USDACATP

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• USDA-CATP
• Touch points for Commercialization
• Joel Balbien, Program Manager, Larta Institute
• Rohit Shukla, Founder CEO, Larta Institute
• LARTA CATP WEBINAR
• March 17, 2009

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What is Commercialization?

• The act of structuring and managing a commercial
  venture on a business basis for profit including
  the sequence of actions necessary to
• Develop and acquire customers
• Add value to customers
• Achieve market entry and general market
  competitiveness of new and existing technologies,
  products, services, and processes

Source Ron Lyons, Alberta Agriculture and Food,
Larta Institute
3
The Tube Model for Technology Commercialization
Source Dr. D.A. Okongwu, Director General,
National Office for Technology Acquisition and
Promotion (NOTAP), Abuja, Nigeria November 6,
2006
4
Understand Your Commercialization Value Chain
Source Making Technology Happen by Denzil J.
Doyle, DoyletechCorporation
5
Six Critical Success Factors New Product
Development (NPD)

• Start with a unique superior idea, product or
  service
• Differentiation means unique benefits and
  superior value to the customer
• Sustain a strong market orientation
• Be market driven customer focused
• Follow the voice of customer
• Live, observe and work with innovative customers
• More pre-development work
• Do your homework and up-front activities before
  development gets underway
• Dont jump ahead, and protect your Goodwill
  by avoiding premature field or customer demos
• Do it right the first time

Source Ron Lyons, Business Commercialization
Branch, Alberta Canada and Larta Institute
6
Six Critical Success Factors New Product
Development (NPD) ..continued

• 4. Establish the right organizational project
  team
• Cross-functional, empowered, and accountable team
• Foster an innovative supportive climate and
  culture
• Team openly supports innovation
• Assign support and resources to the most creative
  employees
• Provide rewards and recognition for employee
  ideas
• Consider partnering and/or outsourcing as an
  option
• Outsource non-critical functions and activities
• Outsource test, validation, and some engineering
  activities

Source Ron Lyons, Business Commercialization
Branch, Alberta Canada and Larta Institute
7
Reach high in commercializing new products.
Source Arch International Knowledge Integrators
8
Welcome To The Valley of Death

• Initial start-up capital and government support
  during RD phases are readily available
• But, early commercialization phases often take
  longer than anticipated, thereby exhausting seed
  capital
• With insufficient capital to secure early market
  validation, venture capital and other financing
  sources are withdrawn

Source Rocket Builders, Vancouver BC
9
Avoiding the Valley of Death
Source Rocket Builders, Vancouver BC
10
What is Added Value?

• The additional value created at a particular
  stage of the value chain of production or through
  packaging, marketing, or branding
• Product attributes that save the customer time,
  effort, and money or provide new functionality
• For example, in food processing, increasing the
  value of a raw food product by changing it in
  some way to better meet the needs of final
  consumers

Source Rob Lyons, Alberta Agriculture and Food,
Larta Institute
11
What is Startup Management?

• The organizational process that includes
• Strategic planning, setting objectives, managing
  scarce resources, measuring results, and
  deploying the human and financial assets
  necessary to meet objectives
• Executing plans, coordinating activities and
  resources, fostering cooperation among employees,
  advisors, partners, suppliers, beta customers,
  and supervising day-to-day operations
• Selling the vision of an underdog to a world of
  doubters

Source Robert Lyons, Alberta Agriculture and
Food, Larta Institute
12
Proven Factors in Building Successful High-Tech
Companies

• Entrepreneurial and small company attitude
  (flexibility and low switching costs)
• Management Team (focused, on 24/7, hiring star
  power)
• Patents and Sustainable Advantage (the bulwark
  effect)
• Passionate Behavior (enables cohesive,
  infectious team)
• Quality Investors (focused on company needs, big
  picture)
• Product Quality and Speed to Market (essence of
  value)
• Location of the Company (near talent,
  competitors, customers, and capital, or with
  virtual presence on the World Wide Web)

