technology start ups

7/23/2019 Technology Start Ups

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Wednesday 23 October 2013

Hosted by The Warwick Entrepreneurship

Professional Network

This event will start at 18:00 BST

How to do Technology

Business Start-Ups


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Warwick Business School

Ola Henfridsson

Information Systems & Management

WBS


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1. Many potential entrepreneurs


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FACTORY

CAPITAL


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design AND production AND distribution


7/99Warwick Business School

Design+production:software tools

Distribution:software platforms



Many potential entrepreneurs

MANY POTENTIALENTREPRENEURS



THE PHILADELPHIA EXPERIENCE


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2. Massive recombination


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Standalone service, yet

Rightmove, hotels, navigation, tourist, socialmedia services

Bundled with laptops, cellphones, televisions,cars, navigation systems, cameras,

Components in layered architectures areproduct-agnostic


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Massively increases the space of possible ideas


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3. Redefines scale and scaling


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PRODUCTION NEEDS TO BE NEARLY ALGORITHMIC FORACHIEVING SCALE ADVANTAGES


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REPRODUCED WITHOUT VIRTUALLY ANY PRODUCTIONCOST


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PLATFORMS


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Platforms as Multi-Sided Markets

Platforms must cater toboth application

developers and end-users

The value of joining a

platform depends onexpectations of the

opposite marketAPPLICATION

DEVELOPERS:

-What is the installed base?

-Who are the customers?

END-USERS:

-How many applications are

available?

--Are they useful?

PLATFORM

Readings:

Evans, D.S., Hagiu, A., and Schmalensee, R. 2006. Invisible Engines: How Software Platforms Drive Innovation and Transform

Industries. Cambridge, MA: MIT Press.

Messerschmidt, D.G., and Szyperski, C. 2003. Software Ecosystem: Understanding an Indispensible Technology and Industry.

Cambridge, MA: MIT Press.


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4. New Motors of Change


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THE ENTREPRENEUR ALWAYS ADDS TO AN (INCREASINGLY

DIGITAL) INFRASTRUCTURE


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ADOPTION, INNOVATION, SCALING


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More users adopt

Digital Infrastructure

More services

offered

More resources

invested

Figure 5. The Adoption Mechanism

Ref: Henfridsson and Bygstad (2013)


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Recombination


Technicalmalleability Newservices

Figure 4. The Innovation Mechanism



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Partner solutions

added


Partners

attracted

Reach

expanded

Figure 6. The Scaling Mechanism



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5. New Perception of Business Value


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REPROGRAMMABILITY:separates the semiotic functional logic of the device from the

physical embodiment that executes it

Makes the physical embodiment less important


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HOMOGENIZATION OF DATA:any digital contents can be stored, transmitted, processed, and

displayed using the same device and networks

Makes the network, or distribution, less important


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GENERATIVITY


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The five things

1. Many potential entrepreneurs

2. Massive recombination

3. Redefines scale and scaling

4. New motors of change

5. New perception of business value


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Many thanks for your attention!

Ola HenfridssonWarwick Business SchoolThe University of Warwick

CoventryCV4 7AL, UK

[email protected]
mailto:[email protected]:[email protected]


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References

Evans, D.S., Hagiu, A., and Schmalensee, R. 2006. Invisible Engines: How

Software Platforms Drive Innovation and Transform Industries. Cambridge,

MA: MIT Press.

Henfridsson, O., and Bygstad, B. 2013. "The Generative Mechanisms of

Digital Infrastructure Evolution," MIS Quarterly (37:3), pp 907-931.

Messerschmidt, D.G., and Szyperski, C. 2003. Software Ecosystem:

Understanding an Indispensible Technology and Industry. Cambridge, MA:

MIT Press.

Yoo, Y., Henfridsson, O., and Lyytinen, K. 2010. "The New Organizing Logic

of Digital Innovation: An Agenda for Information Systems Research,"Information Systems Research (21:4), pp 724-735.


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Professor John Lyon


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Corporate life

Support structures

Corporate identity

Well defined organisational structure

Politics


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Corporate life

Support structures

Corporate identity

Well defined organisational structure

Politics


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Entrepreneurial life

Every day a new challenge

When to use in-house skill base and when to

outsource

finance

patents

science


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Entrepreneurial life

Forever raising capital

Always looking for an exit

Requires entrepreneurial capabilities


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The transition

Opportunistic (too good to miss)

Planned (strategic)

Forced (redundancy)

My story


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The transition

Meeting your partner (the courting ritual)

Business vision and mission

Living off the corporate package

Exit from the corporate


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The transition

Raising seed capital

Availability

Ease

Financing package

Due diligence


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The Early Days

Greatest difference between corporate and

entrepreneurial life

So I have the money, what do i do next as CEO?

