commercialising emerging technologies - paul atherton · commercialising emerging technologies paul...

Commercialising

Emerging Technologies

Paul Atherton

©Dr Paul D Atherton 2010

My Background

• Serial, Successful Entrepreneur

– Queensgate Instruments (Imperial spin out) • (sold to SDL/JDS_Uniphase)

– C2V-microGC for environmental monitoring • (sold to Thermo-Fisher)

• Active Investor (focus on University spin-outs)

– Infinitesima – high speed AFM for semicon inspection

– Nexeon – next generation Li-ion batteries

– Midaz – high power tunable UV lasers

– Executive Chairman

• Seed Capital Funds

– SPV (London Business School)

• Imperial Innovations (Non Exec Director)

– Raised >£50M from AIM float – VC Fund


New Technologies

• Create new markets

• Create new industries

• Industry Life Cycle :

– Early stage – looking for market acceptance

– Rapid growth – high profits

– Consolidation (winners emerge)

– Maturity (large competitive companies)

– Decline – new technologies disrupt the model


Technology is Disruptive

• Destabilising existing business models

– Steam

– Railways

– Electricity

– Internal combustion engine

– Telecoms

– Internet

– Nanotechnology

• Schumpeter – ‘Gales of Creative Destruction’


© Paul Atherton 2007

Some Lessons from History

• All innovation is disruptive to some extent – New rules – new games

– Technology changes the rules • Changes the game in unexpected ways

• Unexpected winners and losers

• But - Markets that do not exist cannot be analysed – New markets – no maps

• Markets and applications are often unknown and unknowable – beware analysts reports – they don’t have a

crystal ball ..... – remember the telecom boom??


Timing

• Technology takes a long time to

commercialise

– printing press, steam, car,

• Needs other subsidiary inventions

– Inks, metallurgy, scripts, paper, presses

– Tyres, roads, fuels

• Generate new demands

– Railways and telegraphy

• Incremental and slow process

– But getting faster


The ‘Best’ does NOT always win

• Qwerty keyboard

– 1873 – anti-engineering – jamming keys

– 1882 – Ms Longley, Frank McGurrin

• VHS vs Betamax

– Tape length vs Quality • Usage for taping movies rather than camcorder

• other factors for success–

– Lifestyles, branding, fashion, environment, distribution, social value, prestige

– Why did IPOD succeed?

– Is Windows better than Mac ?



Success often comes from

unexpected directions • Very often the application of a technology is a

long way from the original idea

• Phonograph – Edison 1877

• Intel – DRAM memory.

– From a Japanese calculator chip to the IBM PC.

• He-Ne laser – bar code scanners

• Commercialisation is essentially an adaptive process

• Technology is a basket of options on the future

• ‘you have to kiss a lot of frogs to find a prince’


Technology Businesses

• Importance of Intellectual Property

– Monopoly

– True first-mover advantage

– Allows a market-entry window


Intellectual Property

• Black art – craft knowledge

– Highly skilled workers – eg optical compts

– 5 year apprenticeships, 20yrs to be a Master

• Process knowledge – internal, documented

– Trained workers, specialised machines

• Patents


Patents

• Inherent strength of patents varies between sectors

– Pharmaceuticals – very strong

– Software – very weak

• Important differences between countries

– US, UK/Europe, Japan



Patents

• US patents vs UK

– First to invent vs first to file

– Threshold of true inventive step – US low, UK high

– Triple damages for wilful infringement in US

• In US the incentive is to file first and ask questions later –

– US patents not valid until tested in court (10 years, $M)

– Court rulings are often an award of enforced license

• Most large corporate patent activity is defensive

– preventing competitors having a clear field

– something to negotiate cross licensing with


Appropriability of Technology

• How easy is it to steal or copy

• Cameras

– even with all the plans you could not make one

• Wafer steppers

– why are there only three manufacturers –

Nikon, Canon, ASML ?


Product vs Process

• Challenge is how to capture the value.

• Licensing is hard without granted patents.

• Licensing tends to be low risk, low return option.

