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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

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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