Managing Expectations

Transcription

1 Managing Expectations The role of a founder Founders versus managers Not all founders are good managers Roles change over time Start-up business plans change a lot! Goal Synergy: Compensation: cash or equity? What are realistic expectations?

2 Development of a Start-up Company Commercializing Technologies at the University of Minnesota Venture Center University of Minnesota

3 Elements of Success There are 3 major requirements for a successful start-up company: World-class technology Experienced management Adequate financing from experienced investors

4 Technology Ownership For University intellectual property (IP): The Bahy-Dole Act (1980) Grants ownership of IP to the University Requires the University to use its best efforts to commercialize University Regents Policy on cash proceeds from commercialization 1/3 share to the researcher or research team 1/3 share to the research college or department 1/3 share to the University

5 Ownership Goals of a Venture Center Start-up University Management Investors

6 Phases of a Start-up Company s Growth and Development Phases Description 0 Pre-company Formation 1 Start-up/Company Formation 2 Development Stage 3 Growth Stage 4 Preparation for Exit

7 Pre-company Formation Milestones: Technology assessment Evaluate strength of intellectual property Proof of concept Business/commercialization assessment Determine market need and size Develop 5 year revenue projections Does return on capital meet investor requirements Draft initial business plan

8 Start-up/Company Formation Organizational Structure Chief Technical Advisor (Plus 1-2 Additional) Chief Executive Officer Board Of Directors (3 Members) Research & Development Chief Financial Officer (Part Time) Business Development Engineering Team Chemistry Team Accounting

9 Start-up/Company Formation Milestones: Initial management group formed Obtain license from the University Raise initial financing (1 st round) Establish initial company operations Develop commercial prototype

10 Start-up/Company Formation Ownership structure following license agreement and initial financing Management University Investors

11 Development-Stage Company Organizational Structure Chief Technical Advisor (Plus 1-3 Additional) Chief Executive Officer Board Of Directors (4 Members) Research & Development Chief Financial Officer (Part Time) Operations Business Development Sales and Marketing Director Engineering Director Chemistry Controller Quality Manager Manufacturing Manager Engineering Team Chemistry Team Accounting IT Manager

12 Development-Stage Company Milestones: Raise 2 nd round financing Expand and develop operations in preparation to launch products Implement manufacturing and sales and marketing strategies Complete development of first product platform

13 Development-Stage Company Ownership structure following second financing Management University Investors

14 Growth-Stage Company Organizational Structure Chief Technical Advisor (Plus 1-3 Additional) Chief Executive Officer Board Of Directors (5 Members) Research & Development Chief Financial Officer (Part Time) Business Development Operations Sales and Marketing Director Engineering Director Chemistry Controller Quality Manager Manufacturing Manager Instrument Service Technical Service Manager Engineering Team Chemistry Team Accounting Marketing Manager Sales Manager IT Manager

15 Growth-Stage Company Milestones: Launch first product Raise 3 rd round financing Drive rapid revenue growth, name and brand recognition - worldwide Continue product development, especially product improvements

16 Growth-Stage Company Ownership structure following third financing University Management Investors

17 Preparation for Exit Milestones: Launch 2 nd generation product Achieve profitability Continue rapid revenue ramp Maintain R&D activity

18 Preparation for Exit Example of valuation at exit: Assume revenues of $50 M and profitability Expect multiples in the range of times revenue This produces valuations in the range of $125 M - $300 M University portion in the example was 24.5% (or approximately $49 M at a $200 M valuation) Of this portion, the University research team would receive approximately $16 M at the time of exit