Tips on How to Capitalize on a New Idea or Invention

1. Research to Revenue Putting All the Pieces Together 1

2. Common Hurdles Is there a market? What is the market? How much will someone pay for it? How long to market? What stage are you at now? How much $ to get to market How will you find patient money/investors? What is the ROI? 2

3. Common Problems Emotional attachment Lack of executive and business skills Who owns the company Investors Inventor Reluctance to ask for help No one will think less of you Too little too late The language of science vs the language of investors 3

4. Standard Disconnects The Market License Jargon Form of Business & Ownership Structure Time vs Money Risk Lab vs Real World Don’t talk without an CDA 4

5. The Market No idea can succeed if there is no market for the eventual product. Take the time to understand the current and future market. Talk to end users and decision makers. Understand units, prices and cost of goods sold. Understand reimbursement rates. 5

6. License Just because you did the research doesn’t mean you own it! The institution or the government does! Negotiation of a license is a business transaction, not a scientific endeavor What is an invention? Patents are not being filed on everything! Publish to gain protection The tech transfer office is your friend! File an invention disclosure report before you talk Don’t talk w/o CDA 6

7. Jargon Nda is a non disclosure agreement NDA is a new drug application CDA is a confidential disclosure agreement Also called an nda Don’t assume that you know the meaning of a term Don’t assume that your audience knows the meaning of the term either! 7

8. Business Structure Type of entity Partnership LLC Corporation Preferred by Venture Capital Ownership structure Tax structure 8

9. Timeline Research pace is slow and deliberate Investors look for a return as fast as possible Even the fastest research is not soon enough for investors 9

10. Risk Paycheck vs No Paycheck Running a startup entails risk – of not getting a paycheck Academia promises a steady paycheck Entrepreneurship Don’t make the leap unless you can accept the risks Employees Budgeting 10

11. Employees Similar to post-docs Admin staff have different needs Managing employees requires knowledge of employment law and practices 11

12. Budgets Spend money to fill the gaps that exist in the basic research Hire people and/or consultants who know things that you don’t Avoid duplication of skill sets Focus on doing what you do well and hire experts who can do what they do well 12

13. Business Relationships Every party to a business relationship has a different goal They are all valid They know as much about their business as you do about yours They are working as hard as you are to achieve them Everyone has to walk away feeling like a winner. The one who walks away with it all is really the looser 13

14. Business Relationships (Cont’d) A business plan is to a business man as a drug rep’s flyer is to a physician They are as astute at evaluating how a business plan will benefit their constituents as you are at evaluating how effective a drug will be for you patients. Milestones are different They intersect at approval Think at different rates Science is slow Business is fast 14

15. Building Relationships Allies approach everyone as if you want to win them over to become your allies, rather than your adversary Build trust Find the common language Hire trusted advisors Seek them out Ask around for names 15

16. Raising Money Develop a realistic plan for getting to market Understand regulatory requirements Understand product development process Set a realistic valuation You are selling a piece of the company to investors What is the price? 16

17. Valuations The key to raising capital Subjective Negotiated between buyer and seller You set a price, but be prepared to negotiate It is always a seller’s (investor) market There are more good ideas looking for money than money looking for ideas 17

18. Developing Your Plan Set realistic milestones and meet them Do What You Say, When You Say Don’t be overly optimistic There are no automatic 2nd helpings It is not easy to ask for more money when you run out Test your hypothesis: get a grant Get another grant and learn more 18

19. Your Plan (cont’d) Think past FDA approval Have a contingency plan Don’t think cheap! Learn what things really cost Use invested money exactly as your plan states Treat it like it is your last nickel 19

20. Pitfalls High salaries and costs don’t fly Modest stipends do You must have some skin in the game Sweat equity You don’t get repaid for debt or expenses paid for before the investors put their money in. Investors are paying for costs GOING FORWARD 20

21. Seeking Capital Ask and answer the following: What are the investors looking for? How can I meet their needs? Remember: Investors have choices They will only buy what they want and nothing else 21

22. Investors Angels/Wealthy individuals Venture capitalists Private funds Public capital 22

23. Angel Investors Wealthy individuals Early money The answer to your prayers Hence the term Accept high risk Expect a large % of the company Better to have a smaller piece of something with $ than a large piece of 0. 23

24. Venture Capital Can provide a large amount of capital Can provide follow on capital (subsequent rounds) Demand a large amount of control Bring a network of trusted advisors Expect milestones to be met 24

25. Picking Your Investors Choose carefully You can replace a business advisor You cannot replace your investors Investor community is small All know each other What you do with one investor group will become known and remembered by others 25

26. Ideas are for Sale Investors are investing in you Not the product The investor is trying to decide if you can be trusted to do what you say It is an emotional decision on both sides 26

27. Water Your Plants Investors are allies who should bring something other than a check to the table another investor business acumen contacts treat them as partners, not patients or test subjects They deserve your utmost respect Pay them first they will never forget it they will come back for more 27

28. Growing Your Plants Ask for feedback when told No. Make changes These can lead to a YES down the road Don’t’ waste their time Their time is as valuable as yours. 28

29. Methodology You are not the first to form a company and raise capital Many have done it before you There are right and wrong ways to go about it Seek counsel and advice from seasoned professionals before moving forward 29

30. Seasoned Professionals Steven M. Plumb, CPA (713) 780-0806 Clear Financials Solutions, Inc. Strategic capital formation advice Steven King, CPA (281) 312-6502 GrowthForce, LLC Accounting and bookkeeping services Jeff Houston, CPA (713) 629-8300 GBH CPA’s CPA firm with life science expertise 30