LED-Clothes Powered by Body Heat: A Business Idea

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Table of Contents

Executive Brief
Background Information on the Product Technology and Need
The Industry and the Main Competitors
Proposed Marketing Strategy and Competition Strategy
Appropriateness of the Management Team
Protection of Intellectual Property
Financial Projections
Proposed Valuations and Shares
Reference List

Executive Brief

The proposed business is a LED-lights, TEG-powered jacket suitable for performing various sorts of outdoor activities in the dark. The estimated valuation of the product is $600,000. The sum needed to jump start TE business is a combination of the operational, admin, manufacturing, and marketing costs for the first year, which is a total of $300,000. As more people decide to move their workouts outdoors due to COVID-19 gym closures and restrictions, there is a rising risk of injuries associated with cycling and walking outside in the dark. The proposed jacket can solve the problem as it is a great, environmentally friendly, and non-chargeable way of keeping oneself visible to others, particularly drivers. The product is expected to be a hit largely due to its innovative design and existing demand for smart technology in the athleisure sector. The investors can expect a 20% share in the company.

Background Information on the Product Technology and Need

The technology chosen for the proposed product is thermoelectric power generation, which is an alternative and green option for harvesting heat that can be converted into energy with the assistance of thermoelectric generators (TEGs). On the contrary, this technology is able to convert electrical energy directly into heat energy (Chu, 2018). Thus, thermoelectric devices can function either off the Seebeck effect or the Peltier effect (Twaha et al., 2016). In the first case, gadgets can produce a voltage as a result of temperature gradient exposure. As for the Peltier effect, it implies that TE devices can generate a temperature gradient by exploiting the electricity they were exposed to prior. Thermoelectric technology is primarily applied for heat recovery purposes, which include “plant/district/water heating, direct power generation (TE and piezoelectric), absorption cooling, indirect power generation (stream and Rankine cycle), desalination” (Twaha et al., 2016, p. 699). It allows to transform thermal energy directly into electrical energy and Vice versa, which makes it an invaluable method of power generation. In addition, it is crucial to recognize that TE modules offer the market low cost, green energy. However, it is also important to note that the performance of such devices depends largely on the materials selected and the operation techniques implemented.

The idea for the product is a versatile jacket, which includes LED lights powered by a person’s body heat through a small thermoelectric generator in the form of a bracelet located at the end of one of the sleeves. After an individual puts on their jacket and fastens the TEG bracelet around their wrist, the device is ready to begin to harvest thermal energy and concert it into electric energy, which, in turn, powers the LED lights (Freer and Powell, 2019). One can wear the jacket to conduct various activities, including walking, running, or cycling. Furthermore, it is important to add that the technology could be utilized for a variety of pieces of clothing, although the primary focus of the proposed start-up in the context of this business plan is the jacket.

In order to understand exactly how the jacket functions, there is a need to decipher the structure of the TEG. In simple terms, it consists of modular TE chips, as well as “liquid metal as electrical wiring, and dynamic covalent thermoset polyimine as both the substrate and encapsulation for liquid-metal wiring” (Ren et al., 2021, para. 3). In the case of the proposed jacket, liquid-metal wiring is going to be comprised of non-toxic alloy of two metals, which will increase the device’s stretchability and wearability (Kulikowski, 2020). The TEG used for the proposed product is self-sustainable, recyclable, and flexible due to the fluidity of the wiring and the dynamic polyimine system. Moreover, it has high functionality because of outstanding mechanical characteristics such as the fact that it can be easily stretched and bent. As a result of such flexibility, products utilizing the TEG can be worn for energy generation and harvesting. The proposed jacket uses just one TEG as it is efficient enough for the mechanism to work. According to Enescu (2019), a single generator produces power from 1 to 125 W. Ren et al. (2021) further note that “for the surface area of a typical sports wristband (6 cm by 25 cm), a power output of 12.5 uW and a voltage output of 5 V can be generate when the wearer is walking” (para. 6). This is enough to power the LED lights, which are a part of the jacket.

