Dr. Shahram Yazdani Venture Nurturing Shahid Beheshti University of Medical Sciences School of Medical Education Strategic Policy Sessions: 09

Dr. Shahram Yazdani Main Role Seed Finance Seed Finance Start-up Venture Capital Start-up Venture Capital Expansion Venture Capital Expansion Venture Capital Mezzanine Finance Mezzanine Finance New Firm Mature SME Large Company Product Research Founders Research Founders Angel Investors Angel Investors Venture Capital Firm Venture Capital Firm Corporate Investors Banks Corporate Investors Banks IPO Acquisition IPO Acquisition Researcher Inventor Entrepreneur Businessman Research Grants Research Grants Business Plan Propositional Knowledge Propositional Knowledge Prescriptive Knowledge Prescriptive Knowledge Basic Research Basic Research Applied Research Applied Research Product Design & Development Product Design & Development Manufacturing Pre-production Prototype Pre-production Prototype Engineering Prototype Engineering Prototype Innovation Process Concept Map

Dr. Shahram Yazdani Venture Nurturing Apart from financial resources, the availability of knowledge resources during the start-up phase also plays a crucial role in fostering growth oriented spin-offs.

Dr. Shahram Yazdani Common reasons for failure of new ventures 1. Insufficient access to capital, 2. Lack of managerial expertise, and 3. Insufficient marketing expertise.

Dr. Shahram Yazdani Most Appreciated Contributions for Ventures Financial Advice 44% Corporate Strategy & Direction 43% Sounding board for ideas 41% Challenging status quo 32% Contacts or market information 26% Management recruitment 10% Marketing strategy 7% Money only 12%

Dr. Shahram Yazdani Venture Nurturing: The Role of Special Persons A study of high-tech start-ups in Silicon Valley emphasizes the important role played by lawyers as bearers of knowledge between different companies in the area.

Dr. Shahram Yazdani Venture Nurturing: The Role of Special Persons In Europe, the role of knowledge brokers tends to be fulfilled by intermediary organizations and research institutes setting up spin-off activities.

Dr. Shahram Yazdani Venture Nurturing There are three distinct categories of support activities  Technological nurturing,  Business coaching  Facility management

Dr. Shahram Yazdani Technological Nurturing The first activity, technological nurturing, includes three elements: 1. Searching for ideas that can be commercialized in a research organization or university; 2. Creating fertile ground for technology dependent applied researches 3. Protecting the technology base and intellectual property rights

Dr. Shahram Yazdani Business Coaching When the potential spin-off project reaches the transition phase, technological nurturing gives way to business coaching. Business coaching activities are classified into three groups: 1. Business plan development, 2. Start-up coaching (commercial, financial and legal aspects of a technology venture) 3. Specialized advice or consulting on the business process

Dr. Shahram Yazdani Facility Management The nature of facility management tends to evolve along the spin-off process. In the invention phase, start-ups need relatively small premises, including facility services such as reception, cleaners, network access, etc. Later on in their development they need more complex and difficult-to-find facilities located on incubators and science parks.

Dr. Shahram Yazdani The Spin-off Funnel

Dr. Shahram Yazdani Financial Resources along the Spin- off Funnel`

Dr. Shahram Yazdani Venture Nurturing along the Spin-off Funnel

Dr. Shahram Yazdani Science and Technology Parks: Definition A managed environment set up to leverage local science and technology or knowledge resources to enhance a region’s economic base.

Dr. Shahram Yazdani Science and Technology Parks: Definition A property-based initiative, which has formal and operational links with universities or other higher educational institution, or major centers of research; Designed to encourage the formation and growth of knowledge-based industries or high value- added firms, normally resident on site; and Has a steady management team actively engaged in fostering the transfer of technology and business skills to tenant organizations. International Association of Science Parks

Dr. Shahram Yazdani STPs: Global Evolution The first park was founded in California in 1951, at what is now the center of the Silicon Valley – the University of Stanford. There are currently about 700 science parks worldwide.

Dr. Shahram Yazdani STPs: Global Evolution USA Europe Japan Asia Pacific Rest of World Estimated total number: 700  300 in North America  240 in Europe  80 in China  30 in Asia Pacific  50 in rest of World The first park was founded in California in 1951, at what is now the center of the Silicon Valley – the University of Stanford.

Dr. Shahram Yazdani Roles of STPs 1. Recruit and co-locate new and established knowledge- based companies; 2. Promote innovation based on ‘smart’ technologies; 3. Provide an interface or shared research environment for research organizations and private industry; and, 4. Leverage local knowledge resources to enhance a region’s economic base. 5. Cooperation in R&D with scientific research institutes and laboratories; 6. Financial consulting and assistance in obtaining venture capital; 7. Professional, technical, administrative and legal assistance; 8. Information and telecommunications services; 9. Supportive business infrastructure.

Dr. Shahram Yazdani Specialized services of STPs to private companies o Assessment of technological and innovation needs; o Research, development and transfer; o Project management; o Promotion of research outcomes; o Promotion of the ‘culture’ of innovation; o Marketing; o Establishment of partnerships and networks in research and transfer; o Monitoring and rising of financial resources; o Enhancement of human capital skills; o ‘Incubation’ of technological innovative businesses.

