Business development and entrepreneurship basics
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`. Business Development and Entrepreneurship Basics. Presented by: Tony Redpath Vice President, Partner Programs MaRS Discovery District 7 October 2008. Four basic questions:. What does my business look like ? What resources do I need? How do I fit into the rest of the world?

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Business development and entrepreneurship basics

`

Business Development and Entrepreneurship Basics

Presented by:Tony Redpath

Vice President, Partner Programs

MaRS Discovery District

7 October 2008


Four basic questions

Four basic questions:

  • What does my business look like ?

  • What resources do I need?

  • How do I fit into the rest of the world?

  • What is my business model?


Technology commercialization

Technology Commercialization

KNOWLEDGE

Universities / Hospitals

Government Labs

PATENTS (Novel, Useful, Non-Obvious)

Company II

Concept

R & D Project

Lab Prototype

Production

Engineering Project

Engineering Prototype

Sales

Marketplace

Production

Sales

Concept

R & D Project

Lab Prototype

Engineering Project

Engineering Prototype

Company I


Business types consulting

Business types - Consulting

  • You provide advice, based on your specialized knowledge


Technology commercialization1

Technology Commercialization

KNOWLEDGE

Universities / Hospitals

Government Labs

PATENTS (Novel, Useful, Non-Obvious)

Company II

Concept

R & D Project

Lab Prototype

Production

Engineering Project

Engineering Prototype

Sales

Marketplace

Production

Sales

Concept

R & D Project

Lab Prototype

Engineering Project

Engineering Prototype

Company I


Consulting cont d

Consulting …. Cont’d

  • Can start as a one-person business

  • May have a technical, management, or marketing focus

  • Often stay small, but consulting engineering firms can be large (e.g Hatch Associates)

  • Often operate via a virtual network of consultants

  • Need liability insurance

  • Capital costs low


Business types consulting1

Business types - Consulting

  • Q: How much should I charge?

    * A: What is the client’s alternative cost?


Business types service

Business types: Service

  • You provide a service to existing businesses


Technology commercialization2

Technology Commercialization

KNOWLEDGE

Universities / Hospitals

Government Labs

PATENTS (Novel, Useful, Non-Obvious)

Company II

Concept

R & D Project

Lab Prototype

Production

Engineering Project

Engineering Prototype

Sales

Marketplace

Production

Sales

Concept

R & D Project

Lab Prototype

Engineering Project

Engineering Prototype

Company I


Service business cont d

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


Business types product

Business types: Product

  • You have real article ( pharmaceutical compound, medical device, consumer product….) that you wish to take to the market


Technology commercialization3

Technology Commercialization

KNOWLEDGE

Universities / Hospitals

Government Labs

PATENTS (Novel, Useful, Non-Obvious)

Company II

Concept

R & D Project

Lab Prototype

Production

Engineering Project

Engineering Prototype

Sales

Marketplace

Production

Sales

Concept

R & D Project

Lab Prototype

Engineering Project

Engineering Prototype

Company I


Product cont d

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


Types of financing

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


The lemonade stand example

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


Sources of debt financing

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


Sources of equity financing

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/


Special financing sources

Special Financing Sources

  • Proof of Principle / Idea to Innovation

    • http://www.researchnet-recherchenet.ca/rnr16/viewOpportunityDetails.do?prog=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&lbi=b4

  • NRC - IRAP

    • http://irap-pari.nrc-cnrc.gc.ca/main_e.html


The financing life cycle

Expansion

Concept

Growth

Start-up

The Financing Life Cycle

Public Markets

Venture Capital

Seed Funds

Angels

Investment

Grants

Sales

Risk


The financing life cycle1

Expansion

Concept

Growth

Start-up

The Financing Life Cycle

Public Markets

Venture Capital

Seed Funds

Angels

Investment

Grants

Risk

Sales


The financing life cycle2

Expansion

Concept

Growth

Start-up

The Financing Life Cycle

Risk

Investment:

Self-finance

Grants

Sales


What do financing sources look for

What do Financing Sources Look For ?

Technology Risk

  • Stage of Development

  • Impact & Application

  • Sustainable Advantage


Technology risks

Technology Risks

  • Stage of 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


Due diligence and valuation criteria

Due Diligence and Valuation Criteria

Technology Risk

  • Stage of Development

  • Impact & Application

  • Sustainable Advantage

IP Risk

Market Risk

  • Nature and Scope

  • IP Form

  • Ownership

  • Enforceability

  • IP Building

  • Freedom to Operate

  • Size and Growth

  • Dynamics

  • Competition

  • Customers

  • Distribution Channels

Execution Risk

  • Reputation / Leadership

  • Commitment

  • Market Knowledge

  • Experience


Intellectual property risks

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


Market risks

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


Execution risk

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


Building a business model

Building a Business Model

  • Where do you fit in the ecosystem?

  • What do you enable (not just what do you do)?

  • How much money is on the table?

  • THINK BIG!


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