IVI Presentation At Rusnano Conference

07 October 2009 [email protected]

Mgt & Organization for New Mgt & Organization for New Business FormationBusiness Formation

Presentation at 2Presentation at 2ndnd Rusnano IntRusnano Int’’l Conferencel ConferenceMoscow, Russia, 7 October 2009

Innovative Ventures Inc.Innovative Ventures Inc.Haslett, MI. USAHaslett, MI. USAMoscow, RussiaMoscow, Russia

Thomas NastasThomas NastasFounderFounder

[email protected]@IVIpe.comwww.www.IVIpe.comIVIpe.com


TodayToday’’s Messages Message

Focus of this PresentationRusnano Request: What are the strategies

in Tech Transfer, used by leading American UniversitiesMy Subject: New Business Formation Dept.Message is for Institutes, Universities,

Technoparks, etc. Only have 15 minutes, will outline reasons

why take this action, ideas to accomplishSpecific Actions to Improve Your Chances of

Success


IVI HistoryIVI History--Direct Invest & Direct Invest & AdvisoryAdvisory

Canada (1992)

C$100MM-Canadian Bus. Dev. Bank

USA (1986)

The Michigan Product Dev. Fund ($5MM)

Europe (1992/94)

TP Fund, $10MM- EU, $-Financière St Dominique, Paris

Russia (1997)

HP LP, $30MM-EBRD & USAID

Africa (1993/96)

E. Africa $5MM, Sub- Saharan, $200MM, South Africa,$30MM, IFC/WB


About MeAbout Me• Founder of IVI,1986. In Russia

since 1997• Moscow Bank, Member, Board of

Directors, 2007

• Member, Board of Directors, 2008

• Moscow IT/VC, Member, Investment Committee, 2009

• Los Angeles, CA, Member, Global Advisory Committee, 2009

• Moscow, Co-Founder, 2009• Russian operations, Tata Coffee

Board of Directors, 2009• Moscow MBA Program, Prof of VC

& Marketing, 2002/9• Moscow, MBA Advising, 2001

Ассоциация

независимыхдиректоров

http://www.aibec.org/index.php

http://www.pericles.ru/able/index.html

07 October 2009 [email protected] 5

Typical Tech Transfer UnitTypical Tech Transfer Unit

Executive Director

Administrative Services

Legal SupportLicensing Agreements & IP Protection

Accounting MarketingData Support ..

• 7-20 individuals

Office of the VP for Research


Form the Licensee Operational Role

Flexible L

icensin

g

Terms

Hands-in-Pockets

Hands-Off

Hands-On*

Up-to-Elbows**

Progressiv

e Polici

es

Business

Plan

Development A

ssista

nce

Business

Operatio

ns

Particip

ation

Aid in Securin

g Funding

Help Recr

uit Tale

nt

Direct I

nvestm

ent

Policies

Models for Academic Business Development

* Sometimes Bus Dev Group is quasi-external to the U** Often exclusive arrangement with Bus Dev Group that is external to the Univ

UM

Source: MIT, AUTM, MRUN, U Michigan et al


Creation: New Business Creation: New Business Formation Unit in Tech TransferFormation Unit in Tech Transfer

Executive Director

Administrative Services

Legal SupportLicensing Agreements & IP Protection

Robin Rasor

Ken Nisbet

Rick Brandon

Accounting MarketingData Support ..

• 23 individuals

Business DevelopmentNew Venture Formation

Office of the VP for Research

Andrew McColm

Created, 2006


Form the Licensee Operational Role

Flexible L

icensin

g

Terms

Hands-in-Pockets

Hands-Off

Hands-On*

Up-to-Elbows**

Progressiv

e Polici

es

Business

Plan

Development A

ssista

nce

Business

Operatio

ns

Particip

ation

Aid in Securin

g Funding

Help Recr

uit Tale

nt

Direct I

nvestm

ent

Policies

Models for Academic Business Development

* Sometimes Bus Dev Group is quasi-external to the U** Often exclusive arrangement with Bus Dev Group that is external to the Univ

UM

Source: MIT, AUTM, MRUN, U Michigan et al


Why Be Proactive? Why Be Proactive? Why ‘Hands-On?’ Most States (in US) have: Incubators & TechnoparksUniversity, State, Federal & Corporate R&DVenture Capital $$, Seed-Expansion/GrowthR&D Grant, Seed & Start-up Programs Support Services in Accounting, Legal,

Consultants. Marketing, Advertising, etc.Venture Capital Networks, Infrastructure &

Eco-systemWhatWhat’’s Happening Qualitatively to s Happening Qualitatively to Explain?Explain?