Sources John T. Preston, MIT Sloan, Larta
Institute
13
Entrepreneurial/Small Co Attitudes vs. Big
Companies

• BIG
• Incremental budgeting and high switching costs
• Too big to fail
• No sense of urgency
• Defend the status quo
• Struggles to sustain a professionally managed
  entrepreneurial Co
• SMALL
• Zero based budgeting and low switching costs
• Believes that radical innovation never originates
  with the market leader (e.g., Thomas Edison)
• Spends money only on the core things that
  matter
• Realizes that time is not your friend

Source John Preston, MIT Sloan and Larta
Institute
14
Management Teams

• Value of a team of entrepreneurs is more than the
  sum of the parts
• Pursue the best and brightest
• Foster complementary skills
• Build industry knowledge (or DNA)
• Develop team chemistry to surmount inevitable
  challenges and setbacks
• Speak externally with one voice, but each member
  of the team knows the limits of his competence

Source John Preston, MIT Sloan and Larta
Institute
15
Patents and Sustainable Advantage

• Patents are like tacks in the road, they might
  stop your competitors, but are more likely to
  slow them down (1 - 2 MM to stop infringement
  activity)
• Improve your odds of sustaining a freedom to
  operate
• Seek to patent an innovative integration of
  technologies already in the public domain
• This can sometimes create more value than a home
  run utility patent
• Defeating obviousness is becoming more
  difficult
• Secure the home front (USA)
• Overseas filings - carefully select countries
  with the greatest market and partner potential
• Seek overseas partners to fund the filing,
  enforcement, and prosecution of offshore patents
  in return for certain marketing rights, but
  always maintain control of the worldwide patent
  portfolio
• Retain Patent Counsel with startup experience
  that can optimize IP strategy given financial and
  technology constraints

Source John Preston, MIT Sloan and Larta
Institute
16
Passionate Behavior

• Distribute Ownership Widely through ESOP
• Southwest Airlines, Lotus Development
• Believe in yourself and your mission, i.e., Walk
  the Walk so suppliers, advisors, and employees
  will accept your stock as currency
• Balance passion with credibility on the market
  and technology
• Successful competitors validate the market
  know, study and respect them

Source John Preston, MIT Sloan and Larta
Institute
17
Seek Quality Investors

• Provide Leverage
• Know that they can open Doors
• Find out just how deep their pockets are
• They must be hands-on
• Super Angels and VCs can supply sufficient long
  term capital to complete a rocky but worthwhile
  journey
• Angels and high net worth individuals can fuel a
  takeoff, open the door, but they rarely supply a
  parachute for a safe landing

Source John Preston, MIT Sloan and Larta
Institute
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Implement Best Startup Practices Part I

• Start with a properly structured company or
  business
• Board of directors, company management and
  employees are focused and share a common vision,
  mission, and strategic goals
• A corporate culture of caring, sharing and
  excellent communications is in place
• Reward and celebrate success
• 5. Seek out entrepreneurs within customers and
  partners (the largest companies will not adopt
  radical innovation)

Source John Preston, MIT Sloan and Larta
Institute Ron Lyons Business Commercialization
Branch, Alberta Canada
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Implement Best Startup Practices Part II

• 6. Invest for the Long Term (Create Wealth vs.
  Shift Wealth)
• 7. Be open to innovative ideas from all
  employees
• Assign high priority to input from those working
  with and observing customers
• Good ideas should be considered seriously and
  rewarded
• 8. The quality of your people/management and
  complementary skills determines success
• 9. Up-to-date strategic business plan covering
  the upcoming year and 3-5 future years
• Covering new and existing products and services
• Make it available to employees
• 10. Attack the fiercest market early (e.g., USA)
  and move quickly to the market (Fast or Dead)
• 11. Eliminate regulatory and other government
  barriers
• seek governmental advocates

Source John Preston, MIT Sloan and Larta
Institute Ron Lyons Business Commercialization
Branch, Alberta Canada
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Other Proven Commercialization Strategies

