tm&i 2010 VIII.1

technology management & innovation

technology start-up companies: sources of funding & the business

plan

R&D product

patent technology transfer

spin-out

start-up

VC

NPD

Angel

business plan

INNOVATION

incubator

the background & history of the

company

the investment required

the technology and

IP position

the market

potential

the product or service offering

the opportunity

business plan

Innovation & R&D

NPD

brain-storm sessions

Technology Transfer & Exploitation of IP

Intellectual property

Project Management

patent datebase searches&analysis

Gantt chart cash-flow spreadsheet

summary BPs & TM&I LECTURES

Intellectual property

technology start-up/spin-out companies sources of start-up and early-stage

finance the business plan

tm&i 2010 VII.4

tm&i 2010 VII.5

inventorsinvestors

new company

$ IP

new product or service

university

private inventors

small company

spin-out company

innovation fund

bank

angel

VC

large company

consortium of any of the above

tm&i 2010 VII.6

raising financestart-up finance

seed capital = the $ capital needed to “seed” a new company or business,early-stage funding = investment needed for a new company to survive the “early” phase of growth and initial product development (typ. 0 – 5 yrs)

how does it work?- an investor’s decision to provide seed or early-stage capital is usually based on their assessment of the IP and the business plan and hence the “opportunity”- IP position and business plan must both therefore be strong- there may not be an existing product or service in the market with which to compare

who might invest?- public innovation funds, banks, business angels, venture capital firms (VCs), larger companies

innovation funds funds are usually in the form of “soft” loans from the

government (i.e. no interest, no repayment, but they do expect

results!)

directed at existing small and medium sized companies (SMEs) and new start-ups

usually for short periods and relatively small sums (typically 3 – 12 months, < $50000)

funds mostly provided for proof-of-principle demonstrator of a new product or process and/or market research

tm&i 2010 VII.7

http://www.step.uniri.hr/poc-program-provjere-inovativnog-koncepta/

bank loan

typical range $5000 - $50000 for a new start-up company (but can be much more for an established company)

loan amount is repayable with interest in monthly installments

terms from 1 to 5 years typically

loan usually requires collateral “guarantee” (often the directors/founders of a start-up will offer their

personal property, e.g. house/apartment as guarantee)

tm&i 2010 VII.8

http://www.rba.hr/my/bank/services/category.jsp?product_type=Craftsman&path=/usluge/financiranje&language=HR

business angels• seasoned business professionals/individuals• have money to invest in exchange for a “share” in the

company (usually 15 – 25%)• often involve themselves in day-to-day running of the

company• typical angel will invest between $20k - $1M• can have more than one angel investor, in a consortium• angels get their initial investment back plus more when

they sell their share later, when the business has grown and is worth more

• unlike a bank loan, if the company fails, the angels loose their money – which is why angels take a close interest in how the company is run!

tm&i 2010 VII.9

http://www.crane.ini.hr/

venture capital funds (VCs)• VC’s are professional investment firms specialised in

funding high-risk ventures, especially early-stage high-tech companies

• investment typically at least $5M and upwards• usually take a controlling/majority stake (51%+ of the

shares) and put a director on the board• typically want a return on investment in 5 years and will

drive the company to achieve a trade sale (sell the company to another company) or an IPO (initial public share offering, i.e. floatation on the stock exchange)

• typically seek return of 10 x original investment!

tm&i 2010 VII.10

http://www.cvca.hr/home/

large corporations• many large corporations have investment funds that are

operated like independent VC funds or banks• will invest in early-stage companies of interest to them

e.g. which have relevant technology• exit strategy (how they get their money back) depends

on the specific case, but could be by:• trade sale (sell the company to another company),• IPO (floatation on the stock exchange),• retain the company because it has become a very

profitable business!

tm&i 2010 VII.11

http://www.gelending.com/servlets/ActionServlet?action=ShowGEEquityHomePage

early-stage funding cycles

tm&i 2010 VII.12

time

valueof

business

* start-up companies often avoid taking bank loans because of the need to make regular cash repayments

the investor’s decision to provide capital is usually based on their assessment of the IP and the business plan and hence the “opportunity”

tm&i 2010 VII.13

the business plan

tm&i 2010 VII.14

http://web.sba.gov/busplantemplate/BizPlanStart.cfm

business plan

what is it?• a written and/or slide-show presentation of your

commercial idea for a new business

what’s it used for?• to attract the attention of potential investors• as a reference document to help keep the company

focussed in its early stages

tm&i 2010 VII.15

what’s in a business plan?

the opportunitythe product or service offeringthe market potentialthe technology and IP positionthe investment requiredthe background & history of the company

A typed & bound business plan should have a cover page, an executive summary, and appendices of supporting data.

tm&i 2010 VII.16

opportunity

o the business opportunity for the new product/process

• background on the business sector the company will operate in • (e.g. medical diagnostics, tests for HIV)

• current practice in that sector• (e.g. blood test at laboratory)

• limitations of the current practice• (e.g. inconvenient, slow, expensive)

• the “unmet need” which the new business will address• (e.g. saliva test at clinic with result in 5 minutes)

You should not describe your new product/process here, only what it will do

tm&i 2010 VII.17

new product/process or service offering

o detailed description of the form and function of the new product, process or service which the business will develop

• storyboards and/or graphics and pictures will help sell the product idea

• emphasise advantages compared to existing technology or practice

• “new-to-the-world” products must be clearly explained• considers the product lifecycle and future product roll-out

tm&i 2010 VII.18

market potential

o describes the nature and estimated market size for the new product, and who the main competitors are

• the target customers• the competition• market share the new company expects to achieve with time

• (e.g. 1% in 1yr, 5% in 2 yrs, 50% …. etc.)

• and how?• (better product, lower price, better service offering , new-to-the-world

product etc …)

• how many units per annum and at what price the product will sell at

• consider the product lifecycle, and future product launches if appropriate

tm&i 2010 VII.19

technology and IP position

o describes the underlying science and technology of the new product, and the IP that protects it

• basic scientific and technology principles• existing IP coverage and ownership, and any licenses

needed• the company R&D strategy• the company IP strategy

• consider different forms of IP for corporate and product “branding”, such as trademarks (e.g. EZee-HIVee test)

tm&i 2010 VII.20

investment required

o an estimate of the cash investment the business requires for early stage funding, and the sources and timing for that funding

• cash-flow projection table and graph (usually for at least 3 years ahead)

• indicates required funding against company’s objective (e.g. to completion of NPD cycle, to first product launch, to trade sale or IPO, etc.)

the cash flow projection should cover business costs over the required period, including salaries, capital equipment, R&D & IP costs, overheads, NPD costs, manufacturing costs, sales & marketing etc

tm&i 2010 VII.21

background & history of the company

• company name, legal status (e.g. d.o.o.) and registered address• share holdings (who owns shares) and names of any other

investors• mission statement• company history (e.g. university spin-out)• names and CVs of founders, directors and principle employees

and scientific advisors• names and addresses of the company’s bank, accountant, &

lawyers• any other relevant information

tm&i 2010 VII.22

team assignment (mini-project)

• your team is forming a high-tech start-up company based on at least one of your four patents

• your team needs to• prepare a 20 minute slideshow of its business plan,• present the slideshow as if to “potential investors”,• each team member is responsible for a different part of the

plan and should expect to present slides for about 5 minutes,• be prepared to answer questions, as a team

• presentations will be held in January 2012

• The presentations for the mini-projects are part of the formal examination for tm&i, and are compulsory.

tm&i 2010 VII.23