1. Slide 1 MaRS ` Business Development and Entrepreneurship Basics Presented by: Tony Redpath Vice President, Partner Programs MaRS Discovery District 7 October 2008

2. Slide 2 MaRS Four basic questions: What does my business look like ? What resources do I need? How do I fit into the rest of the world? What is my business model?

3. Slide 3 MaRS Technology Commercialization KNOWLEDGE Universities / Hospitals Government Labs PATENTS (Novel, Useful, Non-Obvious) Marketplace Concept R & D Project Lab Prototype Engineering Project Engineering Prototype ProductionSales Company I Concept R & D Project Lab Prototype Engineering Project Engineering Prototype Production Sales Company II

4. Slide 4 MaRS Business types - Consulting You provide advice, based on your specialized knowledge

5. Slide 5 MaRS Technology Commercialization KNOWLEDGE Universities / Hospitals Government Labs PATENTS (Novel, Useful, Non-Obvious) Marketplace Concept R & D Project Lab Prototype Engineering Project Engineering Prototype ProductionSales Company I Concept R & D Project Lab Prototype Engineering Project Engineering Prototype Production Sales Company II

6. Slide 6 MaRS Consulting …. Cont’d Can start as a one-person business May have a technical, management, or marketing focus Often stay small, but consulting engineering firms can be large (e.g Hatch Associates) Often operate via a virtual network of consultants Need liability insurance Capital costs low

7. Slide 7 MaRS Business types - Consulting Q: How much should I charge? * A: What is the client’s alternative cost?

8. Slide 8 MaRS Business types: Service You provide a service to existing businesses

9. Slide 9 MaRS Technology Commercialization KNOWLEDGE Universities / Hospitals Government Labs PATENTS (Novel, Useful, Non-Obvious) Marketplace Concept R & D Project Lab Prototype Engineering Project Engineering Prototype ProductionSales Company I Concept R & D Project Lab Prototype Engineering Project Engineering Prototype Production Sales Company II

10. Slide 10 MaRS Service business…. Cont’d Technical service businesses often provide analytical services May provide custom clinical trials Classic IT service providers Can be very small or very large Capital costs can be quite high

11. Slide 11 MaRS Business types: Product You have real article ( pharmaceutical compound, medical device, consumer product….) that you wish to take to the market

12. Slide 12 MaRS Technology Commercialization KNOWLEDGE Universities / Hospitals Government Labs PATENTS (Novel, Useful, Non-Obvious) Marketplace Concept R & D Project Lab Prototype Engineering Project Engineering Prototype ProductionSales Company I Concept R & D Project Lab Prototype Engineering Project Engineering Prototype Production Sales Company II

13. Slide 13 MaRS Product …. Cont’d Examples range from cottage industry craft producers up to General Motors Capital needs vary widely, but there will usually be a need for at least working capital “Mercedes in the driveway” vs. high growth

14. Slide 14 MaRS Types of Financing Debt  You borrow from someone, using some asset as security, an amount that will have to be repaid Equity  You sell a piece of your venture to someone in exchange for an investment in the venture Bootstrap  You self-fund by using the profits of your business to grow the business

15. Slide 15 MaRS The Lemonade Stand Example Assume you’re 8 years old and you need $20 to set up a lemonade stand Revenues Debt 50:50 Equity Rain $10 lender loses $10 partner loses $15 entrepreneur gets $0 entrepreneur gets $5 Cloud $30 lender is even partner loses $5 entrepreneur gets $10 entrepreneur gets $15 Sun $50 lender is even partner makes $5 entrepreneur gets $30 entrepreneur gets $25

16. Slide 16 MaRS Sources of Debt Financing You – your mortgage You – your credit cards The 3 F’s – Friends, Family and Fools Banks  Can lend to you (e.g. line of credit) or to your venture  Lend against assets or receivables Venture Debt funds

17. Slide 17 MaRS Sources of Equity Financing The 3F’s again – Friends, Family and Fools Angels (aka high net worth individuals)  Generally like to invest in areas that they have worked in or are comfortable with  Can add valuable hands-on experience  http://www.angelinvestor.ca/ http://www.angelinvestor.ca/  http://www.mapleleafangels.com/186103_186104.html Venture Capital Funds  Different funds invest at different stages in the growth of a company  http://www.cvca.ca/

18. Slide 18 MaRS Special Financing Sources Proof of Principle / Idea to Innovation  http://www.researchnet- recherchenet.ca/rnr16/viewOpportunityDetails.do?pro g=205&view=search&terms=proof+of+principle&org= CIHR&type=AND&resultCount=25NSERC Idea to Innovation (I2I) Program  http://www.nserc.ca/professors_e.asp?nav=profnav&l bi=b4 NRC - IRAP  http://irap-pari.nrc-cnrc.gc.ca/main_e.html

19. Slide 19 MaRS The Financing Life Cycle Risk Sales Investment Concept Start-up Growth Expansion Grants Venture Capital Public Markets Seed Funds Angels

20. Slide 20 MaRS The Financing Life Cycle Risk Sales Investment Concept Start-up Growth Expansion Grants Venture Capital Public Markets Seed Funds Angels

21. Slide 21 MaRS The Financing Life Cycle Risk Sales Investment: Self-finance Concept Start-up Growth Expansion Grants

22. Slide 22 MaRS Stage of Development Impact & Application Sustainable Advantage What do Financing Sources Look For ? Technology Risk

23. Slide 23 MaRS Technology Risks Stage of Development (concept  proof of concept  prototype of product) Product development path (costs and “risks”) Technology impact Scope of application Competitive technologies Disruptive technologies Reliance on infrastructure Ease of scale-up, technology transfer, copy Manufacturability and costs

24. Slide 24 MaRS IP Risk Market Risk Stage of Development Impact & Application Sustainable Advantage Reputation / Leadership Commitment Market Knowledge Experience Due Diligence and Valuation Criteria Size and Growth Dynamics Competition Customers Distribution Channels Nature and Scope IP Form Ownership Enforceability IP Building Freedom to Operate Technology Risk Execution Risk

25. Slide 25 MaRS Intellectual Property Risks Nature of the invention Scope of the invention IP form: Patent, know-how, software Ownership of IP - Lingering rights of funding agencies or students Level of IP protection – NA, worldwide Competitive research activity, patent activity, availability of Licensees Prior disclosure - publications or conferences Enforceability

26. Slide 26 MaRS Market Risks Market size, dynamics and growth potential Route to market, access, scalability USPs of the products or services Nature of the customers Lead customers Market or industry drivers Competitive landscape and profit margins Regulatory barriers or opportunities

27. Slide 27 MaRS Execution Risk Management vision for the company Management leadership ability Commitment and drive Recognized technology expertise Knowledge of the market, networks Skills required to move the technology through all stages of development and product launch Reputation in the marketplace

28. Slide 28 MaRS Building a Business Model Where do you fit in the ecosystem? What do you enable (not just what do you do)? How much money is on the table? THINK BIG!