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1 Converting Technology to Wealth Workshop Commercialization as a Process.

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1 1 Converting Technology to Wealth Workshop Commercialization as a Process

2 2 The Jolly Model of Commercialization

3 Vijay Jolly’s Model of Technology Commercialization Source: Jolly, Vijay. 1997. From Mind to Market. 3. Incubate define Commercializ- ability 7. Promote adoption 9. Sustain commercialization 2. Mobilize Interest and endorse- ment 5. Demonstrate contextually in products and processes 4. Mobilize resource for Demo 6. Mobilize market consti- tuents 8. Mobilize complimentary assets for delivery 1. Imagine the dual (techno- market) insight Sub-Processes: Building the Value of a New Technology Tech Assessment Venture Analysis Business Plan Bridges: Mobilizing the Stakeholders Going Global – Parallels each stage/process in the model

4 4 Imagining  Competition for ideas  Very high attrition rates  Very subjective idea judgement  Technical merit or market factors decision factors  Least investment in resources

5 5 Incubating  Market for the technology is defined  Additional stakeholders are brought into the process, both internal and external  Market opportunities are estimated over time  Estimate development of other technologies  Champions and agents can be important  Greater investments in the technology begin

6 6 Demonstrating  Develop the product to a commercially feasible stage  Complimentary technologies may be important  It may be necessary to expand the scope of the technology beyond what was initially foreseen  Develop with the end commercial markets in mind

7 7 Promoting  Persuade people to adopt the technology  Ideas that fail in this stage and beyond can result in large sunk costs  Recognize barriers to promotion go beyond the particular technology  Infrastructure can be a barrier  Market acceptance is never assured

8 8 Sustaining  Sustaining commercialization is a planned activity  Sustaining requires constant improvement in price and performance  Pay attention to competitors  The key to realizing value from a technology is sustained market presence

9 9 Bridging the Subprocess  Mobilize interest of stakeholders  Mobilize resources to continue the commercialization process  Mobilize market constituents  Mobilize complimentary assets for delivery

10 10 Bridges of Commercialization  Early bridges deal more with technology transfer  Later bridges deal with commercialization and sales activities  One constant in each stage is marketing  Critical skills are reaching out, interesting others, and influencing stakeholders and customers

11 11 The Commercialization Process  Each stage is designed to have independent go/no-go decision points  Each stage requires an increasing investment  Investments should match the value created in that stage  Uncertainty is high throughout the process, and the sources of uncertainty change

12 12 Managing the Process  The value of a technology is measured by what stakeholders perceive  Each stage’s research must interest the stakeholders and manage their expectations  Killing a technology project may be necessary to focus resources  Use current information to judge the technology at each stage

13 13 Exercise (20 minutes)  At what stage of the process is your venture?  Who are key stakeholders controlling your progress?  What are the decision points for your stakeholders?

14 14 Quickloook Technology Commercialization Assessments

15 15 Session Success Factors  Understanding of how a technology assessment process can be used to identify potential commercialization partners  Understanding of how a technology assessment process can be used to focus additional R&D

16 16 Session Success Factors  Understanding of how a technology assessment process can be used to advocate support for the next stage  Knowledge of information resources for technology assessment and commercialization

17 17 Quicklook Assessments  A snapshot look  A focus on primary research  Secondary research fills in the background of the marketplace  Targets early interest and warning signals

18 18 In-Depth Assessment  A systematic attempt to foresee the consequences of commercializing a technology  A look beyond the obvious at all opportunities, possibilities, and ramifications for the enterprise

19 19 Quicklook Versus In-depth  Triage versus strategic decision  Identification of issues versus exploration of issues  More extensive use of same type of resources with in-depth assessment  Level of investment is typically much higher with in-depth

20 20  Identify potential markets.  Identify end users and potential licensees.  Contact experts and companies.  Identify the barriers and opportunities. Quicklook Research Steps

21 21  Contact inventor or associate – the best source for original intent.  Brainstorm with others – various viewpoints yield viable uses.  Identify similar products.  Skim abstracts, internet, may conduct database search. Identify Potential Markets

22 22  Contact the inventor  Contact associations  Search conference proceedings  Search Dun & Bradstreet  Search the internet Identify End Users and Potential Licensees

23 23  Call the identified contacts for their expert opinions  Emphasize invention’s potential benefits  The best contacts usually are in marketing or R&D Contact Experts and Companies

24 24  What product characteristics are most important? Why?  How large is the market for products like this?  What similar products are on the market?  What is an appropriate price range?  What would be considered proof of performance?  What are key buying factors for these types of products? Sample Questions for Contacts

25 25  Reconfirm data collected from primary research.  When asking about potential market size, offer scale examples based on an educated guess.  Usually only 7 to 10 productive calls are needed for a Quicklook study. Information Collection Tips

26 26 Identify Barriers and Opportunities  Define the hurdles that the technology must overcome  Make the case for the barriers in the body of the report  Identify market and technology barriers.  Outline potential ways to overcome the barriers

