Company separate from founding
Some major companies like Palm and
Lucent were originally ‘spin offs’
Becoming a metric in and of itself
Demonstration of new enterprise
Licenses can create jobs too
Tendency is to use a spin-off locally in
preference to a license externally
Need to put a business on a business
By sheltering within parent organization
sometimes don’t cut apron strings
Finances become confused
Personnel commitments can be
Generating tax incentives and
attracting other money
Loss of tax status
Market valuation problems
Can’t be a one time licensing play
› May be tax reasons to incorporate these
› Not officially a spin off
Needs to be able to sustain itself
› Platform technology is best
› Platform allows future growth
› Definition of platform may be debated
› Pros and cons?
› This is the easy one
› Who will do this?
› Sometimes surprisingly, this
is the second easy one
› Toughest one
› What do you do when Chief
scientist wants to run a company?
› Decision to assign or license?
› Assignment not possible if initiating
organization either won’t or can’t
› Won’t: matter of policy
› Can’t: IP constitutes needed background for
other IP being practiced
Will amount be paid in cash, shares or
Assignment likely to be an equity interest
License likely to be cash
› Can be deferred as needed
Becoming a very important component
How is it funded?
Sometimes this is what generates the
Money and the People
Consider engaging a professional
Business plan identifies cash needs
How do you raise money?
Smaller amounts may be self-financed in
Larger amounts may require access to
Friends and Family
› Amounts ~ <$250K
› ~ $100K to $5M
› ~ $1M to $25M
› > $10M
How much will the money cost in terms
› Who is providing the money?
› What is value of other components?
What is plan for future money?
› IPO usually doesn’t happen until 2 or 3
› Each tier is called a ‘tranche’
Technology is worth?
Cash in is $1M
On paper company
› Technology ($0) +
What percentage of
person with the cash
What skills do you need?
What power will the
Cost of people
› More gray hair the higher
› Compensation will be
combination of cash, stock
You will have at least 2 different types of
people and generally 3 or more
› Organization originating technology
› Where the money comes from
› The people
› Professional advisers
Peace isn’t possible; settle for an
What are key points?
› Shareholders; Directors and Officers
› What will company do?
› Death; disability; unwillingness to act
Buy/sell; shotgun; puts & calls
Marcel D. Mongeon
+1 (905) 390 1818