1. Research based innovation Dr. Haakon Bryhni (haakon@bryhni.com)

2. Overview Research-based innovation and Disruptive technologies Commercialization of research-based innovation –Process –Organization –Initial funding –Patents –Sell your prototypes! Sales integrated with development R&D funding –National innovation capital –National R&D capital –European research framework programs –US-based research funding –Venture capital Use-case 1: Birdstep Technology Use-case 2: Nunatak AS and how we work to commercialize research- based innovation

3. Background and experience Master of Science (Siv.ing), Telecom systems, NTNU 1992 Research Assistant, FFI 1992-93 Guest Researcher, Apple Computer, California, 1994-95 PhD Computer Science (Dr. scient), University of Oslo, 1993-98 CEO, Advanced Communication Technology AS, 1998-2000 Associate Professor, University of Oslo, Informatics, 1998+ Partner, Nunatak AS 2000+ CTO, Birdstep Technology ASA, 2000+ Commercial experience –Established 8 IT companies over the last 15 years –Roles as CEO, CTO, consultant, advisor, board member and seed capital investor.

4. Research-based innovation should look for Disruptive technologies Research looks ahead – easier to identify a technology shift Significant time/technology advantage is needed to establish new markets with new technology Research-based innovation is not traditional academic research –New skills are required (sales, marketing, VC,...) –Patenting before with IPR sharing –Prototyping –Product packaging –Companies as the nucleus for innovation Examples of Distruptive technologies in the ICT sector: –HyperText Transfer Protocol (web) –Peer-to-peer technology (e.g. Napster...) –IP as Telecom core technology –WLAN and other unlicenced radio technologies –Mobility –Security –Open Standards (e.g IETF, Java,...) –Open Source (e.g. Linux)

5. Business idea development 1.Select area 2.Study the customers 3.How to create value for the customer 4.Constrain the market / get focus 5.Understand competition 6.Business plan Classical error 1 – Too high focus on own technology / ideas – forget customer requirements and needs

6. Business idea requirements Start with comparative advantage E.g. Business, market or technology knowledge Spend time understandng the customers and their business Studies Work experience Prototypes => Ideas Meet potential customers Demo Targeted seminars Undersand customer business process  Understanding of value for customer, your ”Value Proposition” Establishment and understanding of comparative advantages Better performance Lower cost Simpler Own IPR => Good understanding of your position

7. What is a good business idea? A new technology is not a business idea The word “business idea” contains nothing about technology or product. An idea about a business, a market Example: –To deliver a better method for securing data to customers that need security, and agrees that the new method gives a substantial improvement to same cost without replacing existing infrastructure is a business idea.

8. Process for realizing business idea 1.Business plan 2.Financing 3.Focused development 4.IPR protection 5.Sale of prototype 6.Improvements 7.Sell projects with product 8.Improve product 9.Sell standard product Classical error 4 – Wait for the breakthrough Clasiscal error 3 - IPR not protected Classical error 2 - Spend all resources to raise funding

9. The startup enterprise as foundation for research based innovation Idea Products and Revenue Patent Commercialization Market studies Prototype First sales Markeds- føring Projects Improvements Competition analysis Supporting Research Product packaging Repeated sales Financing Customer installation The startup enterprise as tool for research-based innovation University education IPR ownership, supporting R&D, Knowledge ”production”, students Partners National R&D funding National Startup Funding Patent EU R&D funding

10. Startup funding environment Customer e.g. 4G operator R&D EU Startup company University Venture Capital Dissemination Journals, Conferences National Startup capital SND IFU/OFU, Etablererstipend, SkatteFUNN, etc. End users Partners Comp- etitors R&D units National Research funding Partners Comp- etitors R&D units

11. Startup funding environment Customer e.g. 4G operator R&D EU Startup company University Venture Capital Dissemination Journals, Conferences National Startup capital SND IFU/OFU, Etablererstipend, SkatteFUNN, etc. Cost Squeeze + R&D support - Low income potential - IPR sharing + Supporting research - No income - IPR sharing End users Partners Comp- etitors R&D units + Capital + International network - Anti-dillution clauses - Options - Controlling position National Research funding Partners Comp- etitors R&D units + Supporting research + International network - Admin overhead - IPR sharing

12. ”Friends&Family” ”Industry Angels” or national startup capital Venture Capital Round 1 Venture Capital Round 2 The long run to steady state Challenge Time Year 1 Year 2Year 3 Motivation Solution approved, customer delays purchase Sales cycle is longer than expected Startup euphoria First contract Customer see sufficient demand for the solution, places volume order Expensive sales

13. The entrepreneur should be in focus Many actors would like control and influence national startup capital –Research parks (Real Estate, FORNY, SIVA) –Universities (base funding, NFR, EU) –Venture Capitalists (EFFEKT, Argentum,...) –Research institutions (NFR, EU, consultant business) –Existing industries (Existing cashflow, SkatteFUNN,..) –Political goals (e.g. SkatteFUNN to reach OECD targets) Critical check: Is the entrepreneur commercially oriented? Protect and support the entrepreneur –Knowledge (Entrepreneurship as an academic study) –Grants (e.g. Commercial post-doc grant) –IPR (patents, designs, source code, prototypes, documentation) –Startup services (office, administration, legal, etc) –Supporting research from University and R&D institutions –National startup funding projects –National and EU research funding –Use people in the network as advisors, but never attach people that also control the national startup funding, to avoid double hatting Commercial focus from day one: –Sell your own services and products –Sell your prototypes –Commercialization competency within the company, cannot be outsourced!