Some of the factors, which can affect TEG performance, include ambient radiation, the surface of the solar spectra, as well as non-radiative thermal exchange. Therefore, the TEG in a sleeve of the jacket is covered in a glass-polymer meta-material on its cold side. This ensures that the wavelength-selective surface is not as dependent on the aforementioned factors, remaining efficient and wearable in the long run. The design of the jacket might be considered primitive, although it is crucial to acknowledge that its simplicity is what makes it highly scalable and flexible to adapt new materials or fabrication techniques. Ren et al. (2021) suggest that improving the performance of a TEG requires the enhancement of the “fabrication process of thermoelectric films, adopting thermoelectric films with better thermoelectric properties, and using traditional thermoelectric legs with much smaller dimensions” (para. 16). In regards to washing the jacket, it is important to note that both the LED strips and the TEG wristband in one of the sleeves will be removable. Thus, the process of cleaning is going to be simplified.

In regards to the need for the proposed product, it is evident that outdoor activities present numerous threats, especially when performed in the dark. The Department for Transport (2019) has reported that, in 2019 alone, over 1000 U.K. residents suffered from injuries or died as a result of drivers simply not noticing pedestrians in the dark. After all, it is extremely dangerous to walk, run, or cycle at night if one disregards their safety and wears dark clothes. Although it depends on the neighborhood, it is very concerning that there are not that many street lights or fully lit pavements, which significantly increases the risks of getting into an accident. Therefore, the proposed product offers a solution to ensure that people are safe when performing outdoor activities in the evening or at night.

The Industry and the Main Competitors

It is apparent that the proposed product is located at the intersection of two industries, both of which seem to be extremely profitable and have favorable future growth projections. Firstly, as the jacket is powered by a thermoelectric generator, it is rightfully a part of the thermoelectric industry. According to the latest research, the market is projected to grow substantially, reaching the value of $741 million by 2025 (MarketsandMarkets Research, 2019). It is important to note that the increase in demand for TEGs is associated primarily with the need to recover wasted heat in various industries, which allows companies to improve their overall efficiency and environmental impact. The selected industry has numerous segments, including aerospace, military, healthcare, mining, and so on. The jacket is in the consumer segment of the TE industry.

Secondly, the product chosen for this business plan can be a part of the athleisure industry. The size of the activewear market has grown substantially and demonstrated an astounding figure of $353.5 billion value as of 2020 (Shahbandeh, 2021). Nowadays, consumers are becoming more fitness and health conscious as around 65% of people note that they prefer sportswear as garments of choice for day-to-day activities, according to Statista (Shahbandeh, 2021). In addition, it is crucial to acknowledge that one of the most prominent athleisure trends has been the incorporation of technology into clothing as a way of customization, which makes the LED-lights, TEG-powered jacket so much more appealing.

In regards to the target market for the proposed product, it consists of people who enjoy exercising outdoors, yet are concerned about their safety. During the COVID-19 pandemic, there has been a significant rise in popularity of outdoor activities due to the closure of gyms and sports centers. In the United Kingdom, around 67.2% of adults claim to engage in physical activities daily, while nearly 23% walk for travel at least a couple of times a week (Public Health England, 2020). The jacket is suitable for all ages, sizes, and genders, although it is important to recognize that young adults, members of the Generations Y and Z, are the primary target as they are the ones tech-savvy enough to appreciate the innovative benefits of the product offered (Bradshaw, 2019). Although there are certainly many alternatives on the market, the proposed jacket is better. It does not lead to any issues with batteries or charging beforehand, including safety concerns once the battery is out and a person might be stranded in the dark. Thus, the jacket proposed in this business plan allows users to engage in activities, which require more time, including long commutes, long-distance marathons, and cycling. As the chosen product does not contain batteries, which have toxic chemicals, it is more environmentally friendly.

In terms of competition, there are certainly companies who are already experimenting with thermoelectric technologies and rather successful at applying it for wearable garments. MATRIX Industries offers the PowerWatch, which is a smart device that does not need charging. As a leading innovation hub in thermoelectrics, the U.S.-based company MATRIX is on the course of launching more new products, with over $17 million in funding (Levy, 2017). Based on the research conducted, PowerWatch seems to be the only wearable product on the market that allows to transform body heat directly into electric energy.

Proposed Marketing Strategy and Competition Strategy

As for the marketing strategy, the primary goal for promoting the jacket is to ensure that all the marketing activities are cost- and resource-efficient. The first step in keeping the cost of sales and operations down is focusing exclusively on one product, which is the jacket. Once the startup attracts more investors and generates more sales, it can branch out and use its patented technology for numerous different pieces of clothing or accessories. The trajectory is based largely on the success story of Under Armour, which started off with its patented HeatGear, ColdGear, and AllSeasonsGear fabrics, and then, moved towards more general products (Gardener, 2017). The second step is to develop a set of values for the company as an important aspect of connecting with the customer base. After that, it is crucial to set up operational and evaluation strategies to ensure that the startup functions in accordance with these views and morals. The values chosen for the product are gender and race equality, inclusivity, diversity, corporate responsibility, as well as environmental sustainability. All of these should be incorporated throughout a variety of the company’s promotional activities.

