Dr. Shahram Yazdani Venture Nurturing Shahid Beheshti University of Medical Sciences School of Medical Education Strategic Policy Sessions: 09

Dr. Shahram Yazdani

Venture Nurturing

Shahid Beheshti University of Medical SciencesSchool of Medical Education

Strategic Policy Sessions: 09

Dr. S

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Main Role

SeedFinanceSeed

FinanceStart-up

Venture CapitalStart-up

Venture CapitalExpansion


Venture CapitalMezzanine

FinanceMezzanine

Finance

New FirmNew Firm Mature SMEMature SME Large CompanyLarge Company

ProductProduct

ResearchFoundersResearchFounders

AngelInvestors

AngelInvestors

VentureCapital Firm

VentureCapital Firm

Corporate InvestorsBanks


IPOAcquisition

IPOAcquisition

ResearcherResearcher InventorInventor EntrepreneurEntrepreneur BusinessmanBusinessman

ResearchGrants

ResearchGrants

Business PlanBusiness Plan

PropositionalKnowledge


PrescriptiveKnowledgePrescriptiveKnowledge

BasicResearch

BasicResearch

AppliedResearchApplied

ResearchProduct Design &

DevelopmentProduct Design &

Development ManufacturingManufacturing

Pre-productionPrototype


EngineeringPrototype


Innovation Process Concept Map

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Venture Nurturing

Apart from financial resources, the availability of knowledge resources during the start-up phase also plays a crucial role in fostering growth oriented spin-offs.

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Common reasons for failure of new ventures

1. Insufficient access to capital,

2. Lack of managerial expertise, and

3. Insufficient marketing expertise.

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Most Appreciated Contributions for Ventures

Financial Advice 44% Corporate Strategy & Direction 43% Sounding board for ideas 41% Challenging status quo 32% Contacts or market information 26% Management recruitment 10% Marketing strategy 7% Money only 12%

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Venture Nurturing: The Role of Special Persons

A study of high-tech start-ups in Silicon Valley emphasizes the important role played by lawyers as bearers of knowledge between different companies in the area.

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Venture Nurturing: The Role of Special Persons

In Europe, the role of knowledge brokers tends to be fulfilled by intermediary organizations and research institutes setting up spin-off activities.

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Venture Nurturing

There are three distinct categories of support activities Technological nurturing, Business coaching Facility management

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Technological Nurturing

The first activity, technological nurturing, includes three elements: 1. Searching for ideas that can be

commercialized in a research organization or university;

2. Creating fertile ground for technology dependent applied researches

3. Protecting the technology base and intellectual property rights

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Business Coaching

When the potential spin-off project reaches the transition phase, technological nurturing gives way to business coaching.

Business coaching activities are classified into three groups: 1. Business plan development, 2. Start-up coaching (commercial, financial and

legal aspects of a technology venture)3. Specialized advice or consulting on the

business process

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Facility Management

The nature of facility management tends to evolve along the spin-off process.

In the invention phase, start-ups need relatively small premises, including facility services such as reception, cleaners, network access, etc.

Later on in their development they need more complex and difficult-to-find facilities located on incubators and science parks.

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The Spin-off Funnel

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Financial Resources along the Spin-off Funnel`

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Venture Nurturing along the Spin-off Funnel

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Science and Technology Parks:

Definition

A managed environment set up to leverage local science and technology or knowledge resources to enhance a region’s economic base.

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Science and Technology Parks:

Definition

A property-based initiative, which has formal and operational links with universities or other higher educational institution, or major centers of research;

Designed to encourage the formation and growth of knowledge-based industries or high value-added firms, normally resident on site; and

Has a steady management team actively engaged in fostering the transfer of technology and business skills to tenant organizations.

International Association of Science Parks

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STPs: Global Evolution

The first park was founded in California in 1951, at what is now the center of the Silicon Valley – the University of Stanford.

There are currently about 700 science parks worldwide.

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STPs: Global Evolution

USAEuropeJapan

AsiaPacific

Rest ofWorld

50 60 70 80 90 00

Estimated total number: 700 300 in North America 240 in Europe 80 in China 30 in Asia Pacific 50 in rest of World

•The first park was founded in California in 1951, at what is now the center of the Silicon Valley – the University of Stanford.