Qualitative Differences: Silicon Qualitative Differences: Silicon Valley/Boston & Rest of USA Valley/Boston & Rest of USA

1. Serial Entrepreneurs & Entrepreneurship


Qualitative Differences: Silicon Qualitative Differences: Silicon Valley/Boston & Rest of USAValley/Boston & Rest of USA

2. Amount & Velocity of VC InvestmentAttitude to Risk Influences Risk Taking-#1

Acceptance: Lack of Certainty-#2

Brand & Reputation Effects- #3


Qualitative Differences: Silicon Qualitative Differences: Silicon Valley/Boston & Rest of USAValley/Boston & Rest of USA

3. Nature of the Deal Flow

Parallels/Similarities: Rest of USA & Russia


Research

Pre-Disclosure

Disclosure

Assessment

Protection

Find or Form a Licensee

Existing Company Marketing Business Concept Planning

Developing the License Components

Business Formation

Licensing

Relationships, Revenue,Reinvestment

Find Form

UM Technology Transfer Process

UM Bus Dev gets involved (initiates a Project) at/or before this point if:- the disclosure is related to an existing BD Project- assessment or marketing activities reveals that a start-up may be the best commercialization path- the inventor is interested in a start-up- accelerator or investor is interested in a start-up


Research

Pre-Disclosure

Disclosure

Assessment

Protection


Existing Company Marketing Bus Concept Planning


Business Formation

Licensing


Find Form

JargonJargon

Launched Start-up

Bus Dev Project

possible Option Agreement


ThreeThree--step Bus Dev Processstep Bus Dev Process

Research

Pre-Disclosure

Disclosure

Assessment

Protection


Existing Company Marketing Bus Concept Planning


Business Formation

Licensing


Find Form

1) Evaluation2) Emerging

.

3) Business Formation


•

Distinct from, but team with, Patent/Licensing and Legal Professionals

•

Focused on business formation consulting –

Specialize somewhat by industry–

Broad expertise –

product development, market/industry trends, project management, finance, UM policies, counseling, investment strategy…

•

3 FTEs with part-time admin support

•

External relationship champions

Bus Dev Group within Tech Transfer


•

Project Planning and Management–

Act as communication “hub”

(esp. early in a Project)

•

Serve as mentor, guide, and instructor–

Engage in review of choices & expectations

–

Help the inexperienced understand what they need to know

–

Advise relative to business plans and investor materials

–

Navigate thru university systems/procedures

–

Counsel re: effective utilization/selection of resources, programs, & partners

Business Creation Experts: Proactively Assist as Needed & Desired

http://www.techtransfer.umich.edu/entrepreneurs/startups.html


•

Identify, locate and engage needed resources–

Access to market information resources

–

Hire outside experts for critical path activities (Tech Transfer

funds –

leverage/utilize other programs as possible)

–

Targeted partnering with outside entrepreneurial resources

–

Provide team formation assistance

•

Help create and execute funding strategy (including introductions)

•

External Relationship Champions

Business Creation Experts: Proactively Assist as Needed & Desired

http://www.techtransfer.umich.edu/entrepreneurs/startups.html


Bus Dev Project:Bus Dev Project: Step Descriptions (Staged Gates)Step Descriptions (Staged Gates)

Fully Defined Product/ServiceSatisfies Customer Need with potential for Sustaining Revenues. Competitive with alternatives. Sufficient Tech Development complete. Initial IP evaluation.

Evaluation

Emerging

Business FormationBusiness PlanIncludes operational Structure, Competitive Positioning, Product Development, Strategy and Finances. Determine Business Model.