The third step is to strike partnerships with individual influencers and sports teams (college, university, and professional). Promoting the product among athletes ensures that it reaches relevant audiences who are interested in athleisure and physical activity. For instance, Under Armour spends more than $70 million on such partnerships annually, which means that the company “boasts multimillion-dollar agreements with a variety of sports teams, including in football, motor racing, baseball, basketball, rugby, and athletics” (Pafitis, 2020, para. 17). The fourth step includes digital communication, which allows companies to stay connected to existing and potential customers through multiple channels such as social media platforms (Twitter, Facebook, TikTok, Instagram, etc.). The social media strategy for marketing the jacket would center around its innovative design and safety maximization benefits. This could be achieved by maintaining a strong social media presence, sharing relevant and entertaining content, and directly communicating with customers.

In regards to competitive positioning, it is important to develop a strong set of characteristics, which distinguish the brand from anyone else. Firstly, the price of the jacket is going to be relatively low, so that the youth can afford it. In addition, this allows the company to conquer the market rather efficiently. Secondly, in comparison to the competition, the jacket’s innovative approach to thermoelectrics should be emphasized as it is one of the only products that uses body heat and transforms it into electric energy. Thirdly, the product is going to position itself as an environmentally friendly alternative to flashlights, which appeals to an ethically and climate conscious consumer base. Lastly, the company can distinguish itself from primary competitors by amplifying its mechanical flexibility and stretchability (as a result of implementing SOM-RIPs) in its promotional messages.

As for pricing, it is apparent that there is no clear-cut answer as to how much must be allocated to marketing the product. At the first stages, since the startup has no revenue, it is rational to spend at least 30% of projected first-year revenue on marketing activities. As the company grows, it is fair to spend 20-25% of the revenue on promotional initiatives and digital communication. However, a more established business has to spend no more than 10-15% of its revenue on marketing.

Appropriateness of the Management Team

In regards to assembling a team for launching the product, it is evident there is no universal recipe for success. However, any startup lineup usually consists of a designer, an engineer, and an entrepreneur. In the case of the proposed product, it is wise to add the position of a marketing specialist to the mix. The designer can work with the marketer to ensure that the finished product is desirable enough, which requires prior research on customer needs and concerns. The engineer is responsible for applying technical knowledge to achieve maximum feasibility. Thus, the entrepreneur is tasked with managing finances and making sure the business model is viable and attractive to investors.

Protection of Intellectual Property

It is crucial to keep in mind that there are already existing patents owned by large corporations related to thermoelectrics. The primary goal is to design a way of making jackets, so that the manufacturing process does not break the laws of intellectual property. The solution to overcome such a challenge may lie in securing an exclusive patent for the company. After all, in the production of TEGs, the brand will utilize innovative SOM-RIPs, which separate rigid chips from fragile ones in case of deformation.

Financial Projections

As for financial projections, Figures 1-3 demonstrate what can be expected during the first 10 years of operations, including the best and worst case scenarios. These estimations are rough and based primarily on online data on income statements of similar ventures, both successful and not. In order to make sure these projections are more accurate, the company should hire an expert in the field.

Figure 1. Projected Income Statement for the 10 Year Period

	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
Sales	$100,000	$200,000	$400,000	$550,000	$750,000	$1000,000	$1500,000	$1750,000	$2250,000	$3000,000
Cost of Sales	– $50,000	– $100,000	– $200,000	– $275,000	– $375,000	– $500,000	– $750,000	– $875,000	– $1125,000	– $1500,000
Gross Profit	$50,000	$100,000	$200,000	$275,000	$375,000	$500,000	$750,000	$875,000	$1125,000	$1500,000
Admin &Selling	-$20,000	-$40,000	-$80,000	-$110,000	-$150,000	-$200,000	-$300,000	-$350,000	-$450,000	-$600,000
Op. Profit	$30,000	$60,000	$120,000	$165,000	$225,000	$300,000	$450,000	$525,000	$685,000	$900,000

Figure 2. Projected Income Statement for the 10 Year Period (Worst Case Scenario)

