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Collaborative Innovation: The Enterprise + Startup ConnectionBrian Steketee, founder and CEO of Modustri
ACG Breakfast, Feb 2017
Serial Entrepreneur with some Fortune 500 experience
Before that…. I cut my teeth on leading Innovation for many other fortune 500 brands
By 2020, sharing is a global $26B business~Forbes Magazine, 2013
People will maximize asset utilization as a way of life and share products, services, labor, transportation, materials… 4
5
“Your team distilled down 70 years of our technology in one year and executed a better strategy”
– Ken Hoefling, Vice President and Officer, Caterpillar
+
“We are at the forefront of a revolution in the heavy equipment industry. Emerging technologies are changing the way
we can help customers maintain a competitive advantage and achieve new levels of equipment productivity and
profitability. Our alliance with Modustri will be key in making this happen.”
– Greg Folley, Vice President of Analytics & Innovation Division
“Our parts monitoring and management tool has been a leader in the equipment management industry for 75 years, but we’re always looking for ways to step up our game. Our relationship with Modustri will allow us to take advantage of emerging technology that gives our customers more information on parts and components to maximize uptime. The days of being reactive are over.”
– Doug Hoerr, Vice President of the Reman, Components & Work Tools Division
Some key themes for today
1. What is innovation?
2. Identifying your path to growth
3. Vetting you partner
4. Structuring the right kind of deal
Innovation is… not just...
A new product
Jump the curveGuy Kawasaki
You can’t do things 10% better, you must do things 10 times better.
1.0 Ice Harvester
2.0 Ice Factory
3.0 Ice Box (aka Refrigerator)
If you define yourself by what you do, and not the benefits you provide then you can’t jump to the next curve “Guy Kawasaki”
Identifying your path to growth
What type of relationship are you looking for?
I want to be a supplier
Consider special circumstances – IP, incentives
What motivates an entreprenuerial and innovative team doesn’t always work within corporate guidelines
Freedom to operate
I want to be a partner
Think of the vehicles – JV, Alliance, Equity
Think of the complications – IP, goal alignment, fit
Mutualism— both entities benefit
Channel
Speed
Fortune 50 Company
I need commitments to support scale
Let’s share the risk / reward and have the right provisions to address that
Let’s account for that in our plans
So do we
How can we both benefit from it
Can you support us globally?
Are you going to be around in 12 months?
We want your speed but probably wont be able to go as fast as you do
We want consistency and stability
Do you have IP?
What am I looking for from you?
Small Market Company
Vetting the partnership (It’s a lot like dating)
Alignment
When you are ready to start datingMutual due diligence is crucial….
Talk to her ex-boyfriendsMake sure to meet her parents
Is this a long term or short term type commitment? Are you truly aligned?
Will she get jealous if you are spending time with other friends?Will your friends like her friends?
No plan has ever survived the ”REORG”
If it’s not in writing it doesn’t matterDoes your success metrics align with your partners? Are your KPIs in your documents?
Simple contracts survivePricing, Volume, and the importance of guarantees
Consider your governance and voting structureSet rules for governing key issues you may have to delay the discussion on
Don’t forget about the soft metrics
Address IP up front
Without an executive champion (on both sides),find something else to do
Prepare for the antibodies
Create ”mechanics” to address
Structuring the right deal
Don’t underestimate the value of experts that know what good looks like
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Respect the process
You can’t measure a partnership purely on a DCF model
How Angry Birds started
Financing the deal
Drive towards a contract with “bankable” terms (involve your bank or investors in this process)
Don’t forget about the tax implications – Licensing v IP sale v standardGet innovative – upfront loans with capped paybacks for programs
Investors like revenue numbers – technology will not be your problem
Find alternative financing mechanisms and make sure not to overspend
Never underestimate the time it takes to get a deal done Always maintain at least 12 months of funding and appreciate the time to get a deal done
Make sure it’s a win/win – zero sum games fail in the end
What to capture in the agreement
Design the business model, goals, and projections into the contract and stick to themA clause that plans for a renegotiation
Include break up clauses and rational plans to address disagreementsIf you have IP, or joint development, define up front the the compensation methods that may last beyond the term
Soft Metrics
Governance
Warrants, Options, and mutually aligned goals
Crabs in a bucketPerception is more important than reality
Up front v earn out
Assume up front your five year plan won’t happenDon’t underestimate the unknowns
Line up your buyer ahead of time
Planning for the exit
Q & A
Brian Steketee, FounderModustrim +1.312.259.0800 // o +1.888.266.0950
Modustri.com