• Process patents are hard to police – China……

– And can take 10 years to resolve…. • 5 million dollar poker game – big boys games, big boys rules

• Process patents are easy to improve upon. – Lose control of technology to licensee……

• Embodiment in a product can capture more value.... – But more investment and more risk


Ideas are cheap……

• Inert

• Numerous

• Cheap

• Go mostly unexploited

• An Idea is NOT an Opportunity

• The problem of the ‘Inventor’ :

– Implementation is the difficult part

– Genius is 1% inspiration 99% perspiration

• Execution : – Team, Resources, Talent and skill, Experience


The Problem with the Business Plan

• The world keeps changing

– tsunamis, terrorism, climate change, energy

shortages, governments

• The need for complementary assets

– The things you did not know you needed

• Unexpected problems

• And Unexpected opportunities

– If you have the wit to recognise them............

©Dr Paul D Atherton 2010 management

management

management!!! • The Founders are rarely managers

• Changing situations require flexible managers

• CEO needs market knowledge – Customer access, trends, what deals are possible

• Chairman needs industry background – Networks, people

• Experience leads to fewer mistakes – Most start ups fail because of avoidable mistakes.

– Fail cheaply – if you can - knowing when to stop

• Good managers can tell which frogs are worth kissing

• …..and which puppies need to be drowned


Building a Management Team the importance of experience

• CEO – understands technology, has done spin-out before

• CTO – may be one of the Academic Founders

– But he will need training

– Senior academic will be part time Chief Scientist

• Sales/Marketing

– Used to work for your key customer, or competitor

• Operations – scaled up before

• If you can attract a good team – then you probably have a

good company!!

• But a good team is expensive – the need for Scale!!


Because

• The world is changing rapidly

• Being best is insufficient

• Kissing frogs is unpleasant

• You may not recognise a Prince when you find one

• Hiring good people is hard

• Making things is hard

• Selling is hard

• The skill set for business does not overlap much with that

for doing good science

• You don't appreciate how much you don't understand

An experienced management team is crucial

for success – but its expensive.....


The Crucial Decision

• So licences need

– Strong IP, granted patents, proof of concept,

patience

• Spin outs need

– Strong IP, market size, management team, and

a large investment.

• Or do nothing!!

– Researchers migrate to industry with know how

– Govt gets large slice of the take anyway


Venture Capital Funds

• Very few opportunities are suitable for Venture Capital

• What are VC’s looking for?

– High upside, low downside, scaleable, building >$100M businesses in 5 years

• What do they promise their investors

– > 25% per annum return on funds ( up to 40%)

– Exit in 5 to 10 years

• There are different kinds of VC

– Seed, early stage, technology, bio-tech, MBO’s, Private Equity, Turnarounds

• But......

1996-2004 Funds – Since Inception to December 2008

(% p.a.)

-1.8

6.5

14.9

21.5

17.2

-5

0

5

10

15

20

25

Venture Small MBO Mid MBO Large MBO Total

VC funds lose money on emerging technology

Pre-1996 Funds – Since Inception to December 2008

(% p.a.)

9.210.2

15.8

18.2

15.8 15.6

0

2

4

6

8

10

12

14

16

18

20

Early Stage Development Mid MBO Large MBO Generalist Total

And early stage investing has the lowest returns

Harris and Harris

a nanotech VC


Nanoparticles

• Capacity cost and market size issues

• Scale up issues

• Production technology

– Plasma vs precipitation

• New start ups vs existing players :

• Evonik, Cabot Corp, Johnson Matthey

• BASF, Altana

• Being at the bottom of the Value Chain


Nanoparticles an update • CNI

• 2000 founded by Richard Smalley et al - $15M angel investment

– April 2007 sold to Arrowhead for $5.4M in stock

• Ntera – 1998- University College Dublin spin out

– 2006- raised $35M to date

– 2007 – repositioned to printable displays

– 2010 major product launch nanochromic displays

• Quantum Dot Corp ($37M) – bio-assays – Acquired by Invitrogen oct 2005 for $26M

• Nanosphere – Gold nanoparticle DNA probes for bio-threat detection

( anthrax)

– Now healthcare – IPO


Nanophase Nanosys and Oxonica

• Nanophase – first Nanotech IPO

– Over valued

• Nanosys – the hyped Nanotech IPO

– Over sold

• Oxonica – an unexpected IPO

– Over diluted


NanoPhase Technologies

• Patents licensed from Argonne – 1990

• Zinc oxide nanoparticles – sunscreens

• Catalysts

• Floated on Nasdaq – 1998

• Early Nanotech IPO

• Rode technology wave

• Look at recent history……


Nanophase

• Founded 1994

• 1998 Over hyped IPO

– paid compensation of $4.8M (Jan 2002)

• Nov 2001 Layoffs – insufficient demand

• Growth, but quite volatile

– Customer delays

– major customer - sunscreen

• 2003Q1 revenues $1.66M

• 2003Q2 revenues $1.3M

• Losing about $1.3M per quarter


NanoPhase 2004 – Altana invest

• Altana Chemie AG – acquires 7% for $10M – Speciality chemicals business

– 2 year lock up

– 8 year strategic agreement

– c.f. BASF investment in Oxonica….

