intro to tech companies & business creation

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` Introduction to technology commercialization

Presented by:

Raphael Ronen Commercialization Manager -The Innovations Group University of Toronto

raphael.ronen@utoronto.ca

16 October 2009

“At TIG, we bring together researchers and businesses to capitalize on the ideas developed at the University of Toronto and the hospitals affiliated with the university, where more than $2 million worth of research is conducted daily. . .”

-Tim McTiernan

Idea Research or ??

Commercial Potential?

Technology D

evelopment

Business

Developm

ent Value established

-financing

-licensing

Tech Transfer

•  Assess

•  Protect (patent) •  Funding •  Business Plan •  Marketing

•  License / Start-up

Commercial Potential?

Business Development

Value established

-financing

-licensing

Outline

•  Assessment – Understand your product/company’s

strengths/limitations •  Lessons learned from commercializing

from an academic armchair – Start-up versus License – Funding/Financing – Ownership

Technology Commercialization Evaluation

•  Intellectual Property Factors •  Technology Factors •  Market Factors •  Team Factors

•  Impact

Intellectual Property Background

•  Patents . . . also copyright, trade secrets, trademarks

•  Principle: – Reward to disclose – 20 year monopoly where

right to exclude everyone else – Greater good: Everyone can practice

afterwards

Why Patent

Competitive Advantage

Invest in R&D – Recoup costs

•  Development Costs –  Pharma: $500M-$1.2B – Device: $50M-$160M

•  Development Time –  Therapeutic: 8-15 years – Device: 3-6 years

Patent

R&D / Approvals

First Sale

Revenue

Patent expiry

Patent Factor Evaluation

•  Invention has protectable IP – Novelty (i.e. new and not disclosed) – Non-obviousness – Utility

•  There is freedom to practice the IP •  IP is defensible and infringement

detectable

Patent costs and timelines

Abandon

Provisional Patent

1 yr

$2-4k

PCT 18 months

$10-12k

EP

US

CAN

JP

$$ $25k

+$50k

Office Actions

Issuance

Technology Commercialization Evaluation

•  Intellectual Property Factors •  Technology Factors •  Market Factors •  Team Factors •  Impact

Technology Factors

•  Scientific basis understood •  Scientific data is thorough •  Technology is well developed •  Team has product development capabilities

IS IT REAL – WILL IT WORK?

Value in developed technology

Micro-CT System

•  Scientific basis understood •  Scientific data is thorough •  Technology is well developed •  Team has product development

capabilities

Technology Commercialization Evaluation

•  Intellectual Property Factors •  Technology Factors •  Market Factors •  Team Factors

•  Impact

Market Factors •  Need is well defined •  Product addresses the need •  Market is large and growing •  Competition and barriers are low •  Time to market is short •  Profit margin of product is high •  Market receptors can be easily identified •  Investment or funding can be easily obtained

Example •  Need is well defined •  Product addresses the

need •  Market is large and

growing •  Competition and barriers

are low •  Time to market is short •  Profit margin of product

is high •  Market receptors can be

easily identified •  Investment or funding

can be easily obtained

Technology Commercialization Evaluation

•  Intellectual Property Factors •  Technology Factors •  Market Factors •  Team Factors •  Impact

Rectal Wall

Heating Pattern

Thermal Damage Boundary

Bladder

Multi-element Transducer

Urethra

Cooling Balloon

Need is well defined ? Product addresses the

need Market is large and

growing Competition and barriers

are low Time to market is short Profit margin of product is

high Market receptors can be

easily identified Investment or funding can

be easily obtained

Technology Commercialization Evaluation

•  Intellectual Property Factors •  Technology Factors •  Market Factors •  Team Factors

•  Impact

Technology Commercialization Evaluation

•  Intellectual Property Factors •  Technology Factors •  Market Factors •  Team Factors

•  Impact

Team Factors

•  Team has product development capabilities

•  Team has time and is willing to support •  Team has realistic expectations •  Team has commercialization experience

Team Factors

•  Team has product development capabilities

•  Team has time and is willing to support •  Team has realistic expectations •  Team has commercialization experience •  Team is reasonable, ethical, can work well

together and deliver

Technology Commercialization Evaluation

•  Intellectual Property Factors

•  Technology Factors •  Market Factors •  Team Factors

Understand your strengths, understand your weaknesses and plan accordingly

Idea

Commercial Potential?

