1 internet business models text and cases Doubletwist

2 Overview of Doubletwist, Inc. Introduction Doubletwist was named after the double helix configuration of DNA Doubletwist was the biotechnology industry’s first ASP. Specifically, they would provide tools for bioinformatics, the rapidly growing field of biological computing (combining biology, computer science, and math) Provided access to research agents, databases, and other powerful tools to enable genomic analysis previously available to only the largest companies. © 2005 UMFK.

3 Overview of Doubletwist, Inc. Mission and Vision - Empower all life scientists and scientists in training to conduct genomic research Direction - Use the Internet as a computational engine to realize this vision © 2005 UMFK.

4 Overview of Doubletwist, Inc. History • • Formed as Pangea Systems in 1993 by: – – Stanford graduates Joel Bellenson (former head of the Stanford Sequencing laboratory) and Dexter Smith (formerly a computer scientist in the industrial engineering department at Stanford) These men realized that with the advent of sequencing technology, that they were witnessing a second “industrial revolution”. They began developing sequencing databases for Stanford on a consulting basis, developed Incyte’s Life. Seq database and Oxford Glyco. Science’s Rosetta proteome system for others - $$$ for others Decided to go after VC money, and raised 7. 5 M in Feb 1997 from Mayfield Funds, Industrial Venture Partners, and Clyner Perkins, Caufield & Byers (all respected in the Biotechnology field) The acquision of John Couch in 1997 – THE landmark for the company Changed name to Doubletwist and pursued second round of VC in 1999 – handcuffed by crash of biotech industry in year – raised 19. 7 M Third round of fundraising in 2000 – seeking 20 M – 90 M offered! Cut back some, eliminated others, spoke with investment bankers – prepared to go public, but did not due to uncertain markets, and no need for cash! © 2005 UMFK.

5 Overview of Doubletwist, Inc. History (continued) John Couch • Hewlett Packard – • • Apple – – Director of New Products, VP and General Manager of personal Office Systems Division Pioneered Apples GUI computer 7 M / annually when he arrived, 1 B / annually when he left 10 Years off to create an educational foundation to fund technology in schools – – – • • Involved in development of hand-held calculator marketing Took over failed private school Used 150 student K-12 school to prototype his ideas on technology education Consulted for corporations and received goods for the school in payment School thrived – gained reputation for digital curriculum and unique facilities including one of the earliest editing studios School grew to 900 students and was profitable Returned to business world with the advent of the Internet Began consulting with Pangea Systems in 1997 © 2005 UMFK.

6 Goal Build a Life Sciences Portal • Gain mindshare • Create an affordable point-and-click environment which would anyone in the biotech or academic communities to do computational work without intermediaries to run algorithms against multiple databases • Early goal was mapping the human genome (3% of genome made of genes – special sequences of hundreds or thousands of base pairs which provide the templates for all the proteins that the body needs to produce. © 2005 UMFK.

7 Doubletwist, Inc. Strategy Democratize genomics by providing all life scientists with a secure and comprehensive research environment and community via the internet (some 200, 000 life scientists (bottom of the pyramid) without this access, representing a market of 1. 4 B (based on 10 K/commercial scientist and 1 K/academic scientist. © 2005 UMFK.

8 Doubletwist, Inc. Strategy (continued) John Couch – changing the company and culture (attitudes and processes) • Was a linear process – – – Market research and validation Wrote a detailed product definition Build the product (6 -12 months) QA Beta testing Product release • Now… – Integration of marketing and development functions – Do discovery, market testing, and validation while doing development (engineering group most affected) – Tackle for projects simultaneously – More urgency, flexibility, awareneess © 2005 UMFK.