• 2007 – revenue $12.2M

– net loss $3.5M


Nanophase Mkt Cap $82M


Nanophase Technologies Corporation Issues Q3,

Q4 and FY 2008 Guidance Below Analysts'

Estimates

Tuesday, 22 Jul 2008 04:00pm EDT

• Nanophase Technologies Corporation announced that it now

believes that the third and fourth quarter 2008 guidance will

be relatively flat compared with the second quarter. The

Company reported total revenue of $2.94 million, a net loss

of $788,000, or $0.04/share for the second quarter 2008.

Now it appears that total fiscal 2008 revenue will be down

about 10%-15% year-over-year. The Company reported

revenue of $12.21million for fiscal 2007. According to

Reuters Estimates, analysts were expecting the Company to

report revenue of $3.01 million and EPS of $(0.05) for third

quarter 2008; revenue of $3.51 million and $(0.05) for

fourth quarter 2008; and revenue of $12.66 milion for fiscal

2008


New Management Team

• Q3 2008 – President and CEO Joseph Cross

resigns

• Q1 2009 - On March 3, 2009, the Company announced

the resignations of Mr. Robert Haines its then-current

Vice-President of Operations and Dr. Richard Brotzman its

then-current Chief Technology Officer. Additionally, on

February 19, 2009, the Company eliminated twelve

positions within the Operations group as a result of a

reorganization plan implemented to align the organization

with current demand based upon current economic

conditions


Nanophase - Today

• Total revenue increased to $2,010,182 for

the three months ended March 31, 2010,

compared to $1,405,158 for the same period

in 2009.

• Nanophase Technologies Corp. has a

market cap of $33.9 million; its shares were

traded at around $1.60


Nanosys

• Charles Lieber, Hongkun Park

– Harvard Chemistry Nanowires

• Paul Alivisatos –

– UC Berkeley – nanocrystals, quantum dots

• Larry Bock – biotech serial entrepreneur

Fundraising :

• Oct 2001 - $M1.65

• Feb 2002 - $M15.5

• June 2003 - $M39


Nanosys - 2003

• Bio-sensors

– functionalised inorganic semiconductor nanowires

– 1D electron flow highly sensitive and selective

• Photovoltaics

– nanocrystals in host matrix

– Solar cells as roof tiles (Matsushita contract)

• Macroelectronics – flexible low cost substrate

• Nanostructured surfaces

– Hydrophobic and anti-microbial surfaces


Nanosys

• Land Grab IP strategy – > 430 patents owned or licensed

• Licensed portfolios from world class scientists and institutions – Lawrence Berkeley - Alivisatos, McEuen

– UC Berkeley - Yang

– Harvard – Lieber, Park

– MIT - Bawendi

– Columbia - Brus

– UCLA - Heath

– Yussum, Hebrew Univ of Jerusalem – Banin

– Chicago – Guyot-Sionnest

• The Scientific Advisory Board


Nanosys – the IPO

• April 23, 2004 – Nanosys Inc. , a Palo Alto-based

developer of inorganic semiconductor

nanocrystals, filed for an initial public offering

Thursday, according to its SEC registration

statement. Merrill Lynch, Lehman Brothers, CIBC

World Markets and Needham & Co. are

underwriting the offering. The company is seeking

to raise up to $115 million on the Nasdaq market

and has applied for the symbol “NNSY.”


NANOSYS WITHDRAWS IPO

Aug. 4, 2004 – Nanosys Inc. has announced the withdrawal of its IPO. The Palo Alto, Calif.-based nanotech startup was expected to go public this week or early next week.

• "Based on adverse market conditions," the company said in a news release, "Nanosys has determined that it is not advisable at this time to proceed with the proposed offering."