	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
Sales	$100,000	$120,000	$150,000	$170,000	$250,000	$350,000	$500,000	$600,000	$800,000	$1000,000
Cost of Sales	-$50,000	-$60,000	-$75,000	-$85,000	-$125,000	-$175,000	-$250,000	-$300,000	-$400,000	-$500,000
Gross Profit	$50,000	$60,000	$75,000	$85,000	$125,000	$175,000	$250,000	$300,000	$400,000	$500,000
Admin &Selling	-$20,000	-$25,000	-$30,000	-$35,000	-$45,000	-$55,000	-$65,000	-$100,000	-$200,000	-$200,000
Op. Profit	$30,000	$350,000	$45,000	$50,000	$80,000	$120,000	$185,000	$200,000	$200,000	$300,000

Figure 3. Projected Income Statement for the 10 Year Period (Best Case Scenario)

	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
Sales	$200,000	$400,000	$800,000	$1100,000	$1500,000	$2000,000	$3000,000	$3500,000	$4500,000	$6000,000
Cost of Sales	-$100,000	-$200,000	-$400,000	-$550,000	-$750,000	-$1000,000	-$1500,000	-$1750,000	-$2250,000	-$3000,000
Gross Profit	$100,000	$200,000	$400,000	$550,000	$750,000	$1000,000	$1500,000	$1750,000	$2250,000	$3000,000
Admin &Selling	-$40,000	-$80,000	-$160,000	-$220,000	-$300,000	-$400,000	-$600,000	-$700,000	-$900,000	-$1200,000
Op. Profit	$60,000	$120,000	$240,000	$330,000	$450,000	$600,000	$900,000	$1050,000	$1350,000	$1800,000

Proposed Valuations and Shares

Figure 4. Estimated Pre-revenue Valuation (Berkus Model)

Sound idea (basic value)	$100,000
Prototype (technology)	$300,000
Quality management team (execution)	$50,000
Strategic relationships (go-to-market)	$100,000
Product rollout	$50,000
Pre-money valuation (TOTAL)	$600,000

Figure 4 demonstrates that the pre-money valuation of the company will be. When it comes to valuations, this business plan utilized the Berkus model to estimate the product’s valuation as it is apparent there is no past or current revenue to base the valuation off (Richards, 2019). As for allocating shares, Ovcharenko (2019) recommends for the founder(s) to have over 60% of shares in total. Thus, an independent advisor for this product will get 5%, investors can claim up to 20%, first employees can expect 10%, which leaves 5% as an available pool.

Reference List

Bradshaw, J. (2019). ‘What’s different about Generation Z tech talent?’, Forbes, Web.

Chu, J. (2018). ‘Turning heat into electricity’, MIT News, Web.

Department for transport. (2019). Contributory factors for reported road accidents. Web.

Enescu, D. (2019). Thermoelectric energy harvesting: Basic principles and applications. Web.

Freer, R and Powell, A. V. (2019). ‘Realising the potential of thermoelectric technology: A roadmap’, Journal of Materials Chemistry, 8, pp. 441–463.

Gardener, A. (2017). ‘Learn about Under Armour technology’, Blair’s Farm & Fleet.

Kulikowski, M. (2020). Flexible tech harvests body heat to power health wearables. Web.

Levy, A. (2017). ‘TECH smartwatch start-up Matrix lands $17.3 million to go after Apple with a device powered by body heat’, CNBC, Web.

MarketsandMarkets Research. (2019). Thermoelectric generators market by application (Waste heat recovery, energy harvesting, direct power generation, co-generation), wattage (<10 w, 10-1kw, >1kw), temperature (<80°C, 80°- 500°C, >500°C, material, vertical, component, region – global forecast to 2025. Web.

Ovcharenko, S. (2019). How shares should be allocated among startup founders and employees. Web.

Pafitis, E. (2020). ‘What can be learnt from Under Armour’s marketing strategy?’ Starting Business.

Public Health England, (2020). Public health profiles. Web.

Ren, W. et al. (2021). ‘High-performance wearable thermoelectric generator with self-healing, recycling, and Lego-like reconfiguring capabilities’, Science Advances, 7(7).

Richards, R. (2019). How to value a startup company with no revenue. Web.

Twaha, S. et al. (2016). ‘A comprehensive review of thermoelectric technology: Materials, applications, modelling and performance improvement’, Renewable and Sustainable Energy Reviews, 65, pp. 698–726.

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