Making friends and influencing people


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The Early Days

Cash is king

Seeking legitimacy

Building the team


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The Early Days

Spreading the word

Managing your time

Can the peaks and troughs be managed and can

the team cope when the chips are down and the

impossible has to be made possible?


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The Early Days

Spreading the word

Managing your time

Can the peaks and troughs be managed and can

the team cope when the chips are down and the

impossible has to be made possible?


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Understand yourself

Do I want to be an entrepreneur?

Why am I doing this?

What do I want to achieve?

What will I do if I achieve my goals?

What will I do if I do not achieve my goals?


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People (the team)

Complementary skills

Complementary knowledge sets

Human chemistry

Up For the challenge

Shared vision, mission and goals?


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People

Making sense

Ability to act as bricoleurs

Execs versus non execs Board dynamics

Entrepreneurial versus corporate

How/when (is?) due diligence performed onthe people?


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Gaining legitimacy

Importance of securing good connections with:

Key academics

Key opinion leaders

Required outsource providers

Key commercial players


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Gaining legitimacy

A major reason for striving to achieve legitimacy

is to ease the ability to raise fresh investment in

terms of:

Raising credibility in the city

Speed and complexity of due diligence


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Business model

Has to be robust yet flexible

Meet investors expectations whilst operationally

achievable

i.e. have a story of growth . but one you can deliver

Possess adequate change management

Built in contingency

Planned for exit from day 1


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Support network

Mentors

Peer group

Consultants

Industry groups

Potential to waste time with networks that do

not bring any added value or distract


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Understand cycles

Be aware of where the company is on the

growth cycle:

Think about the different requirements at

different stages of the ventures development

Pre-empt issues that arise through successful

and/or unsuccessful growth

Need to organize for resources to flow into theventure: money, people etc..


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Understand cycles

Be aware of where company is on the funding

cycle:

Is money available?

Exits and marketsare some options not present?

Raise investment when it is not needed (if it is it may

be too late)

Normally a cash run of 2 years is minimum


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Understand cycles

Be aware of where company is on the Human

Resource Cycle

Are good people available to hire?

Can the company attract good people?

What is the HR dynamics between large Pharma

and small Biotechs?


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Understand cycles

Be aware of where the company is on the

Pharmaceutical product pipeline cycle

Pharma products coming off patent

Life of biotech patents left

Competition within therapeutic area

Resistance


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Some general comments

Do not always go for the deal that looks best on

the deal sheet

Investors can bring intangibles as well as cash

Specialist industry knowledge may be key (and bringwith it contacts)

Goal, values and exit congruence between

investors and executives Both amongst executives as well as with investors


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General comments

Fund raising mode is different to building a

business mode

Invest time in keeping investors on message

Look for cues to address small failures

Learn from failure

fail fast, fail cheap, move on

Try to enjoy the experience !!!!!


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Key lessons

As an ex venture capitalist and current business

angel:

Never invest in a company with a fountain

Spend time with the people down the pub

Roll up your sleeves

Encourage healthy debate and decision making


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Key lessons

As an ex venture capitalist and current business

angel:

Always keep an eye on the exit

Continually evaluate value added of each boardmember

Observe cues towards small failures

Act early otherwise may be too late


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Q&A

What do you want to ask an entrepreneur, who

has also been an investor, but never had the

opportunity to ask?


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Commercialisation of Technology from

Introduction to Warwick Ventures

23 October 2013

Quentin Compton-Bishop

CEO, Warwick Ventures Ltd


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2013 Warwick Ventures Ltd

About Warwick Ventures

A commercially-focused team Universitys subsidiary and sole agent to

commercialise Warwick IP

Key drivers

Economic and social impact

Reputation for research excellence

Financial return

A service for academics and other Universityinnovators


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What do we do?

Identify research with commercial potential Protect the Universitys IP

Support proof-of-concept development

Market the opportunities

Negotiate licences

Set up and grow spin-out companies

From innovation to impact


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Spinouts

27 spinouts in

portfolio

4m value of

University shares

55m investment

in 79 companies

created since 1999 Value of University sharesby spinout sector


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nvil

Semiconductors

VirionHealth


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Future opportunities

Warwick Ventures Software Incubator

Warwick Enterprise Fund

Investing in spin-outs and Warwick affiliated tech

enterprises

Involving the Warwick network

Building world-class technology businesses


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Duncan Billson

Assoc. Prof., School of Engineering

Director and founder, Warwick Audio

technologies Limited


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Talk Overview:

Spin-out companiesintroduction

Warwick Audio Technologies Limited

Lessons to be learnt and questions to be asked

from spinning-out research


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DRB / School of Engineering Spin-out

companies:

Digeprint / LumejetWarwick Audio Technologies

http://www.warwickaudiotech.com/

http://zonarsound.co.uk/

Warwick Sensor TechnologiesWarwick 3-D technologies
http://www.warwickaudiotech.com/http://zonarsound.co.uk/http://zonarsound.co.uk/http://www.warwickaudiotech.com/


