Entrepreneurship 101: Different Forms of Entrepreneurship

Slide 2: ` Different Forms of Entrepreneurship Presented by: Tony Redpath Business Advisor, MaRS Discovery District 15 November 2007 Slide 2 MaRS

Slide 3: Three basic questions:  What does my business look like ?  What resources do I need?  How do I fit into the rest of the world? Slide 3 MaRS

Slide 4: Overview  Different types of business  Where do they fit into the rest of the world  How do you finance your business  What factors do investors look at Slide 4 MaRS

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

Slide 6: Business types - Consulting  You provide advice, based on your specialized knowledge Slide 6 MaRS

Slide 8: Consulting …. Cont’d  Can start as a one-person business  Mayhave a technical, management, or marketing focus  Oftenstay small, but consulting engineering firms can be large (e.g Hatch Associates)  Oftenoperate via a virtual network of consultants  Need liability insurance  Capital costs low Slide 8 MaRS

Slide 9: Business types - Consulting  Q: How much should I charge? * A: What is the client’s alternative cost? Slide 9 MaRS

Slide 10: Business types: Service  You provide a service to existing businesses Slide 10 MaRS

Slide 12: 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 Slide 12 MaRS

Slide 13: Business types: Product  Youhave real article ( pharmaceutical compound, medical device, consumer product….) that you wish to take to the market Slide 13 MaRS

Slide 15: 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 Slide 15 MaRS

Slide 16: 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 Slide 16 MaRS

Slide 17: 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 Slide 17 MaRS

Slide 18: 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 Slide 18 MaRS

Slide 19: 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.mapleleafangels.com/186103_186104.html  Venture Capital Funds  Different funds invest at different stages in the growth of a company  http://www.cvca.ca/ Slide 19 MaRS

Slide 20: 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 Slide 20 MaRS

Slide 21: The Financing Life Cycle Public Markets Venture Capital Seed Funds t en Angels m st ve Grants s In le Sa R is k Concept Start-up Growth Expansion Slide 21 MaRS

Slide 22: The Financing Life Cycle Public Markets Venture Capital Seed Funds t en Angels m st ve Grants In R is k s le Sa Concept Start-up Growth Expansion Slide 22 MaRS

Slide 23: The Financing Life Cycle R is k a n t: f in e n ce lf - t m Se ves In s Grants le Sa Concept Start-up Growth Expansion Slide 23 MaRS

Slide 24: What do Financing Sources Look For ? Technology Risk • Stage of Development • Impact & Application • Sustainable Advantage Slide 24 MaRS

Slide 25: Technology Risks  Stageof 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 Slide 25 MaRS

Slide 26: Due Diligence and Valuation Criteria Technology Risk • Stage of Development • Impact & Application • Sustainable Advantage IP Risk Market Risk • Nature and Scope • Size and Growth • IP Form • Dynamics • Ownership • Competition • Enforceability • Customers • IP Building • Distribution Channels • Freedom to Operate Execution Risk • Reputation / Leadership • Commitment • Market Knowledge • Experience Slide 26 MaRS

Slide 27: 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 Slide 27 MaRS

Slide 28: 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 Slide 28 MaRS

Slide 29: 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 Slide 29 MaRS

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