water, you die, it's very hot. The Valley of Death in entrepreneurship is taking an idea from the lab, and in the lab it looks beautiful, and then you have to make a business out of it. And there's so many things that can go wrong. And as you cross the Valley of Death, many ideas perish. So tell us a bit about your journey with your startup, ProteOptics, later Bio-Rad, and crossing the Valley of Death, and creating a marketable product that creates value with a sustainable business. >> Okay, so I think this subject worth probably ten hours of talking. >> Yeah. >> So, the time is a little bit short to discuss this thing. But yes, it is a valley of death. It's kind of a chasm that you have to pass. So where to begin? I mean, many startups begin with technology. Someone in the PhD discovered something interesting, something very cool, very nice. >> Yes. >> And this is not always the way to open a startup. >> No. >> Even though in our case, that was about the story. >> Yep. >> But for my now, about 15 years of experience, you better have a product and look for a technology that will solve that, than the other way. >> Start with the need, a market need, something is really needed, and then you work back to find the enabling technology. >> Yes, the chance of reaching the endpoint with success is much higher if you start with a need and then you are looking for a technology to solve it, better be a cool one. But it's not necessary because eventually the customers, at least in our case, they don't really care about the technology within the instruments. >> Right. >> As long as it gives good results, the product is reliable, the price is okay, they are satisfied. They don't care if it's surface plasmon resonance, or a nuclear reaction within. It has to do the job. >> Yep. >> So, people should keep that in mind. The most important thing is the customer and his needs. >> So Boaz, perhaps one last question. We have many thousands of students watching this course, taking this course, and some of them, hopefully many of them, will start businesses. What is a key lesson that you would like to share with potential start-up entrepreneurs based on your own life experience? >> Well, one is the previous one that I was talking about. Think very carefully if the cool stuff you have is really important for a product. And some other is, have the right team, have the right people around you, make the right connections. In many cases, politics and personal things are more important than the technology. Have the right strategic partner, it's really important. It's very important, we didn't discuss this, but it's very important that the partner will have the interest for the success. Because the money, it could be that someone in the company that gave the money is no longer in the company, and who cares? But if people in the company currently, right now, in marketing, in management, have the interest in the product, or byproducts of this product. >> Right. >> They will give the full support. If they have no interest, the money was given by someone else, it's long forgotten, and who cares? >> This is crucial, the definition of a great strategic partner is an established company with good resources and channels, that has a key interest in your startup success. That's what you're saying, they need to have the motivation to want you to succeed and do everything possible to help you to succeed. >> Exactly, they and their team, and sometimes it could be one person, and others doesn't have. That's a little bit politics. >> Right. >> So you have to have as many people as you can, keepers in the strategic part of the company that will have interest, and they will have also personal benefits. The product will be remembered as kind of their initiation, or something like this. It doesn't have to be money in the bank. >> Right. >> It could be part of being a successful team, and so on. >> Boaz, we've learned a lot from you, and we want to wish you great success in the future. Thank you very much. >> Thank you, it was a pleasure. >> Thank you for hosting us at Bio-Rad. We'd like to walk around and see your operation. >> You're welcome. >> Thank you. >> So maybe you can begin with the coffee machine. >> Yes! >> Which is the most important place in the company. >> Why is that, Boaz? >> All decisions and inventions. >> Right here. >> Right here. So this is our conference room. >> This is where you make decisions. >> This is where formally the decisions are taken. >> Technology startups often combine many technologies. You have chemistry here, electronics, chips, semi-conductors, biology. >> Mechanical engineering, software engineering, algorithms, math, everything. >> Mm-hm. >> So this is the application laboratory. It's a little bit out of order now, but we have two ProteOns here. This is a very old prototype of the ProteOn, where we can try and test new stuff. >> Something we emphasized with startups was the crucial importance of building a prototype. >> Yes. >> Building something. It's not enough to have a business plan or a piece of paper. You have to have it and try it. >> Well, eventually you have to have real prototype, real things, real product. >> Yeah. >> It doesn't have to be the nicest one, but it has to do the very basic functions that you are supposed to develop. >> Right. >> So you can show management in the companies, and also you have to show the customers, some selected customers that will give you honest feedback on your product. It's very important to have honest feedback on your product. >> Very important. And this is the ProteOn itself, this is the machine? The design is very clean and very functional.
