Technology Commercialization Valuing the Idea Laura J. Kilcrease laura@tritonventures.com 6300...

Technology Commercializatio

n “Valuing the

Idea”Laura J. Kilcreaselaura@tritonventures.com6300 Bridgepoint Parkway

Building 1, Suite 500Austin, Texas 78730

(512) 795-5821

Founding Director of the Austin Technology IncubatorATI dominant catalyst for Austin’s transition to a technology centerCorporate Experience: M&A for Fortune 500 CompaniesEntrepreneurial Experience: Instrumental in the launching of 120 Austin start-upsUnparalleled network

PeopleLaura Kilcrease

Valuing The Idea

Valuing the Idea 1 - What technology gets the attention?

Valuing the Idea 2 - Can we make a business out of this?

Valuing The Idea

What technology should get the attention?

The Fundamental Problem of Technology Commercialization:

1. All technology is developed to satisfy a need (necessity really is the mother of invention).

2. The need the technology satisfies may not be one people are willing to pay for.

It’s the market!

Build a Commercialization ProcessThe Three Phases of Technology Commercialization

Information Gathering

Opportunity Analysis

Implementation

TechnologyAssessment

Licensing/

Startup

TechnologyIdentification

MarketAssessment

PreliminaryTechnology

Ranking

Technology Ranking: Criteria

Technology Assessment: How does the technology compare to state of the art?

Market Opportunity: Is it a large, growing market with a current demand?

Stage of Technology: How imminent is the opportunity? How much development, regulatory approval is still required?

• ““Me Too”Me Too”• IncrementalIncremental• RevolutionaryRevolutionary

• ““Me Too”Me Too”• IncrementalIncremental• RevolutionaryRevolutionary

• WeakWeak• ModerateModerate• StrongStrong

• WeakWeak• ModerateModerate• StrongStrong

• EarlyEarly• MidMid• LateLate

• EarlyEarly• MidMid• LateLate

Technology Assessment

“Me Too” Development : Follow-on technologies to the state of the art that represent little fundamental change. (Ex: Microsoft’s Internet Explorer)

Incremental Improvement: Technology that represents a next logical step in the evolution of a product or process. (Ex: The Pentium processor from Intel)

Revolutionary Breakthrough: A new - often unforeseen - approach representing a quantum leap beyond conventional technologies. (Ex: The Integrated Circuit)

Market OpportunityFactors Affecting the “Strength” of a market:

Size• For substantial financial investment, needs to be

$500M+

Expected growth over next 5-10 years• Better be positive (No buggy whip technologies)

Potential Customer Base• Be wary of something that only the government

will buy

Market Share Distribution/Competitive Environment• You’re not likely to join the “Big 3” in automaking

or semiconductor equipment manufacturing• More on this later...

Stage of Technology

Time to Market (numbers vary by industry):Late: <18 monthsMid: 18 months - 36 monthsEarly: >3 years

Not all hurdles to market entry are technological:

Regulatory approval (EPA, FDA, OSHA)Industry Certification

Technology Ranking: Matrix Diagram

Prioritize: Focus on technologies with best chances of success

Late Stage

Mid Stage

Early Stage

Mar

ket

Mar

ket

Technology

The Case to CommercializeThe University/Laboratory/Institute’s Perspective

Market potential for the technologyMarket may be identified by only the technologist

Presence of an industry partnerMore common: License to an established companyLess common: License to a start-up

The Case to CommercializeDrawbacks to licensing to a start-up

Less cash for up-front feesEquity is an option, but not all institutions can take an equity stake in a start-up

Much higher business riskLess experience (generally) in working with an institution’s licensing group

Licenses to start-ups can - and do - work, but it is often a long and difficult process »»

Valuing the Idea 2

Can we make a business out of this?

Can We Make a Business...

Do we have the pieces?Business acumenProduct development &

manufacturing competencies Technology licenses

Is it a business or just a product?Is the market appropriate for a start-up?

All the Pieces 1Two views of what it takes to start a company

1) The Technology2) Personnel

(Technical)3) The Market4) Personnel

(Business)

1) Personnel (Business)

2) Personnel (Technical)

3) The Market4) The Technology

The Technologist The Venture Capitalist

All the Pieces 1, (Cont.)

“I invest in people, not ideas.”

- Arthur Rock, famed venture capitalist who backed Intel and Apple Computer

All the Pieces 1, Summary: What does a VC value?

Business modelAlliance partnersCustomersPeopleTechnology

All the Pieces 1, Summary:So it’s not just the technology!

Technology has a lower value than the people running the company

How experienced are they?Do they already have a customer?

All the Pieces 1, Summary:Risk vs. Value of Investment

Technology People Customers AlliancePartners

BusinessModel

Risk Value

All the Pieces 2

Two central questions that have to be answered for any investor, major customer or business partner:

1) Can you make it?2) Can you sell it?

Each is equally important!

All the Pieces 3

All that being said…You can’t have a technology company without technology

Well-prepared licensing agreementsProtection for existing corporate Intellectual Property

Industry/Competitive Analysis

Direct Competitors

CustomersSuppliers

NewEntrants

SubstitutesTaken from: Michael Porter Competitive Strategy

Taken from: Michael Porter Competitive Strategy

Industry/Competitive Analysis 2Examples of company threats

Wal-Mart: High Customer power relative to its suppliersIntel: High Supplier power relative to the computer manufacturersMicrosoft’s Internet Explorer: New Entrant threat in the Browser warsCoca-Cola: High threat of product Substitution

Triton Ventures, LLC

Triton Ventures is an Austin, Texas-based venture capital fund specializing in high technology spin-

off companies and other promising startups.

Triton Ventures, LLC

6801 N. Capital of Texas Highway

Building 2, Suite 225

Austin, Texas 78731 USA

http://www.tritonventures.com