IVI Presentation At Rusnano Conference

Mgt & Organization for New
Business Formation
Presentation at 2nd Rusnano Int’l Conference
Moscow, Russia, 7 October 2009

Innovative Ventures Inc.
Haslett, MI. USA
Moscow, Russia
Thomas Nastas
Founder
Tom@IVIpe.com
www.IVIpe.com
07 October 2009 www.IVIpe.com
Info@IVIpe.com

Today’s Message
Focus of this Presentation
Rusnano Request: What are the strategies
in Tech Transfer, used by leading American
Universities
My Subject: New Business Formation Dept.
Message is for Institutes, Universities,
Technoparks, etc.
Only have 15 minutes, will outline reasons
why take this action, ideas to accomplish
Specific Actions to Improve Your Chances of
Success
Info@IVIpe.com

IVI History-Direct Invest &
Advisory
Canada (1992)
Europe (1992/94)
C$100MM-Canadian
Bus. Dev. Bank TP Fund, $10MM-
EU, $-Financière
St Dominique,
Paris

USA (1986)
Russia (1997)
The Michigan Product
Dev. Fund ($5MM) HP LP, $30MM-EBRD &
USAID
Africa (1993/96)
E. Africa $5MM, Sub-
Saharan, $200MM, South
Africa,$30MM, IFC/WB
Info@IVIpe.com

About Me
• Founder of IVI,1986. In Russia
since 1997
• Moscow Bank, Member, Board of
Directors, 2007
Ассоциация независимых
• Member, Board of Directors, 2008
директоров
• Moscow IT/VC, Member,
Investment Committee, 2009
• Los Angeles, CA, Member, Global
Advisory Committee, 2009
• Moscow, Co-Founder, 2009
• Russian operations, Tata Coffee
Board of Directors, 2009
• Moscow MBA Program, Prof of VC
& Marketing, 2002/9
07 October 2009
• Moscow, MBA Advising, 2001
www.IVIpe.com
Info@IVIpe.com

Typical Tech Transfer Unit
Office of the VP for Research

• 7-20 individuals

Executive Director

Licensing Legal Support
Agreements & IP Protection

Administrative
Services
Accounting
Marketing
Data Support
.
.

Info@IVIpe.com 5

Models for Academic Business
Development an
ce
di
ng
g ies ist nt un ns
in io t
ns ol
ic lan As
P t
s
T ale g
F
era
t
en
ice ve
P
ss en ru
it ur
in
Op tion es
tm
eL si e m c
Se
c s nv
i bl es sin lop Re es ipa
in ic tI
lex ms gr Bu eve elp
in
us a rt
c
F er Pro D H A id B P D ire
T

Hands-in-Pockets

Hands-Off UM

Hands-On*

Up-to-Elbows**
Policies Form the Licensee Operational Role

* Sometimes Bus Dev Group is quasi-external to the U
** Often exclusive arrangement with Bus Dev Group that is external to the Univ

Source: MIT, AUTM, MRUN, U Michigan et al
Info@IVIpe.com 6

Info@IVIpe.com

Creation: New Business
Formation Unit in Tech Transfer
Office of the VP for Research

• 23 individuals

Executive Director

Ken Nisbet

Licensing Business Development Legal Support
Agreements & IP Protection New Venture Formation

Robin Rasor Created, 2006 Rick Brandon

Andrew McColm
Administrative
Services
Accounting
Marketing
Data Support
.
.

Info@IVIpe.com 9

Models for Academic Business
Development an
ce
di
ng
g ies ist nt un ns
in io t
ns ol
ic lan As
P t
s
T ale g
F
era
t
en
ice ve
P
ss en ru
it ur
in
Op tion es
tm
eL si e m c
Se
c s nv
i bl es sin lop Re es ipa
in ic tI
lex ms gr Bu eve elp
in
us a rt
c
F er Pro D H A id B P D ire
T

Hands-in-Pockets

Hands-Off

UM
Hands-On*

Up-to-Elbows**
Policies Form the Licensee Operational Role

* Sometimes Bus Dev Group is quasi-external to the U
** Often exclusive arrangement with Bus Dev Group that is external to the Univ