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Roles of STPs

1. Recruit and co-locate new and established knowledge-based companies;

2. Promote innovation based on ‘smart’ technologies;3. Provide an interface or shared research environment for

research organizations and private industry; and,4. Leverage local knowledge resources to enhance a region’s

economic base.5. Cooperation in R&D with scientific research institutes and

laboratories;6. Financial consulting and assistance in obtaining venture

capital;7. Professional, technical, administrative and legal assistance;8. Information and telecommunications services; 9. Supportive business infrastructure.

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Specialized services of STPs to private companies

o Assessment of technological and innovation needs;o Research, development and transfer;o Project management;o Promotion of research outcomes;o Promotion of the ‘culture’ of innovation;o Marketing;o Establishment of partnerships and networks in

research and transfer;o Monitoring and rising of financial resources;o Enhancement of human capital skills;o ‘Incubation’ of technological innovative businesses.

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Different Parts of STPs

I. Dedicated sector of the University involved in the study of the specific field.

II. Research Centers: where ideas are developed into prototypes and possible manufacturers are identified.

III. Incubator-Innovation Centre: which is an establishment housing a partnership between the innovator and the manufacturer, where the prototype is further developed into a marketable product.

IV. which is an office type facility, dedicated tBusiness Centre: o those who have passed the incubating period and have products of a rather small scale.

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V. Centre for auxiliary industries – Containers: which is a letable industrial space, used for assembling and packaging of larger scale products.

VI. Serviced sites/plots or pre-built factories: which could be leased or sold to companies that decide to remain in the STP on a permanent basis.

VII. Technological Centers: which deal solely with the testing of products. A partnership can use this facility at any stage of the development of the product to determine its properties, such as strength, quality, composition etc.

VIII.Training Centre for Staff: which is dedicated to the continuous training of staff that work or intend to work in the STP.

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Apart from the above main components, a Park may have some supplementary uses, which could contribute to its R&D role and to the cross-fertilization process, such as: A congress center, Public or private agencies involved in

research, Special elementary and high schools, and A business school

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Spectrum of Science Parks

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The Raleigh-Durham Research Triangle Park

One of the largest research parks in US, home to more than 130 organizations, 99 of them R&D related.

With over 39,500 employees entering the 8-mile by 2-mile Park each day. The combined annual salaries in RTP amount to over $1.2 billion dollars

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History of Technology Incubation

It has been asserted that small businesses are the engine of growth for the U.S. economy (Birch 1987).

Small entrepreneurial companies created approximately 80% of new jobs in the U.S.

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History of Business Incubators

By 1984 there were only 26 business incubators in the USA.

This figure grew to 550 by 1998. Today there are probably more than

3,000 business incubators worldwide.

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Business Incubator

A business incubator is most broadly defined as a facility providing favorable controlled conditions for the development of new companies.

The controlled conditions include at least three types of resources:

1. Facilities support, 2. Administrative assistance, and 3. Professional expertise, e.g., management,

marketing, accounting, financial and legal services.

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Business Incubators

A typical business incubator is a multi-tenant facility with common office equipment and a shared conference room.

There is also an on-site full-time manager to assist in the delivery of business assistance training and services.

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Benefits of Incubators

A survey by the US National Business Incubation Association (NBIA) in 1998 described the key US incubator statistics as follows. North American incubators had created

19,000 companies that were still in business and 245,000 jobs;

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Physical Plant

Multi-tenant facility Flexible space Shared conference room Shared telecommunications equipment Designed to encourage interactions Include common kitchen area Careful site selection Feasibility study to confirm viability, location,

etc.

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General Office Services

Shared office equipment Telephone answering Photocopy machines Fax machine Computer servers meeting rooms

Flexible leasing arrangements Internet access Secretarial services

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Business Assistance Services

1. On-site management2. Business plan development3. Mentoring programs4. Market analysis, Marketing assistance5. Copyright and patent assistance6. General legal assistance7. Entrepreneurial training8. Presentation training

9. Enable incubatees to meet and learn from other firms

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Business Assistance Services

10.Organizing access to workshops and prototyping facilities.

11.Business management training12.Organizing networking functions13.Accounting, bookkeeping assistance14.Aid in attracting investors; Access to capital

15.Financial planning;

16.Introduction to potential customers.

17.investment memoranda, and recruitment.