27 27 Quicklook Report Outline Technology Description  Describe the important technical attributes of the invention so that a non-expert can understand it Technology Benefits  Describe the technology’s benefits to the user, not just the features, and the problems it can solve

28 28 Quicklook Report Outline Potential Markets  What products or processes could result  Describe the market opportunities (size, demand over time, health of the industry, timeliness)  Key benefits sought by the market Market Interest  Level of interest discovered in the research  Were any potential partners identified

29 29 Development Status of Technology Describe the status of the technology (prototype, paper idea or bench model?) Intellectual Property Status Describe the IP protection and ownership status Quicklook Report Outline (continued)

30 30 Quicklook Report Outline (continued) Competing Technologies and Competitors  Describe similar technologies used to solve the problem  Describe sustainable advantages of the target technologies over competitive technologies and competing companies and their place in the market.

31 31 Quicklook Report Outline (continued) Barriers to Market Entry  Outline barriers to market entry  Outline keys to market entry Recommendations  State a go/no-go decision  Outline the next steps needed to help commercialize or license the technology

32 32 Interview Summaries  Capture the main ideas of all of the people interviewed  Note contact information and pertinent comments  It does not have to be verbatim from the conversation – capture the theme

33 33 Quicklook vs. In-depth Assessment  Early stage (imagining, incubating) vs. later stage (demonstration, promotion)  Triage vs. strategic decision  Identification of issues vs. exploration of issues  Same types of resources but In-depth assessments make much more extensive use of them

34 34 Quicklook vs. In-depth  Cost of research should be relative to the cost of the decision  Uncertainty cannot be eliminated, research can only reduce risk  Level of investment is typically an order of magnitude higher

35 35 Review Quicklook Example  Discuss key points in the example report

36 36 Screening and Ranking Technology Portfolios

37 Session Success Factors  Understanding scoring criteria for technology screening and ranking  Being able to implement a scoring system for use with technology portfolio’s from different sources

38 38 Technology Ranking  The mining phase of the project brings in technologies and disclosures  The next action is to review and ranking  Ranking the technologies helps to concentrate resources and improve the hit rate for commercialization  Good ranking schemes give benefits to both the research center and the review team

39 39 Ranking Factors  Why score and rank the technologies? –Should you give equal time and effort to all developments? –Do you have unlimited resources to devote?  How are results measured in public institutions? –Royalty income? –Partnerships? –Research agreements? –Public good? –Job creation? –Keeping the researchers happy?

40 40 Example Screening Criteria from the Federal Laboratory Consortium  Scored 1-5 (low to high) in five categories –Commercial applications identified –Development status –Ownership status (lab involvement) –Patent status –Accessibility to commercial markets and partners What goals do these criteria imply?

41 41 Typical Company Ranking Considerations  A much greater emphasis is put on the market and potential return to the company  The goal is not just a deal but a very profitable deal  Commercial value is paramount  Internal stakeholders and the ability to transfer the technology are also key

42 42 Example Company Criteria  Expected market value: 60%-70% of the ranking  Core value of the technology to the company: 30-40%  Other transferability issues inform the ranking –Stakeholder support –Personnel effort to achieve transfer –Champions

43 43 Example University Screening Criteria –Development/status –Patent status –Significant External Grant Funding Amount of External Funding –Societal Good Big Impact (Would it be a CNN story?) Can it save lives? Positive good? Economic impact, job creation –Markets Disruptive technology (market doesn’t yet exist) How many markets? Addressable Size Potential % of market invention will cover Ease of Entry/Competition –Type and Timing of Return Years to revenue Startup/Equity vs BigCo/Cash&Royalties –Ease of Transfer Inventor Involvement Market understanding Resource Cost to OTC Ownership/legal issues

44 44 Reasons for Different Ranking Schemes  Drivers and sources of income are different –Private companies depend on return from the deal –Laboratories also get income by giving payback to the taxpayer –Research companies and universities can increase proposal hit rates through commercialization –Ease of transfer is an issue for all

45 45 Exercise (20 minutes)  What are the drivers for success at your institutions, universities, or company?  What ranking criteria and weightings do these answers imply for your project?

46 46 Options For Delivering Technology To The Market High Low LicenseLicense AssignmentAssignment AllianceAlliance Joint VentureJoint Venture New VentureNew Venture Return LowHigh Risk Megantz,R. 1996

47 47 Complimentary Assets  Co-specialized assets that can make or break commercialization –Distribution channels –Specialized manufacturing capabilities –Sales force –Personnel expertise

48 48 Complimentary Assets WEAKSTRONG STRONGSTRONG WEAKWEAK Acquire Complementary Assets Strategic Alliance Joint Venture License- OUT Manufacture and Sell Sell or Abandon Technology Asset. Acquire Technology Strategic Alliance Joint Venture License – IN. Technology Assets

