Invention to Venture Workshop

Daniel AyalaDept. of Computer ScienceUniv. of Illinois at Chicago

NSF-IGERT PI Annual Meeting

• Over 100 IGERT programs from across the nation (including another from UIC) and from many different academic disciplines.

• Presentations, poster sessions and roundtable discussions about interdisciplinary research and IGERT programs.

• Final Assessment: We have a GREAT IGERT program!!

NSF-IGERT PI Annual Meeting

• Invention to Venture Workshop sponsored by National Collegiate Inventors and Innovators Alliance (NCIIA). The NCIIA provides faculty and students with the funding, entrepreneurship training, and recognition they need to advance their technology innovation projects.

• From academic research to business venture.• Exposure to opportunities of taking research

outside of academia and into industry.

Ecovative Design

• Create cost competitive alternatives to synthetics like foam and plastics.

• Started as a research project in an undergraduate level materials class at RPI.

• Went through technology transfer process to creating a business venture (SBIR and other grants available for startup businesses).

Intelligent Traveler Assistant (ITA)

• Compact portable device with the capability to plan multi-modal routes for its user.

Outline

I. Technology EntrepreneurshipII. Idea Validation and Opportunity AssessmentIII. Sales and MarketingIV. Building the Venture TeamV. Intellectual Property and LicensingVI. Communicating and Selling Your IdeaVII.Finding the Money

Entrepreneurship

• Identify and evaluate a market opportunity.• Find or invent solutions to fulfill that

opportunity.• Acquire necessary resources – money, people,

equipment – to make business a reality.• Manage those resources from star-up to

survival and expansion.• Manage the associated risks.

Sacrifices of a Successful Entrepreneur

• Uncertainty and stress.• Very long hours, few vacations.• The potential for harm to family/personal life/

career (“The man with a new idea is a crank…until the idea succeeds”– Mark Twain).

• Financial/lifestyle sacrifices.• Assume risk for a later reward.

Innovation/Commercialization Process

Idea Generation

• Individual, serendipitous occurrence or a structured group process that takes place in a research laboratory (ITA?).

• Technology Push – A technology in search of a problem. An idea with no immediate, present-day market opportunities.

• Market Pull – Recognizing a broad opportunity first, and then designing or adapting technology to meet it.

Opportunity Recognition

• Is there a need for the product? Will it be of value to anyone? If not then there is no venture.

• Process of finding markets for your idea:– Recognize that an existing technology can be used

in a totally different way (e.g. microwave oven – “What happened to my candy bar?”).

– Find applications for a brand new technology.

Development and Commercialization

• Refinement of product.• Set up initial manufacturing facilities.• Prepare for commercialization.• This stage is where most likely costs start to

escalate. Marketing and fundraising become a big part of what you do.

Preliminary Questions

• Does it provide significant benefit to specific customers?

• Will it work under real world conditions?• Is it financially feasible/sensible?• Do you have the technical know-how (skills and

people) to make it work?• Can you bring it to market? i.e. does your team

have the necessary marketing and sales skills, or do you need partners?

Information Sources

• Talk about the idea with a lot of people with different backgrounds. Especially with people who will challenge your ideas and give you creative suggestions.

• Tools and resources that are widely available (entrepreneurial research centers, books).

• Get to know experienced entrepreneurs face-to-face and listen to their stories.

Sales and Marketing

• What are you selling? – knowledge/expertise, product, service, system, solution

• To whom are you selling it? – individuals, organizations

• Why will they buy it…from you? – beat the competition

• How will you sell it? – pricing, channels (sales staff, distributors, Original Equipment Manufacturers)

• When will you sell it? – big tech events, determined by budget cycle

Building the Venture Team

• The Management Team• Board of Directors/Advisors• Mentors• Service Providers – attorneys, accountants,

consultants, partners• Investors

Intellectual Property (IP)

• Creations of the mind: inventions, literary and artistic works, names, images, designs used in commerce, etc.

• Protecting IP is essential. Without it you may not have a business.

• Very broad subject (whole branch of law dedicated to IP).• Technology Transfer Office important in establishing IP at

the university (Office of Technology Management at Chicago, http://www.otm.uic.edu/ ).

• Four main types of IP: Copyright, Trademarks, Patents, Trade secrets

IP at UIC

• Office of Technology Management (OTM) sets guidelines for determining when intellectual property is owned by a student and when it is owned by the University.

• Excluding certain exceptions, the University owns all intellectual property developed by any University employee or by anyone, including students, using any University facilities, equipment or funds.

• Info found at: http://www.otm.uic.edu/sites/otm133.otm.uiuc.edu/files/student_ownership%20081009%20Chicago.pdf

IP at UIC: Exceptions• Student Entrepreneurship Activities: Work that comes from

campus initiatives that support student created start up activities by providing limited amounts of funding, space and other resources.

• Student Class Projects: Only certain courses (such as industrial arts design or engineering design) that allow students to own their inventions made as part of the course. This exception is applied on a course-by-course basis.

• When a faculty or any other University employee plays a significant role in generation of that intellectual property that would qualify them as an inventor for such invention under US patent law, the invention would be jointly owned by the student and the University.

IP at UIC

• Works created independently and at the student’s own initiative for traditional academic purposes are owned by the student, but the University retains certain rights to use such works.

