commercialisation at curtin september 2007 commercialisation fundamentals
TRANSCRIPT
Commercialisationat Curtin
September 2007
COMMERCIALISATION FUNDAMENTALS
PRESENTATION OVERVIEW
Commercialisation Fundamentals
1. What is it & what’s involved?
2. The Commercialisation Process
3. Intellectual Property
4. Inhibitors to the Process
5. Managing Expectations
WHAT IS COMMERCIALISATION?
• It’s a lot of things…
• Text Book Definition:“Commercialisation is the process of transforming an idea or invention into a marketable product or service, preferably one that will return a profit”
• Highly complex activity• Involves multiple streams of parallel activity• Relies on wide range of disciplines and skill sets• Requires significant resources: physical, financial, intellectual, etc.• Lengthy process (i.e. many years)• But also (potentially) highly rewarding • A key driver within the Information Economy
• Within the Research Context• An inhibitor publication…? (NO, only a delay if managed correctly)• A means of disseminating research (YES, puts new discoveries in the hands of
the public)• A means of raising profile (BECOMING SO; already an indicator of research
outcomes o/s)• A means of supporting fundamental research (YES, through development
partnerships and consulting)
COMMERCIALISATION LIFE-CYCLE
Identify Technical Challenge
Technical Solution
Proof-of-Concept
Market Analysis Intellectual Property
Strategy Development
Implement & Create Value
Review & Refine Strategy
Technology Driven
COMMERCIALISATION LIFE-CYCLE
Unmet Market Need (the Problem)
Identify Solution
Develop Product or Service
Intellectual Property
Strategy Development
Implement & Create Value
Review & Refine Strategy
Full Market Analysis
Market Driven
SHIFT IN THINKING
• Commercialisation • Typical Start-Up Progression
Market IP Business Revenue Profitability ROITechnology
SHIFT IN THINKING
• Investment Due Diligence• Focus on Return on Investment (ROI)
• Investors are inherently risk-averse
Market IP Business Revenue Profitability ROITechnology
Risk V ReturnValue
Risk
$$
Technical Market IP Commercial Corporate
TYPES OF RISK
KEY IMPERATIVES
KEY IMPERATIVES
• Resources are always limited
• IMPORTANT: Know your limitations and available resources
• Ask yourself…• What’s missing?
• Physical• Intellectual• Financial
• How will you fill the gaps?
• Time is money and the clock is ticking• Good Project Management is CRITICAL• Set clear, realistic objectives & deadlines
FOCUS is essential
1. Evaluate the Opportunity1. Technical Assessment
2. Market Assessment
3. Intellectual Property
2. Business Planning1. Strategy Development
2. Financial Analysis
3. Documentation
3. Implementation1. Licensing?
2. Raise Capital?
THE COMM’N PROCESS
Technology Market Intellectual Property
1. Summary of the Invention
2. Requirement Specification
3. Development Plan
4. Competitive Advantage
1. Customer
2. Value Proposition
3. Addressable Market
4. Industry Structure
1. Ownership
2. Novelty / Disclosure
3. Patentability
4. Enforceability
STEP 1: EVALUATION PROCESS
STEP 1: EVALUATING THE OPPORTUNITY
Ideally, conducted in parallel…
In practice, conducted in sequence…
1. Technical Assessment• Literature Review – arisen from leading edge research• Review of Product Spec – minimum features to address
market demand• R&D Plan – clear, thorough, and realistic plan for developing
the product or service• Competitive – when compared against competing solutions
and alternatives
2. Market Research & Analysis
3. Intellectual Property
STEP 1: EVALUATION PROCESS
1. Technical Assessment
2. Market Research & Analysis• Identifiable customer and clear customer roles – influencer,
buyer and user• Value Proposition – quantifiable economic benefit to the
customer• Addressable Market – segment of the market that is best
addressed by the product/service• Industry Structure – conducive to market entry (new business
or product/service)
3. Intellectual Property
STEP 1: EVALUATION PROCESS
• What is a Value Proposition?• A business or marketing statement that summarises why a
consumer should buy a product or use a service.
• Why are they important?• Convince a potential consumer or investor that your product /
service will add more value or better solve a market problem than similar offerings.
• Simply put…“will the dogs eat the dog food”
• Verified through qualitative and quantitative data generated from market research.
VALUE PROPOSITION
1. Technical Assessment
2. Market Research & Analysis
3. Intellectual Property• Ownership – clearly established btw inventors, collaborators
and funders• Novelty / Disclosure – novel in light of public domain / no prior
publications• Patentability – the critical asset in commercial negotiations• Enforceable – no value if patent does not prevent competition
STEP 1: EVALUATION PROCESS
• IP ownership issues can be a deal killer
• Act early – before value is created• Establish who will own what at the start of a R&D project NOT after
the IP has been created
• Don’t assume anything – document everything• All rights start with the inventor(s)
• IP clauses in employment contracts
• Leaves no doubt as to who owns what• R&D collaborations• Research funding agreements and contract research• Student assignment agreements
• Eases the due diligence process
IP OWNERSHIP
• A business asset that can be a source of competitive advantage
• Know-how
• Institutional
• Memory
• Skills
• Creativity
• Relationships
Human Capital
WHAT IS IP?
