Flinders Technologies Pty Ltd Copyright © 2002 J V Turner WIPO/INV/BEI/02/7.a Universities and R&D organizations are potential sources of valuable intellectual property [IP] Topic 6 : Conditions for Successful Economic & Social Use of Inventions & Innovations Seed Capital Investment for Intellectual Property Commercialization The challenge is to optimize the opportunities and outcomes from IP for wealth-creation

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner At 4th October 2001 Market Cap (US$bil) Est.Value IP (US$bil) % MarketCap Coca-Cola Company Microsoft Abbott Laboratories Yahoo ResMed At 4th October 2001 Market Cap (US$bil) Est.Value IP (US$bil) % MarketCap Coca-Cola Company Microsoft Abbott Laboratories Yahoo ResMed IP is a foundation of modern business (1) Calculated from IP asset = Market Cap. less [Goodwill & Net Tangible Assets]

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner At 4th October 2001 USA Pat’s : TM’s Est.Value IP US$(bil) 1 Ave. Value Each IP (mil) Coca-Cola Company 743 : Microsoft1847 : Abbott Laboratories 2422 : Yahoo4 : ResMed37 : Value creation through investment in IP (1) Calculated from IP asset = Market Cap. less [Goodwill & Net Tangible Assets]

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner IP Assets are Important to Modern Business IP Assets are Important to Modern Business A lack of funds limits the commercial options …... ……the kind of funding depends upon the stage of development and risk. IP development cannot take place without financial support for the physical and human resources needed through each stage Like businesses, universities and R&D organizations need funds and expertise to develop IP in order to optimize the opportunities and outcomes

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Investment risk: New ideas to the marketplace (a simple model) Years High Risk Investment Low Risk Investment Commercially Embryonic $ $ Commercially Mature Innovation Value creation

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Stages of Value-creation for IP and a New Venture ……. a simple model Years High Risk Low Risk Investment Commercially Embryonic $ $ Commercial Maturity R & DPre-seedSeed……. …. Start-up… …..Early growth Stability…. ……Growth... ……..Mezzanine Increasing value

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Technology Commercialisation Value Creation & Sources of Funds Years Risk Commercial Maturity R & D Pre-seed Early growth Mezzanine Funds Seed Start-up Stability Growth Government grants & personal $ Private Investors Business Angels Flinders Tech’s Fed & State Gov’ts Technology Corporates Corporate Investors Venture Capital etc $2,500 B $700 B $2 B Financial Institutions Public Issues IPO

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Technology Commercialisation : Early Stage Proof of Concept & IP Protection : IPR Licensing option Years Commercial Maturity R & D Pre-seed Early growth Technology development & value-creation Seed Start-up Stability Market Growth Exploration First proof of principle Initial IP protection Development of principle prototype Further IP protection Product production & sales Investment ready new venture IPR licensing Mezzanine

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Development and Prototype Product (Later) Stages IPR Licensing &/or New Venture Options Years Commercial Maturity R & D Pre-seed Early growth Company growth & technology development Seed Start-up Stability Market Growth Development of principle prototype Further IP protection Product production & sales Investment ready new venture Product licensing (bundle of IPRs) Patents, Trade Marks Trade Secrets (eg know how) Copyright, Designs Mezzanine

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Making Choices : Licensing vs New Technology Venture Making Choices : Licensing vs New Technology Venture Choices for IP commercialization are influenced by the availability of investment funds for further development and also by the character of the technology prospects.

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Technology Candidates for Licensing Technology for a limited range of productsTechnology for a limited range of products –will not support business in own right Products aligned with existing company’s products : enhance or competeProducts aligned with existing company’s products : enhance or compete –Preferably sales at least $25 million p.a. sales achievable by year 3 Strong intellectual property protection achievableStrong intellectual property protection achievable Potential to add value technically & commercially before dealsPotential to add value technically & commercially before deals Optimizing returns and minimizing risks from deals is achievableOptimizing returns and minimizing risks from deals is achievable Capable R&D/production team to facilitate technology transferCapable R&D/production team to facilitate technology transfer Remote markets and expensive to access directlyRemote markets and expensive to access directly

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Outstanding management team (business & technological)Outstanding management team (business & technological) Platform technology for a wide variety of productsPlatform technology for a wide variety of products Strong intellectual property protection achievableStrong intellectual property protection achievable Markets for products large, expanding, accessible, differentiatedMarkets for products large, expanding, accessible, differentiated –Preferably sales at least $50 million p.a. achievable by year 5 Viable business plan for rapid growth of self-sustaining businessViable business plan for rapid growth of self-sustaining business –Value propositions created for investments & exits –Potential to double value each year to acquisition or IPO (within 5 years) Capital to sustain asset growth to the next planned funding roundCapital to sustain asset growth to the next planned funding round Candidates for New Technology Ventures

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Project Portfolio Management : Seed Capital Funds Management   Investment risk is spread across the portfolio   More projects are dealt with in a shorter time   Likely successes and failures are identified earlier   Successes can be supported with more confidence in later round funding : failures abandoned quickly   The portfolio manager can apply experience across a range of projects to the benefit of each project and the portfolio overall   The boom-bust financial cycle is smoothed out

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner The Planned Path to Profit from IP 1 Identify and evaluate opportunities for commercialization (deal-flow) 2Select the best prospects & construct business plans 3Harmonise technical and commercial strategies 4Provide incentives & rewards for value-creators 5Protect potentially valuable intellectual property 6Invest to reduce risk & create value propositions (with more IP) 7Create wealth through deals 8Manage a project portfolio & seed capital funds

Flinders Technologies Pty Ltd Copyright © 2002 J V Turner Technology Commercialization : More Frogs than Princes - failure is part of overall success Good grief… How many more of these before I find a winner ? Thanks for Listening !