TeamDiverse & ExperiencedTo Manage the Businessand Execute the Plan

FinancingAccess FundingFor company to reach meaningful milestone or revenues

Satisfies definition of viable licensee

Start-up Feasibility and Inventor ConsiderationsPotential to solve unmet need. Industry dynamics, market trends & competitive landscape show possibility of new business to attract needed funding & resources. Inventor comfortable with required time, effort & flexibility to champion start-up.


Product/Service Selection & Definition: Product/Service Selection & Definition: EmergingEmerging

With primary and secondary research:•

Verify industry dynamics

•

Determine if tech development (proof-of-principle) sufficient to demonstrate solution to identified customer problem

•

Strategically define lead product/service from multiple alternatives

•

Create product development plan (estimates)

•

Verify competitive advantage

•

Estimate if needed development resources appropriate for desired

return

•

Reassess IP protection and access (not just UM’s)


Business Formation:Business Formation:

Business PlanBusiness Plan

Revisions staged with company growth

starting with proposed activities moving into implementation

“Blueprint or Playbook”

for the team

should be formulated/influenced by the team

act of writing facilitates comprehensive planning by identifying

gaps

Often highlights initially the need for business talent on the team

Multiple Audiences

self/team

investors/granting agencies

provides depth to investment/funding solicitations

prospective employees



TeamTeam•

Minimally need business AND technical expertise

–

Unlikely to be one person–

Relevant experience is highly valued –

Unlikely for faculty member to take an operational role in the start-up

•

Staged additions to Team

–

dependent on company development status

•

“Chemistry”

(compatibility) is critical

•

Shared Vision Critical

–

Helps relieve inventor concerns over “giving up control”



FinancingFinancing

Avoid pitching the Right Deal to the Wrong Investor

•

Determine the needs of start-up based on Milestone Achievement

•

Profile funding source requirements, expectations, & limitations –

All sources have “strings attached”

•

Formulate a deliberate strategy for seeking funding based upon BOTH of the above

•

Prepare appropriate materials for soliciting funding–

be prepared for next steps (e.g. due diligence)


Project PlanningProject Planning

Create and Communicate a “roadmap”Multiple simultaneous & sequential steps w/varying dependencies

Requires experience with process, business culture/norms, etc.

Select Critical Path and Identify Gating Items

For the inventor and team:

to create common vision

to describe holes, timeframes, resources required

to identify gating and critical path items

to find “show stoppers” ASAP

to facilitate progress


Concluding Remarks Concluding Remarks

Staffing

Hire Business people, not lawyers, academics or university personnel


UM StartUM Start--Ups Ups ––

Recent YearsRecent Years

75 Start-ups * Denotes a presence in MI


Ex: How Much Value (Added)? Where’s the Technology?


Technology In Many Places!Technology In Many Places! Just Look & DefineJust Look & Define

ButcherButcher

Genetic Engineering & Breeding

RaisingSlaughter

Processing- Ham, KielbasaDistribution, Storage &

DeliveryRetail Locations


Download at www.IVIpe.com

News 2007

http://www.ivipe.com/


Thomas D. NastasThomas D. [email protected]@IVIpe.comwww.www.IVIpe.comIVIpe.com

Moscow Tel. 7.985.923.47.27Moscow Tel. 7.985.923.47.27US Tel. 1.517.899.1432US Tel. 1.517.899.1432

Innovative Ventures Inc.Innovative Ventures Inc.

Moscow, RussiaMoscow, RussiaHaslett, MI USAHaslett, MI USA


Decision: StartDecision: Start--up Feasibility up Feasibility EvaluationEvaluation

Dynamic R&D for the industry shifting to the entrepreneurial sector?

Development, Manufacturing and Distribution -

do any require lg

partners?

Is there potential to solve an unmet need w/ competitive advantages?

Are multiple products/services possible with technology?

Does using the technology require a paradigm shift? Or provide an incremental improvement? Satisfy a low-end underserved market?

Is the potential benefit in line with the anticipated costs?