Source: MIT, AUTM, MRUN, U Michigan et al
Info@IVIpe.com 10

Why Be Proactive?
Why ‘Hands-On?’ Most States (in US) have:
Incubators & Technoparks
University, State, Federal & Corporate R&D
Venture Capital $$, Seed-Expansion/Growth
R&D Grant, Seed & Start-up Programs
Support Services in Accounting, Legal,
Consultants. Marketing, Advertising, etc.
Venture Capital Networks, Infrastructure &
Eco-system
What’s Happening Qualitatively to
Explain?
Info@IVIpe.com

Qualitative Differences: Silicon
Valley/Boston & Rest of USA
1. Serial Entrepreneurs & Entrepreneurship

Info@IVIpe.com

2. Amount & Velocity of VC Investment
Attitude to Risk Influences Risk Taking-#1
Acceptance: Lack of
Certainty-#2

Brand & Reputation Effects-
#3

Info@IVIpe.com

3. Nature of the Deal Flow

Parallels/Similarities: Rest of USA &
Russia
Info@IVIpe.com

UM Technology Transfer Process
Research
UM Bus Dev gets involved
(initiates a Project) at/or before
Pre-Disclosure this point if:
- the disclosure is related to an
existing BD Project
Disclosure - assessment or marketing
activities reveals that a start-up
may be the best
Assessment commercialization path
- the inventor is interested in a
start-up
Protection - accelerator or investor is
interested in a start-up
Find or Form a Licensee

Existing Company Marketing Business Concept Planning
Find Form

Developing the License Business Formation
Components
Licensing

Relationships, Revenue,
07 October 2009 Reinvestment
www.IVIpe.com
Info@IVIpe.com 15

Jargon
Research

Pre-Disclosure

Disclosure

Assessment

Protection Bus Dev Project
possible Option
Agreement

Existing Company Marketing Bus Concept Planning
Find Form

Components
Licensing
Launched Start-up
07 October 2009 Reinvestment
www.IVIpe.com
Info@IVIpe.com 16

Three-step Bus Dev Process
Research

Pre-Disclosure

Disclosure

Assessment

Protection

1) Evaluation
Existing Company Marketing
Find Form
Bus Concept Planning 2) Emerging
.

Components 3) Business Formation
Licensing

Reinvestment

Info@IVIpe.com 17

Bus Dev Group within Tech Transfer
• Distinct from, but team with, Patent/Licensing and
Legal Professionals

• Focused on business formation consulting
– Specialize somewhat by industry
– Broad expertise – product development, market/industry
trends, project management, finance, UM policies,
counseling, investment strategy…

• 3 FTEs with part-time admin support

• External relationship champions

Info@IVIpe.com 18

Business Creation Experts:
Proactively Assist as Needed & Desired
• Project Planning and Management
– Act as communication “hub” (esp. early in a Project)

• Serve as mentor, guide, and instructor
– Engage in review of choices & expectations
– Help the inexperienced understand what they need to know
– Advise relative to business plans and investor materials
– Navigate thru university systems/procedures
– Counsel re: effective utilization/selection of resources, programs, &
partners

http://www.techtransfer.umich.edu/entrepreneurs/startups.html
Info@IVIpe.com 19

Business Creation Experts:
Proactively Assist as Needed & Desired
• Identify, locate and engage needed resources
– Access to market information resources
– Hire outside experts for critical path activities (Tech Transfer funds –
leverage/utilize other programs as possible)
– Targeted partnering with outside entrepreneurial resources
– Provide team formation assistance

• Help create and execute funding strategy (including
introductions)

• External Relationship Champions

http://www.techtransfer.umich.edu/entrepreneurs/startups.html

Info@IVIpe.com 20

Bus Dev Project:
Step Descriptions (Staged Gates)
Evaluation Start-up Feasibility and Inventor Considerations
Potential to solve unmet need. Industry dynamics, market trends & competitive
landscape show possibility of new business to attract needed funding & resources.
Inventor comfortable with required time, effort & flexibility to champion start-up.

Emerging Fully Defined Product/Service
Satisfies Customer Need with potential for Sustaining
Revenues. Competitive with alternatives. Sufficient
Tech Development complete. Initial IP evaluation.

