1 Taking Research Products to the End User Presented by Hubert Manseau, President Multiple Capital At the LORNET Symposium November 7, 2007

2 Who Am I? Twenty years career in information systems development & management –Fifteen years in Academia –Five years in private business Three years VP of a computer research institute Ten years in venture capital –7 years as CEO of Innovatech –3 years as president and general partner of Multiple Capital Participation in 3 successful spin offs: –SIGIRD-Multilis, licenced to Multitek, further sold to DRA –Metrowerks, further listed on VSX and sold to Motorola –Locus Dialog, further sold to Scansoft Participation in 2 start ups: –SIPM, further sold to Télémédia –Hugo Plus, further sold to Microsoft Posted 3 softwares for free distribution when in academia

3 Taking Research Products to the End User I am not an expert in e-learning, but I assume we’re talking about: –Development tools or platforms –Contents or components –Services and content delivery platforms –Monitoring and evaluation tools or platforms, etc And I have direct experience in taking products from academia to a user community

4 As a Matter of Introduction A technology is not a product Unit price at end user level can’t be higher than typical software prices Technological platforms are rapidly outdated Contents are rarely universal and must be localized Learning contents compete media wise with leisure contents (e.g. video clips or games) The value of any product is dictated by the market, not its development cost, that may never be recouped If taking a product to the user is not done on a commercial basis, then it has to be done by the creator, or to be subsidized

5 Taking Research Products to the End User Can Take Many Forms Free distribution (open source) Direct sale IP sale Licensing Royalties Spin offs Partnerships

6 Taking Products to the End User Through Free Distribution The so called open source model is old, but the internet is a great facilitator Works well in informal networks and academia Products are rarely 100% end user proof Potential lack of support at the source IP rights may have to be dealt with Intermediates may help: –Commercial: Red Hat –Non commercial: who finances?

7 Taking Products to the End User Through Direct Sale Needs proper organization internally for: –billing and selling –customer support Conflicts of interests may and will arise May go against the mission of the organization But it’s the best proof of concept possible and can serve as a step towards other form of distribution

8 Taking Products to the End User Through IP Sale IP must be accurately protected. This is easier said than done! Must be a «break through» Must address a significant market Needs access to commercial players decision centers Payments often on milestones if technology is still evolving Little follow-up The «jackpot» but very rare with non patentable technologies

9 Taking Products to the End User Through Licensing Allows selling to several master users Involves drafting and managing complex contracts Involves sales and marketing May involve setting up user support services Involves many follow-ups

10 Taking Products to the End User Through Royalties Based on Usage May be highly lucrative Involves drafting and managing complex contracts Involves sales and marketing Involves setting up user support services Involves several follow-ups

11 Taking Products to the End User Through the Creation of Spin Offs Often the only way if the product is not 100% completed Also, often the only way is if it is far from the decision centers Involves financing Needs employees ready to become «entrepreneurs» Involves sharing the ownership between organization, founding employees and investors End to end success rate is low, but it’s an iterative process Returns may be very high, but not always filtered down to initial organization

12 Taking Products to the End User Through Partnerships Commercial partner will complete development and take care of marketing, sales and support Partner will in exchange finance continuity of research activity in source organization (salaries, equipments, etc) Partner may pay royalties in addition, generally based on sales levels

13 Financing the Spin Offs By research organization By founding employees By financial angels By venture capital funds Many subsidies available at that stage Bank loans Bootstrapping by sales of earlier versions of products or services Bootstrapping by sales of consulting services Generally by a combination of several or all these sources

14 Venture Capital Not for every situation, not for everybody –We look for large and rapidly growing potential markets $250M+ –With an exit planned over 5 to 7 years –We participate in management We bring experience and contact network We help with other sources of financing –But yes, We dilute owners/founders equity We control what entrepreneurs do We do what it takes to make projects succeed

15 Some Challenges Taking E-learning Products to the End User Global market is not easy to access from Canada Local market is limited in size and fragmented Government support is paradoxal: –Many small subsidies –But a small number of purchase orders!!! Contents are more local than tools and platforms Few large commercial successes to generate traction

16 Some Solutions Be realistic, only a few initiatives will generate big hits Understand the chasm between a research product and an end user proof product Understand the cultural chasm between academia and the commercial world Create a critical mass of expertise in taking products to market or end users: –Legal and business –IP protection –Commercial (industry data bases, market survey and analysis, etc) –Human (user interfaces) Create a marketing and lobbying organization to gather interest on e-learning as a business sector and as a product class

17 Questions Do e-learning products and services have real commercial potential? Does e-learning qualify for venture capital and/or other forms of financing? Most organizations create both tools and contents. Is the best strategy to sell one, the other, or both? Is e-learning products life cycle long enough to generate commercial success? How do we make money in the learning business?