• Start small, look for quick wins, and show
  examples of success (role models)
• Small successes are the platform for big
  successes and revolution
• Elapsed time to leverage success can be long
  (dont rest on your laurels)
• Take into account the specific context of a
  successful product demonstration
• Take care of localization issues before you
  simply copy/paste to other locations
• Share Your Vision, align focus of all
  stakeholders
• Create awareness based on a sound vision and
  mission
• Keep your focus simple and clear do not fragment
  resources
• Design a form factor and embed your product in
  the existing customer use or market structure
• Where possible, focus on integration with instead
  of replacement of existing products use their
  strengths and optimize their weaknesses

Source Arch International Knowledge Integrators
and Larta Institute
21
Commercialization strategies can be industry
specific Ag-Biotech and Medical
Devices
Source Geoffrey Hansen, Rocket Builders,
Vancouver BC and Larta Institute
22
CATP Deliverables

• Commercialization Strategy Report (CSR)
• Executive Summary
• Barriers to Commercialization Report
• Commercialization Roadmap
• Competitive Matrix
• Companies and PA must sign off on report
• All reports are due May 2009
• Monitoring of Company Progress

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CSR Barriers to Commercialization

• Regulatory hurdles (FDA, EPA, USDA, State and
  Local, Industry Associations, e.g., ASTM)
• No IP or conflicting IP (acquire, merge, or
  license 3rd party IP)
• Other competitive barriers (overcome small co
  bias by selling to govt, utilities, and other
  small companies)
• Market barriers (big companies consolidating
  supply chain)
• Building a supply chain (think global and
  leverage the internet)
• Building a management team (seek experienced
  retirees)
• Securing financing
• Strategies to overcome all barriers

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CSR Barriers to Commercialization
Source Rocket Builders, Vancouver BC
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Building the Roadmap

• A small company with a plan may be more
  successful than its rivals with no plan
• Milestones needed for acceleration/momentum
• Resources needed for the engine of growth
• Obstacles anticipated and unanticipated
  roadblocks
• Note Access to Capital plays a role in all 3
  areas

Source Boone Pickets and Rocket Builders,
Vancouver BC
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Building the Roadmap
Source Rocket Builders, Vancouver BC
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Key Customer Milestones

• Early customer input into product development
• Working with Beta customers
• Early customer input into revenue and business
  model development
• Getting the first paying and referenceable
  customer

Source Rocket Builders, Vancouver BC and Larta
Institute
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Key Partner Milestones

• Carefully survey the co-opetition landscape
• Choose your partner/s well key to marketplace
  acceptance
• Involve the partner in product development
• Leverage the partner to enhance marketing and
  financing credibility
• A reliable and honest foreign partner can help
  secure IP rights in distant markets
• Interview and select the right law firm to assist
  in partnership negotiations

Source Rocket Builders, Vancouver BC and Larta
Institute
29
Building the Roadmap

• Collaborate with your PA to
• Identify key activities and milestones
• Determine the proper sequence of activities
• Estimate the cost and lead time for each activity
• Keep your eye on the critical path
• Help monitor progress
• Update your roadmap as your company progresses

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Commercialization Roadmap Be a Professional
Managed and Entrepreneurial Company
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Competitive Matrix Know your Competitors and
Embrace co-opetition
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Financing A Dose of Reality

• Make a realistic assessment of your product
  development, marketing, and management
  requirements (Quantify and be conservative)
• Startups require absolute focus on the first
  customer and low hanging fruit applications
• 99.9 of business owners and entrepreneurs
  struggle alone (i.e., never accessing third party
  financing)
• Operate as if you will never obtain outside
  capital (Google employed used office furniture,
  and equipment, etc. and didnt receive VC backing
  until their revenue model was proven and scaling)

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Alternate Sources of Capital