• The company had proposed selling 6.25-million shares of stock and estimated the price between $15 and $17 per share.

http://www.nanosysinc.com/


• Press reports leading up to the expected week of

the IPO lambasted Nanosys for having only $3

million in revenues in 2003. It was also pointed

out that one of the few hard metrics available to

value the firm - a price-to-revenue ratio over 120 -

suggested it was a speculative investment, and that

if it performed poorly, it would undermine the

ability of other nanotechnology firms to access the

public markets.


Nanosys Raises $40 Million in a

Private Equity Financing

• Palo Alto , CA - (November 9, 2005) . Nanosys, Inc., a privately held company focused on developing nanotechnology-enabled products, today announced that the company has raised approximately $40 Million in a private equity financing. This financing was led by El Dorado Ventures and includes new investors Masters Capital, Medtronic, Inc., Wasatch Advisors, and others. In addition, there was strong participation from existing investors including Alexandria Equities, ARCH Venture Partners, CDIB BioScience Ventures, CW Group, Harris & Harris Group, Inc., In-Q-Tel, Intel Capital, H.B. Fuller Company, Lux Capital, Polaris Venture Partners, Prospect Venture Partners, UOB Hermes Asia Technology Fund, and Venrock Associates.

• Nanosys will use this funding for the ongoing development and manufacturing scale-up of products that incorporate its proprietary, inorganic nanostructures with integrated functionality for multiple industries. Current product development programs include chemical analysis chips for pharmaceutical drug research, fuel cells for portable electronics, nanostructures for displays and phased array antennas, non-volatile memory for electronic devices, and solid state lighting products.


• December 7, 2006, 4:02 pm

• Nanosys Executive Chairman Larry Bock Leaves The Company

– Posted by Eric Savitz

• Nanosys, a nanotechnology company that tried but failed to go public in 2004, has lost the services of Larry Bock, its founder and executive chairman.

• Bock, who has a long track record of creating startups in the biotech sector, officially left the company December 1. In an e-mail, Bock said he was leaving to “pursue other opportunities.” Bock has been involved in the creation of many biotech startups; that he is leaving Nanosys isn’t a good sign for the company - or for the still struggling nanotechnology sector.

• This is a little off topic, perhaps, but a good lesson in how a hot sector can quickly fizzle.

http://blogs.barrons.com/techtraderdaily/2006/12/07/nanosys-executive-chairman-larry-bock-leaves-the-company/





http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BAFF838CF%2D0177%2D49A0%2DAC12%2D0CF9A780EA0C%7D&siteid=google&dist=google

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BAFF838CF%2D0177%2D49A0%2DAC12%2D0CF9A780EA0C%7D&siteid=google&dist=google

http://www.nanosysinc.com/about/el.html#1


Nanosys 2010

• New CEO

– Jason Hartlove – ex Hewlett Packard

• deal with display manufacturer LG Innotek

(011070.Korea) to use "quantum-dot

phosphor technology" to provide "ultra-

high-color gamut displays.“

• ‘Hartlove says Nanosys can hit cash-flow

break-even this year.’


Oxonica

• Oxford University spin out – Pete Dobson,

• Inorganic Nanoparticles – Fuel additives (sunscreens (Soltan), bio-tags- (Security))

• 1999 – angel round

• 2002 - £4M investment (BASF and others)

• 2004 - £4.2M investment

• 2005 – AIM flotation – raised £7.1M at market cap of £35M

– Float price of 95.8p per share

• 2006 – acquires Nanoplex for £10M in shares


Oxonica May 2006

Market Capitalisation £60M


Oxonica

• Panmure Gordon 12 May 2006 – Initiates coverage

– Analyst issues BUY recommendation

– Price target £2.00

• May 2007 – stock price drops

• The stock crashed around 70% when it was disclosed that trials had failed to prove that Oxonica's fuel-borne catalyst Envirox -- which was supposed to save fuel and reduce emissions – had any effect on high-sulphur diesel fuel.


Market Cap £15M


Shares rally on Stagecoach validation


But worse was to come...

• Sept 2008

• A company spun out of Oxford University science

laboratories with the backing of Richard Farleigh, former

star of BBC TV's Dragons' Den, should have been paying

royalties to another company, a court has ruled.

• The court judgment comes two years of legal dispute

between Aim-listed Oxonica, where Farleigh is chairman

and owns about 20%, and Neuftec, which owns a patent

relating to a fuel additive which improves fuel efficiency.