Intellectual Assets
• Documents
• Drawings
• Programs
• Data
• Inventions
• Processes
Intellectual Property
• Patents
• Copyright
• Trade Marks
• Trade Secrets
• Registered Designs
• Plant Breeders Rights
• A granted patent does not guarantee commercial success • There must be a real market opportunity!• It’s not what you’ve got – it’s how you use it…• Overall IP Strategy is critical
US Patent 3,216,243 “Centrifugal Birthing Device”
IP STRATEGY
• To provide a competitive advantage the IP Strategy must be aligned with and complement the business plan
• Two common misalignments:• Timing – filing for registered rights too early or too late• Content – the registered rights don’t cover the value proposition
• Know the strengths and weaknesses of your IP position• No one likes surprises, particularly investors• Patentability and Freedom to Operate are two different things• Know the literature and patents relevant to your invention and
what makes your invention different – forewarned is forearmed.
IP STRATEGY, cont…
1. Strategy Development• Market Analysis – market characteristics & industry structure • Business Model & Revenue Model – how the business will
operate and make money• Market Entry and Growth Strategy – how the business or
product/service will enter the market• Intellectual Property Strategy – how the IP will be developed
and exploited commercially
2. Planning
3. Financial Plan
4. Implementing the Plan
STEP 2: STRATEGY & PLANNING
1. Strategy Development
2. Planning• Product Development Plan • Manufacturing & Operations Plan• Marketing Plan• Human Resources & Management Plan• Financial Plan
3. Financial Plan
4. Implementing the Plan
STEP 2: STRATEGY & PLANNING
WHAT IS A BP?
• NOT just a document
• A means of UNIFYING the Business and its Stakeholders• Goals, Direction & Strategy
• A means of COMMUNICATING to Stakeholders the value & potential of the Business
• An iterative PROCESS for:• Evaluating a Market Opportunity• Identifying Risks associated with the Opportunity• Developing Strategies to remove or mitigate those Risks• Developing Strategies for Maximising Returns to Shareholders• Determining a Plan for realising / capitalising on the Opportunity• Evaluating performance and identifying New Opportunities
1. Strategy Development
2. Business Planning
3. Financial Plan• Needs Analysis – what resources (physical, intellectual,
financial) are required to implement the business plan• Critical Timing – analysis of the schedule for roll-out and other
key influencing events• Identify Value Inflection Points – removal of key risks that result
in significant uplift in value• Structure the Deal – determine credible valuation and terms for
negotiation
4. Implementing the Plan
STEP 2: STRATEGY & PLANNING
VALUE INFLECTION POINTS
• Value remains steady until key risks are removed then jumps…
Value
Risk
$$
Technical Market IP Commercial Corporate
1. Strategy Development
2. Planning
3. Financial Plan
4. Implementing the Plan• Licensing – negotiating the right to develop; manufacture;
distribute; market; use…• Capital Attraction – identifying investors and securing investment
on the best possible terms• Value Creation – utilise investment to implement plan and create
value• Harvest Value – liquidity or exit for investors through listing on
public market or trade sale
STEP 2: STRATEGY & PLANNING
THE DEAL & IM
• Structuring the Deal• The Valuation – “What is this opportunity worth today”• Business Plan establishes and justifies the valuation and clearly sets
out the Use of Funds• Equity on Offer – valuation and funds required determine % of equity
offered in return for the investment• Funding Strategy:
• how much investment is needed at each stage of the business’ growth;• where will the funds come from; and • what is the uplift for the investor at each subsequent stage?
• Terms & conditions? … will depend on the source of the Capital
• The Information Memorandum• No investor wants to read a Business Plan• IM: detailed Executive Summary and Offering• Main objective: Capture their interest
%4$
INHIBITORS
• BEWARE INVENTOR SYNDROME!!!
• Control Issues1. Technical Control 2. Managerial Control3. Corporate Control
• The Overzealous Inventor• Inventing for inventing’s sake• ‘Feature Creep’
• Real-Life Example• Inventor feared equity dilution by investors• Instead, continued in his comfort zone – refined & added features• Patent clock never stops ticking• Competitive Advantage evaporated = investors / licensees lost interest
• Take home message = TIMING IS CRITICAL
MANAGING EXPECTATIONS
• Dilution is not necessarily a bad thing• Focus on growing the pie -> decrease risk = increased value
• Other people’s money: With capital comes responsibility • Investors will look for protections, e.g. Board representation,
preference shares, preferential returns & special powers
$50k
100%
$250k
75%
$500k
50%
$1m
12.5%
MANAGING EXPECTATIONS
• Keeping it ‘Real’ = Knowing Yourself
• Personal Goals• Why are you doing this?
• Technical interest / passion• Financial gain• Profile
• Know your Limitations • Abilities, Skills & (most importantly) Limitations• ‘Knowing what you don’t know’
• Expectations• What do you hope to achieve? e.g. short term vs long term
• What role do you see yourself going forward?• Identify a personal exit strategy
• Recognising when to let go • Knowing when to shoot the dog – ‘Old Yella’.
IN SUMMARY…
• What have we learned…?
• Think like an Investor• What would it take for you to invest?• A long process but keep the end game in mind
• It’s a Race!• Time is money - Focus is critical• Address real market needs• Strategy and planning based thorough market analysis
• Beware the Pitfalls• We’re all human, but don’t grow too emotionally attached• Focus on growing the pie• Know thyself and manage your expectations – seek information
and talk to others that have ‘been there done that’