Business Formation
Business Plan Team Financing
Includes operational Structure, Diverse & Experienced Access Funding
Competitive Positioning, Product To Manage the Business For company to reach
Development, Strategy and Finances. and Execute the Plan meaningful milestone
Determine Business Model. or revenues

Satisfies definition of viable licensee
Info@IVIpe.com 21

Product/Service Selection & Definition:
Emerging
With primary and secondary research:
• Verify industry dynamics
• Determine if tech development (proof-of-principle) sufficient to
demonstrate solution to identified customer problem
• Strategically define lead product/service from multiple alternatives
• Create product development plan (estimates)
• Verify competitive advantage
• Estimate if needed development resources appropriate for desired
return
• Reassess IP protection and access (not just UM’s)

Info@IVIpe.com 22

Business Formation: Business Plan
 Revisions staged with company growth
 starting with proposed activities moving into implementation

 “Blueprint or Playbook” for the team
 should be formulated/influenced by the team
 act of writing facilitates comprehensive planning by identifying gaps
 Often highlights initially the need for business talent on the team

 Multiple Audiences
 self/team
 investors/granting agencies
 provides depth to investment/funding solicitations
 prospective employees

Info@IVIpe.com 23

Business Formation: Team
• Minimally need business AND technical expertise
– Unlikely to be one person
– Relevant experience is highly valued
– Unlikely for faculty member to take an operational role in the start-up

• Staged additions to Team
– dependent on company development status

• “Chemistry” (compatibility) is critical

• Shared Vision Critical
– Helps relieve inventor concerns over “giving up control”

Info@IVIpe.com 24

Business Formation: Financing

Avoid pitching the Right Deal to the Wrong Investor

• Determine the needs of start-up based on Milestone
Achievement
• Profile funding source requirements, expectations, &
limitations
– All sources have “strings attached”

• Formulate a deliberate strategy for seeking funding based upon
BOTH of the above

• Prepare appropriate materials for soliciting funding
– be prepared for next steps (e.g. due diligence)
Info@IVIpe.com 25

Project Planning
Create and Communicate a “roadmap”
Multiple simultaneous & sequential steps w/varying dependencies
Requires experience with process, business culture/norms, etc.

Select Critical Path and Identify Gating Items

For the inventor and team:
 to create common vision
 to describe holes, timeframes, resources required
 to identify gating and critical path items
 to find “show stoppers” ASAP
 to facilitate progress
Info@IVIpe.com 26

Concluding Remarks

Staffing
Hire Business people, not lawyers,
academics or university personnel

Info@IVIpe.com

UM Start-Ups – Recent Years

Info@IVIpe.com
75 Start-ups * Denotes a presence in MI 28

Ex: How Much Value (Added)?
Where’s the Technology?

Info@IVIpe.com

Technology In Many Places!
Just Look & Define

Slaughter Raising Genetic Engineering
& Breeding

Butcher
Distribution, Storage & Retail Locations
Processing- Ham, Kielbasa
Delivery
Info@IVIpe.com

Download at
www.IVIpe.com
News 2007

Info@IVIpe.com

Thomas D. Nastas
Tom@IVIpe.com
www.IVIpe.com
Moscow Tel. 7.985.923.47.27
US Tel. 1.517.899.1432
Innovative Ventures Inc. Moscow, Russia
Haslett, MI USA
Info@IVIpe.com

Decision: Start-up Feasibility Evaluation

 Dynamic R&D for the industry shifting to the entrepreneurial sector?
 Development, Manufacturing and Distribution - do any require lg partners?

 Is there potential to solve an unmet need w/ competitive advantages?

 Are multiple products/services possible with technology?

 Does using the technology require a paradigm shift? Or provide an
incremental improvement? Satisfy a low-end underserved market?

 Is the potential benefit in line with the anticipated costs?

 Do the start-up scenario realities match desires of the inventors?