• These include class notes, reports, papers, and works prepared by the student as part of the requirements for a University degree, such as a thesis or dissertation.

• Case-by-case basis as well. In any case, for anything developed in the university close communication with the technology transfer office is necessary.

Patents

• Grants the assignee the right to exclude others from making, using, or selling the invention in the US, or importing the invention into the US for as many as 20 years.

• US awards patents to “1st to invent” (rest of the world goes by “1st to file”). Important to keep records with date and time to prove “1st to invent”.

• If a paper is published, you have one year to file for the patent.

• Does little good unless you have the resources to defend it.

Trade Secrets

• Formula, pattern, physical device, idea, process of compilation of information

• Provides owner with a competitive advantage in the marketplace.

• Is treated in a way that can reasonably be expected to keep the public or competitors from learning about it.

• No term limit…as long as secret is kept.

Communicating and Selling Your Idea

• The need to sell your idea to potential investors, customers or potential team members will arise.

• Four essential documents for communicating idea to these people:1. Business Plan2. Executive Summary3. Slide Show4. Elevator Speech

Business Plan

• 20 – 40 page document that serves as internal roadmap for company and an external sales tool for potential investors, customers, and partners.

• Nothing but the truth.• Everyone on the team should know it and believe in it.• Consists of:

– Executive Summary – 2 to 5 pages summarizes the plan’s main points.

– Problem – should grab reader’s attention– Solution – General statement of how problem is solved.– Technology and IP – details of technology but intelligible to a

layman. Describe IP status.

Business Plan

• More components of Business Plan– Size of opportunity/market– Customers and how they’ll be reached– Competition– Business model – General outline of the way the company

will make a profit and how long will it take to make the profit.– Team– Financial needs – How much? For what time frame? – Exit Strategy – Details of how investors will get their money

back (hopefully with a healthy return) and exit your company.

Presentations

• Slide Show– Presentation given in front of investors.– Brief (around 20 minutes)– Tell story clearly and succinctly

• Elevator Speech– Explaining your plan in 60 seconds or less– Clear, simple, and concise description of the

problem your venture solves, how it solves it, and the benefits involved.

Finding the Money

• No money, no venture.• Various forms of capital• Personal Debt – most ventures start with this

step. Potential of financial ruin. Maxing out credit cards, eating Ramen noodles.

Equity

• Purchase of shares of stock in return for money invested in the company.

• Upside – investors share your viewpoint because they take risk with you.

• Downside – You give up a percentage of the company’s ownership.

• People involved in an equity:• Yourself – Invest your own money on the company.

Equity

• People involved in equities:– Friends, Family, Fools (FFF) – early-stage and smaller in

amount. Generally invested out of friendship and is based on less sophisticated, or no, due diligence.

– Angels – High net worth individuals who invest for fun and profit (from $25K to $200K). Angel groups or networks might invest up to $1 to $2M.

– Venture capitalists – They fund a very small percentage of startups. Each VC group has its own criteria in industry it invests in and at what stage it will invest in. Usually invest significant dollars and are looking for a 10x or more return on investment.

Grants

• Inexpensive• No interest charged• No need to pay back• You don’t need to give up equity.

SBIR and STTR

• Small Business Innovation Research Program (SBIR) for companies and Small Business Technology Transfer (STTR) for universities.

• Distributed in two major phases:1. Up to $100K for a proof of concept.2. Up to $1M for development

• Solicitations are once a year and workshops across the country provide information on applying for the grants.

• http://grants.nih.gov/grants/funding/sbirsttr_programs.htm

Other Grants

• Cooperative Research And Development Agreement (CRADA) – used mainly for development or testing. Government lab works with company in testing and development. No money provided but good way to obtain skills and equipment for testing.

• Private Grants – Numerous foundations and organizations provide funds for technology entrepreneurs (http://www.foundationcenter.org/ )

Business Plan Competitions

• Schools run a business plan competition with prize money for winner.

• UIC has a yearly business plan competition, Concept2Venture (C2V).

• C2V 2009 will be held Tuesday December 15, 2009 at Student Center East. Prizes total up to $17,000 cash.

• A distinguished panel of experts including entrepreneurs, venture capitalists, investors, and service providers will judge the entries and provide valuable feedback.

• Teams will be evaluated based on written business plans and 15-minute oral presentations.

• http://www.concept2venture.org/index.html

Bank Loans

• Rarely a source of capital until a company has revenue and profits, or at least significant physical assets that could be used as collateral for a loan.

• Upside – No dilution of ownership.• Downside – If company doesn’t make payments it

loses collateral (land, equipment, patents).• When you don’t need the money banks are happy to

lend it to you. If your need is great, your ability to pay back probably isn’t so good and so they’re less likely to lend to you.

Revenues and Profits

• Holy Grail of financing.• Use your own profits to fund your company.• Profits can be invested back in to the company

to grow and prosper.

What will investors look for?

• Management team is proven.• Market is big for the product or service.

Urgent need.• You demonstrate you can beat the

competition.• Is the product difficult to replicate? IP is

strong.• Ability to forecast realistic results.

Conclusion

• Discussed the Invention to Business Venture process.

• Applicability to ITA??• Possibility of transferring research to business.• The materials from the workshop are available

(through me).

THANK YOU.