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Services During Seed Stage

Write business plan Management, market, technology, products

License technology Attract angel investors or specialized

firms

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Services During Start-up

Bring in professional investors How is the company valued?

Attract management team Build-out facility Begin product development

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Services During Expansion Round

Continue product development Provide “proof of principle” or other

“validation” What justifies a step-up in valuation?

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Finance Schema of Incubators

The 900 incubators, the NBIA estimates that 75% are not-for-profit and 25% for-profit ventures.

Most for-profit incubators do not receive a public sector subsidy.

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Different Organizations of Incubators

In general, state-supported nonprofit incubators are the most popular, followed by university-hosted incubators, though for-profit models have increased dramatically since the late 1990s.

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Different Organizations of Incubators

In the specific case of technology incubators, the majority are hosted by academic institutions (McKinnon and Hayhow 1998).

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Effectiveness of Incubators

New enterprises that receive the benefits of a business incubator have low failure rates (13.9%), and upon graduation 87% locate locally

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Cost-Effectiveness of Incubators

Campbell et al. (1988) probed the question of business incubators as an effective job creation strategy.

The conclusion was that incubators had a public sector cost per direct job created that ranged from $3,500 to $10,000 significantly less than “traditional industrial recruitment programs,” which had an average public sector cost per job of over $40,000.

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IndustrialEstate

BusinessPark

SciencePark

ManagedWorkplace

EnterpriseCenter

InnovationCenter

BusinessIncubator

Business &TechnologyIncubator

TechnologyIncubator

Technology Support

Managem

ent Support

Low Medium High

Low

Medium

High

A more complex classification

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Population Ratio Approach

US to I.R.Iran Population Ratio 300,000,000 vs. 70,000,000 Approximately 4 : 1

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US Infrastructure

US have 900 Incubator US have 400 Technology Incubator US have 300 Science Park 36,000,000,000 $ Venture Capital US have 2500/100,000 Researcher

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I.R.Iran Estimated Needs

Iran Needs 250 Incubator Iran Needs 100 Technology Incubator Iran Needs 70 Science Park Iran Needs 10,000,000,000 $ Venture

Capital Investment Iran Needs 1,000,000 more

researcher

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“Number of Ideas to Support” Approach

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The Origin (Quantity) of Entrepreneurial Ideas That Potentially Deserves Support

Yearly 1,800,000 Young Adult of 18 Years Old

Yearly More Than 800,000 University Graduate

More Than 30,000 University Faculty Member

70,000 R&D Worker

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How Many Incubators is Needed to Support 1000 Entrepreneurial Ideas in Iran

For supporting 1000 Idea per year We Need 300 Incubators (1000/3.3)

To Support 1000 Idea at Seed Phase we Need 75,000,000 $ Seed Finance (1000 * 75,000 $)

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Supporting OrganizationResearch InstitutesResearch Institutes Science &

Technology ParksScience &

Technology ParksTechnologyIncubators

TechnologyIncubatorsUniversitiesUniversities

Main Role

SeedFinanceSeed

FinanceStart-up

Venture CapitalStart-up



Venture CapitalMezzanine

FinanceMezzanine

Finance

New FirmNew Firm Mature SMEMature SME Large CompanyLarge Company

ProductProduct

ResearchFoundersResearchFounders

AngelInvestors

AngelInvestors

VentureCapital Firm

VentureCapital Firm



IPOAcquisition

IPOAcquisition

ResearcherResearcher InventorInventor EntrepreneurEntrepreneur BusinessmanBusinessman

ResearchGrants

ResearchGrants

Business PlanBusiness Plan



PrescriptiveKnowledgePrescriptiveKnowledge

BasicResearch

BasicResearch

AppliedResearchApplied

ResearchProduct Design &

DevelopmentProduct Design &

Development ManufacturingManufacturing





Innovation Process Concept MapSupports

Business Plan DevelopmentBusiness Plan Development

Start-up CoachingStart-up CoachingSpecialized Technical AdviceSpecialized Technical AdviceFacility ManagementFacility Management

BusinessIncubatorsBusiness

Incubators

Thank You !

Any Question ?

Documents

Dr. Shahram Yazdani Venture Nurturing Shahid Beheshti University of Medical Sciences School of Medical Education Strategic Policy Sessions: 09