Technology and Research for Development Lalith Gamage President/CEO SLIIT Chairman ACCIMT

Sri Lanka’s Vision  Double our GDP to $4000 by 2016  IT/BPO Industry - $ 2 billion by 2016 and 100,000 professionals  Tourism Industry - $ 3 billion by 2016 and 500,000 employment  Mahinda Chinthanaya - Accelerate Research and Development to establish 5 Hubs by 2020 Aviation hub, Maritime Hub, Commercial Hub, Energy Hub, Knowledge Hub Aviation hub, Maritime Hub, Commercial Hub, Energy Hub, Knowledge Hub

Man Power Contribution R&D Professional Skills Semi Skilled Contribution Manpower Unskilled US$ 5 bn US$ 3 bn US$ 0.5mn

IT Industry: Case Study  Insignificant in the late 1990s early 2000s  Embarked on an Eco-system (Cluster) based approach Manpower Manpower Infrastructure Infrastructure Business and legal environment Business and legal environment Marketing and Image Building Marketing and Image Building Centres of Excellence (R & D) Centres of Excellence (R & D)

Competitiveness Strategy Infrastructure Education & Training Business Environment Legal Issues Marketing & Image Building Quality Innovativeness Strengths/Niche Skills Centers of Excellence Business Incubators Research and Development Build Confidence ( Make it Competitive ) Create Competence ( Sustain Competitiveness ) Address Issues ( Create the Environment )

IT Industry: Case Study  Today IT industry is one of the fastest growing industries  5 th Largest export earner for the country Annual exports are worth around $400 million Annual exports are worth around $400 million Aims to earn $2 billion by 2016 Aims to earn $2 billion by 2016 Ranked 16 th in 2009 Ranked 16 th in 2009 Addressable market is around $350 billion Addressable market is around $350 billion

 Success is due to collective efforts of Universities/Institutes – developed and offered the relevant programs and carry out research Universities/Institutes – developed and offered the relevant programs and carry out research Infrastructure providers – Private sector understood the industry requirements and service levels and increased capacity Infrastructure providers – Private sector understood the industry requirements and service levels and increased capacity ICTA – policy, research on requirements ICTA – policy, research on requirements SLASSCOM – promotes research, centres of excellence SLASSCOM – promotes research, centres of excellence Industry – provides placements, scholarships, funds research, curriculum dev. Industry – provides placements, scholarships, funds research, curriculum dev.

Technology and Research for Development  Technology and Research as an enabler Product Improvement Product Improvement Process Improvement Process Improvement  Compare IT industry  Build competitiveness, Efficiency  Developing Research as an Industry  Research and innovation to build new companies New Products New Products

Challenges  Industry is not geared to seeking R & D expertise from research institutions  R & D institutions carry out their research without placing emphasis on economic and/or social value creation  Lack of Eco-system based R & D Industry Industry Entrepreneurs Entrepreneurs Investors Investors R & D Institutions R & D Institutions

Challenges  Lack of entrepreneurial culture in the research community  Lack of mechanisms to encourage innovation, commercialization of research Business plan competitions Business plan competitions Incubators Incubators  Non availability of well established Angel and VC funds  Inability to recruit and retain best and the brightest due to poor compensation

Overcoming Challenges  Industry, Research Institutions, Government Interaction – Marketplace  Development of Eco-systems Industry clusters – Electronics, Biotechnology, Nanotechnology Industry clusters – Electronics, Biotechnology, Nanotechnology Centres of excellence Centres of excellence  Mechanisms for commercialisation Industry liaison cells Industry liaison cells Entrepreneurship training Entrepreneurship training Business plan development concepts Business plan development concepts  Establishment of funded research chairs

 What is The Product/Service?  What Technological/Innovative Developments?  Will there be any Intellectual Property?  How do you obtain technical input? – Technical Team  Market Scope?  Key attributes of the target market (size with segmentation, buying criteria, behaviour, etc.)?  What are the market trends and why?  How will you build your market?  Market Need?  Why will customers purchase your Product/Service?  Distribution Channels  How or who will sell the Product/Service? Research to Business (Plan)

 Competitive Situation  Why will your product/service "beat" the competition?  Barriers to competition  Patent or copyright protection  Time to engineer a new product  Management Capacity  Highlight the key credentials of the management team  What key skill sets are required?  Does management regularly consult with market-based advisors or experts? How?  Financial  How will your revenue model enhance market acceptance in the target market? How are you going to price your service/product?  How much money is required? Research to Business (Plan)

Business/Product Development Process Research Institution Research Outcome Entrepreneur Funds Marketable Product Product Prototype

Research Institution Research Outcome Entrepreneur Funds Marketable Product Product Prototype Business/Product Development Process

Source of Capital Amount of Capital Age of Company Angels Angel Funds Public Markets Venture Capital Strategic Investors Founders, Friends and Family Govt.

What Investors Want  Groundbreaking Technology  World-class Product  Revolutionary Business Model  Empowered Team  Visionary/Renowned Board  Attractive Return  3 I’s: Intensity, Integrity, Immediacy  3 G’s: Goodness, Greatness, Greed

Angels  Fun, Interesting Opportunity, A willing protégé  10 investments of Rs. 2.5M each = Rs.25M  1 big payout in 5 years, 50 x Rs.2.5 = Rs. 125M VCs  10 investments of Rs. 25M each = Rs.250M  2 big payouts in 3-5 years, 10 x 2 x Rs.25M = Rs. 500M Angels Vs VCs

Cap Table (Ideal) StartUp Angel Round VC Round ExitGain Founders/Mgmt $~0 (100%) $~0 (75%) $~0 (60%) $60M 1000X Angels $500K (25%) $500K (20%) $20M 40X VCs $2M (20%) $20M 10X Market Cap $~0 $2M $10M $100M

Cap Table - Sri Lankan IT Company StartUp Angel Round VC Round ExitGain Founders/Mgmt Rs.~0 (100%) Rs.~0 (75%) Rs.~0 (60%) Rs.300M1000X Angels Rs. 2.5M (25%) Rs.2.5M (20%) Rs.100M 40X VCs Rs.20M (20%) Rs.100M5X Market Cap Rs.~0 Rs.10M Rs.100M Rs.500M

Incubating Success

 Access to Infrastructure  Access to People  Access to Funds  Access to Right Environment Incubator Features

 A/C Space  Dedicated Internet Services  Quality Regulated Power  Communication Facilities  Office Furniture and Equipment  Secretarial services  Financial Services Access to Infrastructure

 Technical Experts  Researchers  Developers  Students  Business Analysts  Strategists  Venture Capital  Business Plan development to seek funds from other sources Access to Human Resources & Funds

 Entrepreneurship Training – Seminars, Workshops  Technical Training  Business Skills Development – Monitoring and Mentoring  Marketing of Resident Companies  Market Plan Formulation  Marketing through known contacts  Networking with Global Companies  Linking up with Universities and Industry  Consulting on strategies at various stages: Launch, Growth and Harvest of businesses. Access to Right Environment

 Technology and Research are essential for our country’s development  Develop R & D as an enabler and to create new companies  Need to address the issues such as Industry – Research Institution Interaction Industry – Research Institution Interaction Capacity Building of Research Institutions Capacity Building of Research Institutions Funding Sources Funding Sources Entrepreneurial culture development Entrepreneurial culture development Mechanisms for Commercialisation Mechanisms for Commercialisation  Development of a Eco-system (cluster) based approach to R & D Way Forward

Thank you