 Is there sufficient IP protection and access (not just UM’s)?
 Are there economic, social, political and technology context issues that must
be considered?
Info@IVIpe.com 34

Inventor Considerations
 Required commitment of time and energy

 Not all technologies are appropriate for start-ups

 Anticipated financial reward (personal, lab, etc.)
– amount
– timing

 Requirements for flexible planning & shared responsibility/control

 Acknowledgment of cultural difference between business & academia

 Inventor’s role relative to the start-up post-launch (start-up needs business skills
and experience)

 Impact on academic research activities (COI, potential sponsors)

Info@IVIpe.com 35

Additional Slides

Info@IVIpe.com 36

Funding Helps Get the
Other Void-Fillers
(management, knowledge, information)

d
“The Capital Gap encompasses a great deal ce et
en ent
more than simply obtaining capital for a eri em n rk
p
Ex nag Pla Ma
start-up. It refers to the comprehensive set IP & s
Ma m try ip
of tasks necessary to develop a business T ea d us onsh
In lati
concept to a point where it obtains the first Miles Re
tone
round of ‘deep pocket’ professional venture Deve -base
lop’t d
Plan
capital.”
from Journal of BioLaw and Business “The Market
nding
Development of Entrepreneurial infrastructures Understa
Across The United States” by Thomas Dickerson Reduc
ed
vol 6 #4 pgs 14-19 2003 Techni
cal Investment by
Risk
Technology Traditional
$$ VC’s

Info@IVIpe.com

Engagement of Outside Resources
Other Than Investors
 Why engage them?
– Lack of internal knowledge and/or experience
– Need to develop support for the start-up
– Catalytic effect on start-up formation

 When/How to use them?
– Critical path gating items of project plan (clearly defined objectives/deliverables)
– Start-up Evaluation; Product/Service Definition; Business Concept/Plan

• How to find them?
– Targeted networking
– Indexing your rolodex

• What Roles could they take?
– Specialized expert paid consultants/talent
• Continuity post-consulting engagement
– Pro-bono advisors

Info@IVIpe.com 38

Develop Milestones Linked to Company Funding

Year 1 Year 2 Year 3
Milestone
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12
1. (demonstrates market,
business, or product
development)
2. (demonstrates market,
business, or product
development)
3. (completion represents
significant risk reduction)

4. (refine and develop
product)

5. (validation studies)

6. (pilot production)

7. (select & secure
commercial partners)

8. (product launch)

07 October 2009 Seed $K First Rd $M
www.IVIpe.com Second Rd $M Third Rd $M
Info@IVIpe.com 39

Believe in Yourself/Accept
Rejection

 Oldest VC Firm, investing since 1911
 Deals Rejected:

Apollo Computer
(acquired by Hewlett Packard)
BVP's Felda Hardymon was offered a small position in the
company's last private round, and rejected it: too small
a position, he thought, at too high a price. In less
than a year it was worth 17x more.
Info@IVIpe.com

Rejection

 Deal Rejected:

Check Point
In 1994, Gil Schwed pitched his idea to BVP's David
Cowan, who said that Gil would never get
distribution in the US. The next year, Check Point got
a huge Sun OEM deal and sold $25M of firewall
07 October 2009
software.
www.IVIpe.com
Info@IVIpe.com

Rejection

 Deal Rejected:

eBay
"Stamps? Coins? Comic books? You've GOT to be kidding,"
thought Cowan. "No-brainer pass."

Info@IVIpe.com

Rejection

 Deal Rejected:

Federal Express
Incredibly, BVP declined on Federal Express seven times.

Info@IVIpe.com

Rejection

 Deal Rejected:

Google
Cowan’s college friend rented her garage to Sergey &
Larry their 1st year. In 1999 and 2000 she introduced
Cowan to “these two really smart Stanford students
writing a search engine.” Students? A new search
engine? In the most important moment ever for a
Bessemer rejection, Cowan asked her, “How can I get
out of this house without going near your garage?”
Info@IVIpe.com

Rejection

 Deal Rejected:

Paypal
David Cowan declined on the Series A round. Young &
unproven team, regulatory problems, and, 4 years
later, a $1.5 billion acquisition by eBay.

Info@IVIpe.com

Rejection

 Deal Rejected:

StrataCom
(acquired by Cisco)
Felda Hardymon: "[Sierra's] Pete Wendell asked if I'd like
to invest in Stratacom, which was doing a 'fast packet
switch.' I gave him a blank stare."

Info@IVIpe.com

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