9 Doubletwist, Inc. Strategy (continued) “More companies die from indigestion than starvation” (Bill Hewlett) – so slow down burn rate – 1 M down to 600 K / month “You don’t attack a well-built fortress” (Bill Hewlett and Dave Packard) – so - Pursue partnerships with research content companies (data and tools), e-commerce sites which served life scientists, and companies relevant to community building. Partnerships were critical to maintain a competitive edge! Quickly develop products and react to market conditions Hire young, bright enthusiastic people (don’t worry about lack of experience) – must pass the passion test Seek people with systems skills, and not just applications skills © 2005 UMFK.

10 Sales Strategy After moving to ASP model… • Shorten sales cycle • Increase the number of potential users • Capture PR generated leads • Convert users of free service (Bronzelevel) to higher value paid service (Silver-level) © 2005 UMFK.

11 The Facts Value Proposition Provide life scientists with a secure and comprehensive research environment and community via the Internet. Enable sophisticated genomic analysis regardless of level of genomic expertise or access to robust computing power • Bring intelligence and efficiency to biotechnical research by offering research agents which use 20 algorithms (internal and external) for intelligent searching of >24 databases (some proprietary, some public) • Offer valuable features daily including the “Daily Twist” to improve site “stickiness” • Maintain neutrality to increase comfort level of customers with research or data storage by not engaging in biotech research or gene patenting. © 2005 UMFK.

12 The Facts Competitors 5 categories of Competitors 1. Biggest users – enterprise-wide systems (Bayer) 2. Shrink-wrap bioinformatics (software targeted at departments and individuals (Informax, Oxford Molecular Group) 3. Data producers – wet lab experimenters that produced original data – highly valued proprietary offerings (Celera, Incyte) 4. Internal bioinformatics departments of large pharmaceutical companies 5. Internet-focused firms that targeted smaller firms and individuals (Doubletwist, e. Bioinformatics, Lab. On. Web. com) © 2005 UMFK.

13 The Facts Advantages over Competitors Many competitors were silos housing 30 or more VPs and personnel Utilized relationships with a ex-colleague, now head of Sun Microsystems, to provide high-end processing power in exchange for positive publicity (3 new Sun supercomputers at Sun’s Beaverton, Oregon facility) Internal communication, buy-in, flexibility, energy © 2005 UMFK.

14 The Facts Economics / Revenues The bioinformatics market is seen as a pyramid with the top being the 2 K pharmaceutical and biotech companies, and the bottom, the 200 K individual life scientists that are potential users of Doubletwist The 200, 000 life scientists at the bottom of the pyramid representi a market of 1. 4 B (based on 10 K/commercial scientist and 1 K/academic scientist. Fees include • Annual subscriptions (Users paying average of 10 -30 K annually) and • One time pay-per-use (10 K for ten runs) © 2005 UMFK.

15 Primary Stakeholders Company Officers: • John Couch, Chairman, CEO (MS Electrical Engineering, UC Berkeley) • Robert Williamson, COO (MBA Stanford) • Steven Sanders, VP Sales (BA Political Economics) • Colin Freund, VP Business Development (MBA Stanford) • Edward Kirulata, VP Engineering (EE, 15 years software design, systems architecture) • Sophie Vazdi, VP Marketing (Ph. D Medical Chemistry, University College, London) Employees Scientists People (benefit from scientific breakthroughs) © 2005 UMFK.

16 GBF Analysis - Winner takes all? Really GIRF – but change strategies fast!

17 GBF Analysis $ involved in gene research and patenting feeds protectionism and individualism,

18 Success or Failure? • March 2001 Double. Twist withdrew its initial public offering (six months after it had been filed). • January 2002 former COO Robert Williamson replaced Couch as CEO (Couch becoming chairman of the board) • April 2002 Daily. Twist was shut down. "No one was surprised by this, " Williamson told the San Francisco Chronicle, "but everyone was disappointed. We had a great product and a great team, we just didn't have the revenues. " • Double. Twist had raised a total of $76 million • 200 employees, had dwindled to 60 Source, Kevin Davies, East Day Business Times, March 11, 2002 © 2005 UMFK.