• Personal Savings and Investments, and Credit
  Cards
• Affinity Investors
• Friends and Family (Money Pool)
• Professional Affinity and Super angels
• Angel Groups
• Peer to Peer Lending
• Investment Bankers
• The Government and Foundations (e.g., SBIR
  Grants, SBA Loans, ERA Challenge Grants, Tax
  exempt bonds for Intangibles, Gates Foundation)
• Banks and Asset Based Lenders
• Bootstrapping
• Sales and profits, and a modest lifestyle are
  your cheapest source of capital
• Leasing of alpha and beta systems to early
  adopters who also receive non-qualified stock
  options

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Bootstrapping as a financing strategy

• Look Vertically for dollars
• Vendors
• Service Providers
• Employees (more stock and less cash)
• Customers
• Prepayments Deposits
• Non-recurring Engineering NRE
• Lease a Beta system to a distributor/strategic
  partner
• Look Outside the Box
• Creative ways to acquire goods and services
• Think of the three Bs Barter, Bargain, and Be
  Creative whatever it takes to build your
  business

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Bootstrap Operating Practices Save a bundle

• Minimize fixed overhead
• Dont buy anything new that you can pick up used
  on eBay, Craigslist, or at a thrift store
• Avoid fixed costs, pay as much as you can out of
  sales (Choose variable costs over fixed costs
  wherever possible)
• Get freebies including advertising exposure
  through the press
• Share shamelessly someone elses office, trade
  show booth, copier
• Work virtually, but if you have to rent space,
  pack them in!
• Universities can provide low cost human capital
  and IP but can lack urgency (Incentivize any grad
  students or faculty collaborators)

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Bootstrapping by Outsourcing

• Your dream reveals your core, know what this is
  and own it lock, stock, and barrel
• With everything else, outsource relentlessly
• Servers and hosting
• Product and software development
• Engineering Scale up
• Sales
• Marketing
• Finance
• Production
• Licensing Legal (what makes a good license? A
  bad one?)

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Bootstrapping Product Development (PD)

• Bootstrapping PD can save big bucks but is
  fraught with risks
• In software, e.g., two thirds of outsourced
  projects fail because the client
• Fails to precisely express their requirements to
  the vendor
• Continuously changes their mind during the
  development process
• Negotiates a poorly constructed development
  contract

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Bootstrapping Product Development

• During Pre-development and Conceptualization
  focus on
• Strategy describe the market you will serve,
  the current customer pain, and how you are going
  to fix it
• Mock-up - build a mock-up of the system you want
  developed
• Functional Specification - write a clear,
  precise, and high quality document that explains
  exactly what you want
• Vendor long-list - build a long-list of
  possible vendors and NDA them all

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Bootstrapping Product Development

• During Post-Conceptualization and Pre-selection
  focus on
• Request of Information - Write and run a
  professional selection process to sift your
  long-list of vendors down to a short-list of
  between 4 - 10 vendors
• Request for Quotation execute a professional
  RFQ process to determine approach, costs,
  timescales and conditions under which each vendor
  would deliver
• Select a preferred vendor and a spare in case of
  any problems during contract negotiations
• Award contract - Negotiate a product development
  contract
• First trip - if the vender is off-shore you will
  need to visit them and get them started
• Managing the development take responsibility,
  hold employees accountable, and be hands on
• Alpha, Beta, launch - Get a large number of beta
  customers and act on their feedback

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Wrapping Up

• Customer first, product second
• Intellectual property (IP) is not always a
  critical success factor, but you need a plan
• Cluster of similar customers can lead to growth
• Although access to capital is a common obstacle
  identified, it often less clear what additional
  capital would enable
• When your bank account is full, operate in
  non-strategic areas as though the tank is empty
• Share the upside (Equity) with employees,
  advisors, and qualified board members but pay for
  performance
• Surround yourself with the best and the
  brightest, and build a team that is stronger and
  smarter than the sum of the parts
• Set stretch milestones but dont reach for the
  moon
• Life is short, so surround yourself with people
  you enjoy working with

Source Rocket Builders, Vancouver BC and Larta
Institute