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The usual spin-out route

Idea / research discovery

Check viability of idea / Sanity check

Identify your team

Business plan

Funding

Set up business

Run business Either fail / succeed

Disposal


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UOW Spin out company DRB / DAH

UOW and the departmentare shareholders

Thin, flexible loudspeaker technologyRadically new - disrupt ive

Raised ~ several m

12 FTE

Based in Wales / the Venture CentreCurrently making first products - priority is now to get

sales traction

F t & B fit


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Features & Benefits

Ultra thinless than 1mm thick Ultra lighta panel 210mm x 297mm weighs less than 120 grams

Low powerthe loudspeaker panels utilise less than 10% of thepower required by traditional loudspeakers

Directionalputs sound where its needed..not where it isnt

Greenno rare-earth magnets, electrically efficient, minimalmaterial use and lightweight so saves fuel when used in automotive

/ aerospace

F t & B fit


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Features & Benefits

Flexible Soundthe field of sound can be determined byflexing the laminate:

A convex shape will broaden the sound field

A concave shape will narrow it

Water resistantpanels can be treated for applicationsin damp or humid environments

The Management team


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The Management team

Derek Mottershead, Chairman

Derek recently joined Warwick Audio after 14 years as Managing Director of Bang & Olufsen UK, Ireland

and Benelux countries. Marketing Director of Pretty Polly, Lee Cooper and Vanity Fair Corporation ofAmerica and Managing Director of Prontaprint plc.

Ranjit Roy-Choudhuri, F.D.

commercial accountant who began his career in Coopers & Lybrand (UK and Hong Kong) and morerecently has held roles such as Group Finance Director for Intellego Holdings plc.

Andrew Samalionis, Sales

15 years' sales and marketing experience gained with companies such as Meridian Audio, Arcam and Kef.

Chris Rhodes, Operations

Chris Rhodes is Warwick Audios Operations Director. He joins the company with over 25 yearsexperience of improving operational efficiency and profitability at major international companiesincluding Centurion Electronics plc and automotive suppliers Johnson Controls and Valeo.


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ApplicationsConsumer electronics

Laptops & hand-held gadgets

Automotive Public address

Communication & conferencing


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Commercial Manufacturing

2 strands: OEM and our own brand, Zonarsound

Make all our loudspeaker elements

Strategy is to use 3rdparty manufacturers

Production facilities identified in SE Asia, continentalEurope and UK

Most cost-effective production sources based in Telford

and Milton Keynes

Fully automated process designed including 100%testing

Capacity for 400,000 units pcm from one machine


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Zonarsound: Directional Speakers

Our own product range is being marketed under

the ZonarSound brand name

Complete system, including housings, amps etc

UK and European distribution partners established Full product testing (inc. fire testing) completed

Product launch January 2013 at Integrated

systems Europe (EIS) -

Distributor network increasing In production and selling now!


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Directional Ceiling Speakers

First question why exploit University


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First questionwhy exploit University

research?

To make money?

To keep your boss/ department/ University

happy?

To see your invention in the marketplace?

To help the UK plc.?

To benefit mankind?


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Second questionhow can you exploit

the Universitys technical ideas?

Can you exploit the technology?

who owns it?

What is the Universitys attitude to exploitation? What University exploitation infrastructure exists?

Warwick Ventures / tech transfer office

Patent protection

License (One-off payments or Royalties)

Spin-out company

Always do a reality check to see whether its a


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Pro Con

Could make money Could lose money

Glitteringly successful business Crash and burn

Career benefits Hard work

University benefits Cant publish.

Always do a reality check to see whether it s a

good ideamake your own pro and con lists

and share with interested parties!

A k h t d t i 5 10 20


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Ask what do you want in 5, 10, 20

years?

What is the best plan for the business?

What is the best plan fo r you? What is your role now? In the future?

Do you have, or want an exit route?

What do your shareholders want / expect?

Do you have the skills to be the boss as the

business expands - would you employ you?

E it


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Equity

Started with 100%

Investment brings dilution

If you need external funding, this will decrease toa small fraction (~1%?)

Better to own a large % of a small company or a

small % of a big company?

Equity is usually the biggest single point ofcontention

F di


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Funding

Self funding / family / friends

Business Angels

Good Venture Capital (Mercia / Porton) VultureCapital

How much will you need?

How will you manage it? What happens when disaster strikes?


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If you decide to go ahead with a spin-out

then Good Luck!

(but keep taking the tablets!...)