Do the start-up scenario realities match desires of the inventors?

Is there sufficient IP protection and access (not just UM’s)?

Are there economic, social, political and technology context issues that must be considered?


Inventor ConsiderationsInventor Considerations

Required commitment of time and energy

Not all technologies are appropriate for start-ups

Anticipated financial reward (personal, lab, etc.) –

amount –

timing

Requirements for flexible planning & shared responsibility/control

Acknowledgment of cultural difference between business & academia

Inventor’s role relative to the start-up post-launch (start-up needs business skills and experience)

Impact on academic research activities (COI, potential sponsors)


Additional Slides


TechnologyInvestment by

Traditional VC’s $$

Experienced

Management

Team

Market

Understanding

Milestone-based Develop’t Plan

Reduced Technical Risk

IP Plan

Industry & Market

Relationships

Funding Helps Get the Other Void-Fillers(management, knowledge, information)

“The Capital Gap encompasses a great deal more than simply obtaining capital for a start-up. It refers to the comprehensive set of tasks necessary to develop a business concept to a point where it obtains the first round of ‘deep pocket’ professional venture capital.”from Journal of BioLaw and Business “The Development of Entrepreneurial infrastructures Across The United States” by Thomas Dickerson vol 6 #4 pgs 14-19 2003


Engagement of Outside Resources Other Than Investors

Why engage them?–

Lack of internal knowledge and/or experience –

Need to develop support for the start-up –

Catalytic effect on start-up formation

When/How to use them?–

Critical path gating items of project plan (clearly defined objectives/deliverables)–

Start-up Evaluation; Product/Service Definition; Business Concept/Plan

•

How to find them?–

Targeted networking–

Indexing your rolodex

•

What Roles could they take?–

Specialized expert paid consultants/talent•

Continuity post-consulting engagement

–

Pro-bono advisors


Develop Milestones Linked to Company FundingDevelop Milestones Linked to Company Funding

First Rd $M

8. (product launch)

Q12Q11Q10Q9

Year 3

Q8Q7Q6Q5

Year 2

Q4Q3Q2Q1

Year 1

4. (refine and develop product)

5. (validation studies)

6. (pilot production)

7. (select & secure commercial partners)

3. (completion represents significant risk reduction)

2. (demonstrates market, business, or product development)

1. (demonstrates market, business, or product development)

Milestone

Seed $K Second Rd $M Third Rd $M


Believe in Yourself/Accept Believe in Yourself/Accept RejectionRejection

Oldest VC Firm, investing since 1911

Deals Rejected:

Apollo Computer(acquired by Hewlett Packard)

BVP's Felda Hardymon was offered a small position in thecompany's last private round, and rejected it: too small

a position, he thought, at too high a price. In less than a year it was worth 17x more.



Deal Rejected:

Check PointIn 1994, Gil Schwed pitched his idea to BVP's David

Cowan, who said that Gil would never get distribution in the US. The next year, Check Point got

a huge Sun OEM deal and sold $25M of firewall software.



Deal Rejected:

eBay"Stamps? Coins? Comic books? You've GOT to be kidding,"

thought Cowan. "No-brainer pass."



Deal Rejected:

Federal ExpressIncredibly, BVP declined on Federal Express seven times.


Believe in Yourself/Accept Believe in Yourself/Accept Rejection Rejection

Deal Rejected:

GoogleCowan’s college friend rented her garage to Sergey & Larry their 1st year. In 1999 and 2000 she introducedCowan to “these two really smart Stanford students

writing a search engine.” Students? A new search engine? In the most important moment ever for a

Bessemer rejection, Cowan asked her, “How can I get out of this house without going near your garage?”



Deal Rejected:

PaypalDavid Cowan declined on the Series A round. Young &

unproven team, regulatory problems, and, 4 years later, a $1.5 billion acquisition by eBay.



Deal Rejected:

StrataCom(acquired by Cisco)

Felda Hardymon: "[Sierra's] Pete Wendell asked if I'd like to invest in Stratacom, which was doing a 'fast packet

switch.' I gave him a blank stare."

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