1. Technology Commercialization Valuing the Idea Laura J. Kilcrease laura@tritonventures.com 6300 Bridgepoint Parkway Building 1, Suite 500 Austin, Texas 78730 (512) 795-5821

2. Founding Director of the Austin Technology Incubator ATI dominant catalyst for Austins transition to a technology center Corporate Experience: M&A for Fortune 500 Companies Entrepreneurial Experience: Instrumental in the launching of 120 Austin start-ups Unparalleled network People Laura Kilcrease

3. Valuing The Idea Valuing the Idea 1 - What technology gets the attention? Valuing the Idea 2 - Can we make a business out of this?

4. Valuing The Idea What technology should get the attention?

5. The Fundamental Problem of Technology Commercialization: 1.All technology is developed to satisfy a need (necessity really is the mother of invention). 2. The need the technology satisfies may not be one people are willing to pay for.

6. Its the market!

7. Build a Commercialization Process The Three Phases of Technology Commercialization Information Gathering Opportunity AnalysisImplementation Technology Assessment Licensing/ Startup Technology Identification Market Assessment Preliminary Technology Ranking

8. Technology Ranking: Criteria Technology Assessment: How does the technology compare to state of the art? Market Opportunity: Is it a large, growing market with a current demand? Stage of Technology: How imminent is the opportunity? How much development, regulatory approval is still required? Me Too Me Too Incremental Incremental Revolutionary Revolutionary Me Too Me Too Incremental Incremental Revolutionary Revolutionary Weak Weak Moderate Moderate Strong Strong Weak Weak Moderate Moderate Strong Strong Early Early Mid Mid Late Late Early Early Mid Mid Late Late

9. Technology Assessment Me Too Development : Follow-on technologies to the state of the art that represent little fundamental change. (Ex: Microsofts Internet Explorer) Incremental Improvement: Technology that represents a next logical step in the evolution of a product or process. (Ex: The Pentium processor from Intel) Revolutionary Breakthrough: A new - often unforeseen - approach representing a quantum leap beyond conventional technologies. (Ex: The Integrated Circuit)

10. Market Opportunity Factors Affecting the Strength of a market: Size For substantial financial investment, needs to be $500M+ Expected growth over next 5-10 years Better be positive (No buggy whip technologies) Potential Customer Base Be wary of something that only the government will buy Market Share Distribution/Competitive Environment Youre not likely to join the Big 3 in automaking or semiconductor equipment manufacturing More on this later...

11. Stage of Technology Time to Market (numbers vary by industry): Late: <18 months Mid: 18 months - 36 months Early: >3 years Not all hurdles to market entry are technological: Regulatory approval (EPA, FDA, OSHA) Industry Certification

12. Technology Ranking: Matrix Diagram Prioritize: Focus on technologies with best chances of success Late Stage Mid Stage Early Stage Market Technology

13. The Case to Commercialize The University/Laboratory/Institutes Perspective Market potential for the technology Market may be identified by only the technologist Presence of an industry partner More common: License to an established company Less common: License to a start-up

14. The Case to Commercialize Drawbacks to licensing to a start-up Less cash for up-front fees Equity is an option, but not all institutions can take an equity stake in a start-up Much higher business risk Less experience (generally) in working with an institutions licensing group Licenses to start-ups can - and do - work, but it is often a long and difficult process »»

15. Valuing the Idea 2 Can we make a business out of this?

16. Can We Make a Business... Do we have the pieces? Business acumen Product development & manufacturing competencies Technology licenses Is it a business or just a product? Is the market appropriate for a start- up?

17. All the Pieces 1 Two views of what it takes to start a company 1) The Technology 2) Personnel (Technical) 3) The Market 4) Personnel (Business) 1) Personnel (Business) 2) Personnel (Technical) 3) The Market 4) The Technology The TechnologistThe Venture Capitalist

18. All the Pieces 1, (Cont.) I invest in people, not ideas. - Arthur Rock, famed venture capitalist who backed Intel and Apple Computer

19. All the Pieces 1, Summary: What does a VC value? Business model Alliance partners Customers People Technology

20. All the Pieces 1, Summary: So its not just the technology! Technology has a lower value than the people running the company How experienced are they? Do they already have a customer?

21. All the Pieces 1, Summary: Risk vs. Value of Investment

22. All the Pieces 2 Two central questions that have to be answered for any investor, major customer or business partner: 1) Can you make it? 2) Can you sell it? Each is equally important!

23. All the Pieces 3 All that being said…You cant have a technology company without technology Well-prepared licensing agreements Protection for existing corporate Intellectual Property

24. Industry/Competitive Analysis Direct Competitors CustomersSuppliers New Entrants Substitutes Taken from: Michael Porter Competitive Strategy Taken from: Michael Porter Competitive Strategy

25. Industry/Competitive Analysis 2 Examples of company threats Wal-Mart: High Customer power relative to its suppliers Intel: High Supplier power relative to the computer manufacturers Microsofts Internet Explorer: New Entrant threat in the Browser wars Coca-Cola: High threat of product Substitution

26. Triton Ventures, LLC Triton Ventures is an Austin, Texas-based venture capital fund specializing in high technology spin- off companies and other promising startups. Triton Ventures, LLC 6801 N. Capital of Texas Highway Building 2, Suite 225 Austin, Texas 78731 USA http://www.tritonventures.com