July 2009

• Oxonica Loses High Court Appeal Against

Neuftec

• (Nanowerk News) Neuftec Limited, the proprietor

of a new, highly successful technology producing

greener diesel (the original nano-particulate

cerium oxide fuel catalyst previously sold by

Oxonica as Envirox™), announced today that

Oxonica has failed in their challenge to a High

Court ruling that upheld Neuftec’s license rights in

a dispute with Oxonica Energy Limited.


October 2009

• Oxonica Sells Oxonica Energy Limited to

Energenics

• (Nanowerk News) Oxonica plc, the UK-based

international nanomaterials group, has announced

that it has signed an agreement to sell Oxonica

Energy Limited to Energenics Holdings Pte

Limited on terms whereby there has been a full

and final settlement of all legal actions between

the Group and Neuftec Limited.

http://www.oxonica.com/


Making money from Nanotech is

not easy….

• Optiva – flat panel displays- burned $41.5M

• Advance Nanotech – cancelled contracts

and reversed into Owlstone

• NanoOpto – from nanotech company of the

year in 2006 to closure in July 2007 –

burned $50M

• Nanodynamics – announced and withdrew

IPO


Nanosphere – a success?

• Nanosphere, Inc. develops, manufactures, and markets a molecular

diagnostics platform, the Verigene System, that enables genomic and

protein testing on a single platform. Its proprietary nanoparticle

technology provides the ability to run multiple tests at the same time on

the same sample, and enables the development of various test assays to be

performed on a single platform. The company is developing diagnostic

tests for a range of medical conditions, including cancer,

neurodegenerative, cardiovascular, and infectious diseases, as well as

pharmaco-genomics or tests for personalized medicine. It is also

developing other genomic assays, including tests for cystic fibrosis and a

range of infectious diseases. In addition, the company has a program to

develop protein tests based on established biomarkers and to validate new

biomarkers, in which its ultra-sensitive protein detection technology

enables earlier detection of various diseases. Nanosphere was founded in

1998 and is headquartered in Northbrook, Illinois.


Nanosphere Raised $98M at IPO Mkt Cap $260M


Nanosphere – today

Q1 2010 Revenues ?


Observations

• Few ‘pure play’ publicly quoted nanotech companies.

• ‘Profound’ nanotech companies have still to reach the stock market – perhaps Nanosphere is one.....

• Valuations can be very high!!!

• Revenues are very low!!

• Nanotech products tend to be early in the mfg process – And therefore low value components!!

• Not many customers!!

• Flurry of start ups from 1998 to 2002 – Many are floundering or have failed

• Big companies working hard on nanotech


How will nanotech be

commercialised ?

• Nanotechnology is mainly about processes

• Licensing of process technology to large companies

• University spin outs – product based

• Transfer of trained people

• Long slow steady quiet process

• Technology commercialisation is a slow process – nanotech is pretty slow

• Only start ups call themselves nanotech companies


Nano Ethics

• ETC – The Big Down

• Wood et al – Sheffield - ESRC

– The Social and Economic Challenges of….

– Radical vs cautious evolutionists

– The governance of technical change

– The democratic deficit

– Limitations of the nation state as a regulator

• The Hype is a double edged sword

– Good for Government funding

– But public concern about some ‘imaginary’ threats

• Royal Society and Royal Academy of Engineering – toxicity of nanoparticles


• Radical vs cautious evolutionists

– Is nanotech just a continuation of scientific progress

• Cultural views of the world - the GM debate

– Is a farm a machine or part of Nature ?

– Are Nanotechnologists ‘interfering with Nature

• Do we have a choice ?

– getting left behind in the land grab

• Democratic deficits and public accountability of

scientists (Demos)

– The problem of unknowable outcomes

– The need for public engagement and approval

• Role of Lobby groups

The Nanotech Debate


Some Conclusions

• From Hype to Realism

– But reality is more prosaic – finding customers is the hard part!!

– cosmetics and tennis racquets (and socks!!)

• Intensity of nano-debate has subsided

– Drexler marginalised – nobody believes grey goo, or knows how to make molecular assemblers

– Toxicity, regulation, public accountability

– The democratic deficit-do we have the right to open pandora’s box?

• Real Nano companies are here now (finally)

– But from Lab to Stock Market takes 10 to 20 yrs

– And the real beneficiaries will be big Manufacturing companies


Thank You

commercialising emerging technologies - paul atherton · commercialising emerging technologies paul...

Documents