technology management & innovation technology start-up companies: sources of funding & the business plan

Transcription

1 technology management & innovation technology start-up companies: sources of funding & the business plan VIII.1

2 technology start-up/spin-out companies sources of start-up and early-stage finance the business plan VII.2

3 investors inventors innovation fund bank angel VC large company consortium of any of the above $ IP new company university private inventors small company spin-out company new product or service VII.3

4 start-up finance raising finance seed capital = the $ capital needed to seed a new company or business, early-stage funding = investment needed for a new company to survive the early phase of growth and initial product development (typ. 0 5 yrs) how does it work? - an investor s decision to provide seed or early-stage capital is usually based on their assessment of the IP and the business plan and hence the opportunity - IP position and business plan must both therefore be strong - there may not be an existing product or service in the market with which to compare who might invest? - public innovation funds, banks, business angels, venture capital firms (VCs), larger companies VII.4

5 innovation funds funds are usually in the form of soft loans from the government (i.e. no interest, no repayment, but they do expect results!) directed at existing small and medium sized companies (SMEs) and new start-ups usually for short periods and relatively small sums (typically 3 12 months, < $50000) funds mostly provided for proof-of-principle demonstrator of a new product or process and/or market research VII.5

6 bank loan typical range $ $50000 for a new start-up company (but can be much more for an established company) loan amount is repayable with interest in monthly installments terms from 1 to 5 years typically loan usually requires collateral guarantee (often the directors/founders of a start-up will offer their personal property, e.g. house/apartment as guarantee) VII.6

7 business angels seasoned business professionals/individuals have money to invest in exchange for a share in the company (usually 15 25%) often involve themselves in day-to-day running of the company typical angel will invest between $20k - $1M can have more than one angel investor, in a consortium angels get their initial investment back plus more when they sell their share later, when the business has grown and is worth more unlike a bank loan, if the company fails, the angels loose their money which is why angels take a close interest in how the company is run! VII.7

8 venture capital funds (VCs) VC s are professional investment firms specialised in funding highrisk ventures, especially early-stage high-tech companies investment typically at least $5M and upwards usually take a controlling/majority stake (51%+ of the shares) and put a director on the board typically want a return on investment in 5 years and will drive the company to achieve a trade sale (sell the company to another company) or an IPO (initial public share offering, i.e. floatation on the stock exchange) typically seek return of 10 x original investment! VII.8

9 large corporations many large corporations have investment funds that are operated like independent VC funds or banks will invest in early-stage companies of interest to them e.g. which have relevant technology exit strategy (how they get their money back) depends on the specific case, but could be by: trade sale (sell the company to another company), IPO (floatation on the stock exchange), retain the company because it has become a very profitable business! VII.9

10 early-stage funding cycles s t a r t - u p innova tion fund bank loan* angel investment venture capital IPO or sale value of business * start-up companies often avoid taking bank loans because of the need to make regular cash repayments time VII.10

11 the investor s decision to provide capital is usually based on their assessment of the IP and the business plan and hence the opportunity VII.11

12 the business plan VII.12

13 business plan what is it? a written and/or slide-show presentation of your commercial idea for a new business what s it used for? to attract the attention of potential investors as a reference document to help keep the company focussed in its early stages VII.13

14 what s in a business plan? the opportunity the product or service offering the market potential the technology and IP position the investment required the background & history of the company A typed & bound business plan should have a cover page, an executive summary, and appendices of supporting data. VII.14

15 opportunity o the business opportunity for the new product/process background on the business sector the company will operate in (e.g. medical diagnostics, tests for HIV) current practice in that sector (e.g. blood test at laboratory) limitations of the current practice (e.g. inconvenient, slow, expensive) the unmet need which the new business will address (e.g. saliva test at clinic with result in 5 minutes) You should not describe your new product/process here, only what it will do VII.15

16 new product/process or service offering o detailed description of the form and function of the new product, process or service which the business will develop storyboards and/or graphics and pictures will help sell the product idea emphasise advantages compared to existing technology or practice new-to-the-world products must be clearly explained considers the product lifecycle and future product roll-out VII.16

17 market potential o describes the nature and estimated market size for the new product, and who the main competitors are the target customers the competition market share the new company expects to achieve with time (e.g. 1% in 1yr, 5% in 2 yrs, 50%. etc.) and how? (better product, lower price, better service offering, new-to-the-world product etc ) how many units per annum and at what price the product will sell at consider the product lifecycle, and future product launches if appropriate VII.17

18 technology and IP position o describes the underlying science and technology of the new product, and the IP that protects it basic scientific and technology principles existing IP coverage and ownership, and any licenses needed the company R&D strategy the company IP strategy consider different forms of IP for corporate and product branding, such as trademarks (e.g. EZee-HIVee test) VII.18

19 investment required o an estimate of the cash investment the business requires for early stage funding, and the sources and timing for that funding cash-flow projection table and graph (usually for at least 3 years ahead) indicates required funding against company s objective (e.g. to completion of NPD cycle, to first product launch, to trade sale or IPO, etc.) the cash flow projection should cover business costs over the required period, including salaries, capital equipment, R&D & IP costs, overheads, NPD costs, manufacturing costs, sales & marketing etc VII.19

20 background & history of the company company name, legal status (e.g. d.o.o.) and registered address share holdings (who owns shares) and names of any other investors mission statement company history (e.g. university spin-out) names and CVs of founders, directors and principle employees and scientific advisors names and addresses of the company s bank, accountant, & lawyers any other relevant information VII.20

21 team assignment (mini-project) your team is forming a high-tech start-up company based on at least one of your four patents your team needs to prepare a 20 minute slideshow of its business plan, present the slideshow as if to potential investors, each team member is responsible for a different part of the plan and should expect to present slides for about 5 minutes, be prepared to answer questions, as a team presentations will be held in January 2011 each team member will also need to submit their own short report on their component of the business plan. Reports to be submitted on the day of the presentations ( words) The presentations and reports for the mini-projects are part of the formal examination for tm&i, and are compulsory. VII.21