License versus Spin-Off

License

•  “Sell” technology to an established company

•  Return: –  royalty paid based upon sales attributable to IP (a

percentage of net sales) –  Repayment of patent costs

–  Milestones – if license is exclusive then minimum royalties typically apply as well as development milestones (especially in drug development.)

Spin-Off

•  Build: – Team – Product – Sales – Financing

•  Return: –  IPO – Acquired – Dividends

Create a new company

Licensing Considerations

•  Good Licensee fit: Can Leverage development, sales and marketing capabilities of an established company

•  Add-on technology •  Time and risk constrictions

•  Willing to pass control (and responsibility) of your technology

•  Lack of suitable receptor capacity (licensee) for IP •  Platform technology with solid IP potential for

additional synergistic IP •  Potential to be a multi-million dollar public company •  Committed team with long term perspective •  Funding and management can be attracted (team) •  Potential return

Spin-Off Considerations

•  Belief that you can advance the technology better than another company

•  Spin-Off’s are time consuming, risky, and take up a lot of time that may or may not, be better spent on licensing the IP

•  Have potential for big upside under right circumstances.

•  Decision to do spin-off needs careful consideration and commitment from all parties involved.

Spin-off Company

•  Some companies and sectors not well suited to generating new lines of business and divisions; others have sophisticated in-licensing experience

•  Large companies sometimes look to M&A (Mergers and Acquisitions) as an alternative.

•  Companies will pay premium for small companies that are synergistic with their business mission.

Industry Need

It takes 10 times more time to manage a spin-off than it does a licensing transaction

License vs. Start-up Summary License

Good fit with company Add on

Less effort In hands of experienced people Chance of success

Less control Lower potential returns

Start-Up

Platform technology No good licensee

Under your control Higher potential returns

Time consuming Risk of failure

Early stage funding •  Government (Check with your TTO)

–  NSERC I2I –  CIHR POP –  OCE market readiness –  HTX –  Accelerator Funds –  IRAP –  Next Generation of Jobs (MRI)

•  3 F’s (friends, family and fools) •  Angel / VC funds

Returns to the financiers

•  Government – Job creation – Training of HQP – Return to region

•  Angel / VC – Multiples of their

investment (5-10x) – Tangible exit

•  Money •  Tax credits

•  Money •  Guidance •  Contacts

GIFT

NEGOTIATION

Ownership and rewards Who owns the intellectual property? •  If you work for a company Company

–  Might get a reward recognition-$1000 per patent •  If you just left a company/university Be careful

–  Developed (or appeared to be developed) from work done while at the company ~company owns

–  Agreements (confidentiality, non-competition) •  If you work for a university varied

–  You own / University owns / Jointly own (talk to your TTO) –  Reward: 33%-75% of the revenue

•  If you work for a university on research funded by a company company probably has some rights

Clear ownership is needed before investors will fund!

•  Pay to Protect IP – patents, trademarks, copyrights. •  Assist in the developing of Business Plans and

commercialization strategy. •  Assist in getting additional grant funding to further

develop IP (sometimes mandatory that the technology transfer office is involved NSERC –I2I).

•  Create start-up company when appropriate vehicle for commercialization.

•  Assist in raising financing for company. •  Negotiate agreements with licensees.

What TTOs do

•  Overestimating the science/technology and one’s capabilities –  Lack of realism regarding the actual stage of development of the

science/technology (“the next Google”) –  Someone else is probably developing the same technology in

their basement

•  Poor understanding of the customer and his/her value chain –  Proactive ignorance of challenges involved in developing and

realizing value

•  Disconnect between business and the science –  Underweighting of importance of demonstrating progressive

commercial achievement

Recurring Pitfalls and Themes

Questions