49 Texas A&M and Licensing  Licensing Office established in 1992  2,400+ Invention Disclosures  Prosecuted 1,500+ patent applications  Managing 900+ issued patents  750+ Licenses negotiated (1 per week)  $60+ Million in cumulative revenues  8 th in the nation in the number of license agreements generating revenue

50 Why Was Licensing Failing?  Licensing alone has minimal impact on the mission of the university –Education –Research –Public Service/Public good  University commercialization must be broader than licensing –Industry-university partnerships are key to commercialization success

51 Office of Technology Commercialization  A newly created System office offering all the services and support necessary to move A&M innovations from concept to market….. and to provide the link from market opportunity to A&M’s research resources OTC Business Development New Ventures Commercialization Services Licensing & IP Protection

52 Office of Technology Commercialization  OTC is a matchmaker between System members and commercial partners –Single point of contact for partners –OTC works across silos  OTC defines commercialization broadly –Licensing –New venture creation –Increased research flow –Assist with new research infrastructure

53 OTC and Business Development (Working with the Marketplace)  Understanding commercial needs and demands can uncover collaboration opportunities and potential funding –Offer need-driven research opportunities to the researchers  Collaboration opportunities are an outcome of researchers gaining an understanding of commercialization  Long-term commercial partnerships lead to research funding opportunities

54 Involvement in Industry Research Last year helped to secure $10+ million in direct industry funded research ◦ Industry is looking for access to know-how and capabilities ◦ OTC helped to package the university capabilities for industry ◦ OTC has been the primary negotiator on the umbrella research agreements Fill the holes the industry partner has ◦ Connections to other partners ◦ Access to other funding ◦ Framing the opportunity

55 OTC and New Venture Creation (Establishing New Business Entities)  Identify opportunities with start-up potential for equity investment  Assist with market research, business planning and partnering (Commercialization Services)  Partnering with early stage capital funds, investors, and strategic partners –Focus on the relationship and be demand driven  Provide incubation possibilities at Texas A&M or with partners –Be born big with international presence from the beginning

56 TAMUS Approach  Inventor led spin-out vs. university led spin-out –Small equity stake vs large equity stake –No investment vs cash investment –No university business involvement vs university board seats –Part time professor CEO vs full time CEO –Small university upside vs large university upside

57 What Are Spin-Out Opportunities?  Goldilocks technologies –Not developed enough to attract licensees –Developed enough to attract angels  Next steps usually involve further research at the university  Next value add step is relatively inexpensive  Large market – fundable, exit strategy

58 Opportunity Review Process  Opportunities identified by licensing staff  May be approached directly by inventors –Internal review of opportunities –Internal pitches of the vision of a company –Internal analysis of “why a spin-out”?  Analyze the technology, market, intellectual property, and internal support for a spin-out

59 Review Process  Technology status review –Development status –Next steps and cost needed to develop  Market potential –Market pull determined by direct feedback –Competition and competitive technologies –Total available market  Intellectual property –Freedom to operate  Internal support by inventor and administration

60 Spin-Out Approval Process  Develop a formal venture plan –Define the opportunity and next steps needed  Initiate CEO search –OTC network –Visiting entrepreneurs –Venture capital network  Deal structure is finalized –Typically a 10% reserve for the inventor(s)  Legal review and final deal approval

61 Commercialization Services (Information Gathering and Preparation) –Business plan development Cash raising plans –Texas Institute for Preclinical Studies Operating plans –Texas A&M Institute for Genomic Medicine Strategic plans –Bioenergy –Market research Specific products –For external companies and TAMUS inventions General strategic planning –BASF

62 Results of Defining Commercialization Broadly $130 million in new revenue in the last 36 months ◦ State – industry – university research institutes ◦ State - industry – university partnerships to attract star researchers ◦ Industry – university multi-year research programs Direct impact on the mission ◦ Education, research, public good

63 Keys to Success Top administrator support for commercialization Key staff are from industry and speak the language of business Commercialization becomes part of the project design Industry partners know their ultimate goal is important to the university as well Thinking beyond licensing to other possible business support ◦ Development funding ◦ New venture creation

64 64 Venture Capital  Can enter the deal at any stage, development, licensing, manufacturing  VCs typically receive ownership interest in the company, and perhaps controlling interest  High risk demands potential for high returns

65 65 VC Decision Factors From Mark Watson-Grandy, chairman of the UK Private Equity Funding Association:  High rate of return  A way to get the investment out of the company  The management team and people that can be trusted

66 66 VC Decision Factors  Security of the investment and control in the company  Risk identification and planning to overcome them  Parsimony of the management team  Realism about profit and returns  Quality of the business plan

67 67 Valuation Rule of Thumb How does this match with the Colombian experience?

68 68 Other VC Concepts  Overvaluing Early Stage financing is not good  Ownership dilution may lead to value increase  VC money needs an exit path  Different rounds of investment look for different multiples for return –Risk - Reward

69 69 How to find VC firms  Plug into local networks, VC meetings, technology transfer meetings  Examine secondary sources for information  - a product that lists VC firms interested in funding projects worldwide  Other sources exist at libraries

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