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Commercialisation at Curtin September 2007 COMMERCIALISATION FUNDAMENTALS.

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Presentation on theme: "Commercialisation at Curtin September 2007 COMMERCIALISATION FUNDAMENTALS."— Presentation transcript:

1 Commercialisation at Curtin September 2007 COMMERCIALISATION FUNDAMENTALS

2 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

3 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)

4 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

5 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

6 SHIFT IN THINKING Commercialisation Typical Start-Up Progression MarketIPBusinessRevenueProfitabilityROITechnology

7 SHIFT IN THINKING Investment Due Diligence Focus on Return on Investment (ROI) Investors are inherently risk-averse MarketIPBusinessRevenueProfitabilityROITechnology

8 Risk V Return Value Risk $$ TechnicalMarketIPCommercialCorporate TYPES OF RISK KEY IMPERATIVES

9 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

10 1.Evaluate the Opportunity 1.Technical Assessment 2.Market Assessment 3.Intellectual Property 2.Business Planning 1.Strategy Development 2.Financial Analysis 3.Documentation 3.Implementation 1.Licensing? 2.Raise Capital? THE COMM’N PROCESS

11 TechnologyMarketIntellectual 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…

12 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

13 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

14 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

15 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

16 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

17 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

18 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

19 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…

20 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

21 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

22 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

23 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

24 VALUE INFLECTION POINTS Value remains steady until key risks are removed then jumps… Value Risk $$ TechnicalMarketIPCommercialCorporate

25 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

26 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$

27 INHIBITORS BEWARE INVENTOR SYNDROME!!! Control Issues 1.Technical Control 2.Managerial Control 3.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

28 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%

29 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’.

30 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’

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