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How to do technology startups

from an investors perspective


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Introduction to Mercia

Who we are Established reputation for sourcing, investing in and scaling businesses capable of rapid revenue growth Invest in university and non-university businesses from seed to expansion/development capital

~19m under management, syndicated to date circa 70m into our portfolio

Incubator unit in Henley-in-Arden (Warwickshire)

Our teamInvestment Team

7 investment execs in the team

Investment Panel

Peter Gardner (Investment Panel Chairman)

Martyn Booth, BSc, FCMA, MIED (Chief Executive

Simon Cartmell (Venture Partner for Imperial Innovations)

Ray Chamberlain (entrepreneur and investor)

Administration

Ian Scott (Finance Director& Investor liaison)

Talon Golding (Manager, Sales & Investor Relations)

Alan Possart (Admin & Finance support)

Advisory Committee

Michael Cumming (co-founder of Barclays private

Equity)

Peter Dicks (co-founder of Abingworth)

Sir John Egan

Norman Price, OBE

Dr James Wilkie

Prof. Stuart Palmer

Why invest in an Early Stage


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Business?

0%

10%

20%

30%

40%

50%

60%

70%

FTSE All Share FTSE 100 IPD UK AnnualProperty Index

Angel investing- UK

Mercia EIS-qualifying

investments

Mercia EIS-qualifying

investmentsplus income tax

relief (30%)

1998 - 2008

2007 - 2012


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Fundamentals

The right team

Cash & cash management

Proven, scalable business model

Proven route to market (access to

markets, suppliers, channel strategies)

Proven technology/service

Business planning, financial discipline,

product / service monetisation

Forsuccess,

a business

needs:


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Risk management

Finance (total capital needs, finance availability)

Management (gaps, acknowledgment of gaps)

Technology; products/platform/pipeline

IPR / barriers to entry

Business model validation

Analysis of route to market

Competitor analysis

Scalability


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Capital sources

Are you at concept stage:

Own capital, friends & family

GrantsTechnology Strategy Board, university servicesand grants

Pre-revenue, early stage:

Grants

Business angel capital / SEIS Crowd funding?

Early revenue:

Grants

Business angels / EIS

Other early stage investors (very few)

Established trading, with assets for security:

Grants

EIS

VC

Banks, trade finance etc

Match your

need/stage of

development

with an

appropriateprovider:


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Fund suitability example

Mercia Growth Fund 1 & 2Seed EIS

(~2.5m)EIS (~1.5m)

Mercia Fund 2

Mercia Fund 1~9.5m (evergreen, partnership with 8 universities)

~5m (private fund; finished primary investments)


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Business plan & Finance sourcesKey areas sought

by mostproviders:

Introduction to the VC/financeprovider by a trusted intermediary

Details on management team, theirexperience and why they are thebest to deliver the plan

The core product or service

Is it scalable? Proprietary?

What is the consumer pain itaddresses?

Business model

Route to market

Markets Regional, national, global

What is the addressable market

Competition There is always competition!

If a loan or investment, how will it berepaid and when, ROI, IRR / multiples

Revenue / trading achievement to date

Provide precedents for this (trading / exit)

Finances Summary for 3 years

Detail for 1 year

Cash flow is essential


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Sector preferences


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Examples of companies backed

Cash generative /

Profitable businesses

Within 18 months

of profitability

Seed & Early stage
http://www.merciafund.co.uk/portfolio/celentyx/http://www.merciafund.co.uk/portfolio/allinea-software/http://www.merciafund.co.uk/portfolio/warwick-audio-technologies/http://www.merciafund.co.uk/portfolio/sarissa-biomedical/http://www.merciafund.co.uk/portfolio/psioxus-therapeutics/http://www.merciafund.co.uk/portfolio/polytherics/http://www.merciafund.co.uk/portfolio/nightingale-eos/http://www.merciafund.co.uk/portfolio/the-native-antigen-company/http://www.merciafund.co.uk/portfolio/nanotherics/http://www.merciafund.co.uk/portfolio/irresistible-materials/http://www.merciafund.co.uk/portfolio/intelligent-orthopaedics/http://www.merciafund.co.uk/portfolio/lm-technologies/http://www.merciafund.co.uk/portfolio/concurrent-thinking/


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Mark PaytonMercia Fund Management

E: [email protected]

W: www.merciafund.co.uk

University Partners: University of Warwick, University of Birmingham,

Coventry University, Aston University, Staffordshire

University, University of Wolverhampton,

Birmingham City University & Keele University
mailto:[email protected]://www.merciafund.co.uk/http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=6VpUnUUWvd5EDM&tbnid=Pl7JrbnsAX1OYM:&ved=0CAUQjRw&url=http://www.guardian.co.uk/education/2009/may/10/universityguide-uni-wolverhampton&ei=5_ohUaj5MMak4gTllICoCQ&psig=AFQjCNEQjeMX9WIV-4YXVrU8Vnv8jE9Vpw&ust=1361267728036712http://www.merciafund.co.uk/mailto:[email protected]


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Q & A

technology start ups

Documents