Technology Commercialization “ Valuing the Idea” Laura J. Kilcrease [email_address] 6300 Bridgepoint Parkway Building 1, Suite 500 Austin, Texas 78730 (512) 795-5821

Founding Director of the Austin Technology Incubator ATI dominant catalyst for Austin’s 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

Founding Director of the Austin Technology Incubator

ATI dominant catalyst for Austin’s 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

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

Valuing the Idea 1 - What technology gets the attention?

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

Valuing The Idea What technology should get the attention?

The Fundamental Problem of Technology Commercialization : 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 .

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 .

It’s the market!

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

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” Incremental Revolutionary Weak Moderate Strong Early Mid Late

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”

Incremental

Revolutionary

Weak

Moderate

Strong

Early

Mid

Late

Technology Assessment “ Me Too” Development : Follow-on technologies to the state of the art that represent little fundamental change. (Ex: Microsoft’s 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)

“ Me Too” Development : Follow-on technologies to the state of the art that represent little fundamental change. (Ex: Microsoft’s 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)

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 You’re not likely to join the “Big 3” in automaking or semiconductor equipment manufacturing More on this later...

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

You’re not likely to join the “Big 3” in automaking or semiconductor equipment manufacturing

More on this later...

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

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

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

The Case to Commercialize The University/Laboratory/Institute’s 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

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

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 institution’s licensing group Licenses to start-ups can - and do - work, but it is often a long and difficult process »»

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 institution’s licensing group

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

Can we make a business out of this?

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?

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?

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 Technologist The Venture Capitalist

1) The Technology

2) Personnel (Technical)

3) The Market

4) Personnel (Business)

1) Personnel (Business)

2) Personnel (Technical)

3) The Market

4) The Technology

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

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

Business model

Alliance partners

Customers

People

Technology

All the Pieces 1, Summary: So it’s 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?

Technology has a lower value than the people running the company

How experienced are they?

Do they already have a customer?

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

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!

Two central questions that have to be answered for any investor, major customer or business partner:

All the Pieces 3 All that being said…You can’t have a technology company without technology Well-prepared licensing agreements Protection for existing corporate Intellectual Property

All that being said…You can’t have a technology company without technology

Well-prepared licensing agreements

Protection for existing corporate Intellectual Property

Industry/Competitive Analysis Direct Competitors Customers Suppliers New Entrants Substitutes Taken from: Michael Porter Competitive Strategy

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 Microsoft’s Internet Explorer: New Entrant threat in the Browser wars Coca-Cola: High threat of product Substitution

Wal-Mart: High Customer power relative to its suppliers

Intel: High Supplier power relative to the computer manufacturers

Microsoft’s Internet Explorer: New Entrant threat in the Browser wars

Coca-Cola: High threat of product Substitution

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

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