Dr. Shahram Yazdani Different Parts of STPs I. Dedicated sector of the University involved in the study of the specific field. II. Research Centers: where ideas are developed into prototypes and possible manufacturers are identified. III. Incubator-Innovation Centre: which is an establishment housing a partnership between the innovator and the manufacturer, where the prototype is further developed into a marketable product. IV. which is an office type facility, dedicated tBusiness Centre: o those who have passed the incubating period and have products of a rather small scale.

Dr. Shahram Yazdani Different Parts of STPs V. Centre for auxiliary industries – Containers: which is a letable industrial space, used for assembling and packaging of larger scale products. VI. Serviced sites/plots or pre-built factories: which could be leased or sold to companies that decide to remain in the STP on a permanent basis. VII. Technological Centers: which deal solely with the testing of products. A partnership can use this facility at any stage of the development of the product to determine its properties, such as strength, quality, composition etc. VIII. Training Centre for Staff: which is dedicated to the continuous training of staff that work or intend to work in the STP.

Dr. Shahram Yazdani Different Parts of STPs Apart from the above main components, a Park may have some supplementary uses, which could contribute to its R&D role and to the cross-fertilization process, such as:  A congress center,  Public or private agencies involved in research,  Special elementary and high schools, and  A business school

Dr. Shahram Yazdani Spectrum of Science Parks

Dr. Shahram Yazdani The Raleigh-Durham Research Triangle Park One of the largest research parks in US, home to more than 130 organizations, 99 of them R&D related. With over 39,500 employees entering the 8-mile by 2-mile Park each day. The combined annual salaries in RTP amount to over $1.2 billion dollars

Dr. Shahram Yazdani History of Technology Incubation It has been asserted that small businesses are the engine of growth for the U.S. economy (Birch 1987). Small entrepreneurial companies created approximately 80% of new jobs in the U.S.

Dr. Shahram Yazdani History of Business Incubators By 1984 there were only 26 business incubators in the USA. This figure grew to 550 by Today there are probably more than 3,000 business incubators worldwide.

Dr. Shahram Yazdani Business Incubator A business incubator is most broadly defined as a facility providing favorable controlled conditions for the development of new companies. The controlled conditions include at least three types of resources: 1. Facilities support, 2. Administrative assistance, and 3. Professional expertise, e.g., management, marketing, accounting, financial and legal services.

Dr. Shahram Yazdani Business Incubators A typical business incubator is a multi- tenant facility with common office equipment and a shared conference room. There is also an on-site full-time manager to assist in the delivery of business assistance training and services.

Dr. Shahram Yazdani Benefits of Incubators A survey by the US National Business Incubation Association (NBIA) in 1998 described the key US incubator statistics as follows.  North American incubators had created 19,000 companies that were still in business and 245,000 jobs;

Dr. Shahram Yazdani Physical Plant Multi-tenant facility Flexible space Shared conference room Shared telecommunications equipment Designed to encourage interactions Include common kitchen area Careful site selection Feasibility study to confirm viability, location, etc.

Dr. Shahram Yazdani General Office Services Shared office equipment  Telephone answering  Photocopy machines  Fax machine  Computer servers  meeting rooms Flexible leasing arrangements Internet access Secretarial services

Dr. Shahram Yazdani Business Assistance Services 1. On-site management 2. Business plan development 3. Mentoring programs 4. Market analysis, Marketing assistance 5. Copyright and patent assistance 6. General legal assistance 7. Entrepreneurial training 8. Presentation training 9. Enable incubatees to meet and learn from other firms

Dr. Shahram Yazdani Business Assistance Services 10. Organizing access to workshops and prototyping facilities. 11. Business management training 12. Organizing networking functions 13. Accounting, bookkeeping assistance 14. Aid in attracting investors; Access to capital 15. Financial planning; 16. Introduction to potential customers. 17. investment memoranda, and recruitment.

Dr. Shahram Yazdani Services During Seed Stage Write business plan  Management, market, technology, products License technology Attract angel investors or specialized firms

Dr. Shahram Yazdani Services During Start-up Bring in professional investors  How is the company valued? Attract management team Build-out facility Begin product development

Dr. Shahram Yazdani Services During Expansion Round Continue product development Provide “proof of principle” or other “validation” What justifies a step-up in valuation?

Dr. Shahram Yazdani Finance Schema of Incubators The 900 incubators, the NBIA estimates that 75% are not-for-profit and 25% for- profit ventures. Most for-profit incubators do not receive a public sector subsidy.

Dr. Shahram Yazdani Different Organizations of Incubators In general, state-supported nonprofit incubators are the most popular, followed by university-hosted incubators, though for-profit models have increased dramatically since the late 1990s.

Dr. Shahram Yazdani Different Organizations of Incubators In the specific case of technology incubators, the majority are hosted by academic institutions (McKinnon and Hayhow 1998).

Dr. Shahram Yazdani Effectiveness of Incubators New enterprises that receive the benefits of a business incubator have low failure rates (13.9%), and upon graduation 87% locate locally

Dr. Shahram Yazdani Cost-Effectiveness of Incubators Campbell et al. (1988) probed the question of business incubators as an effective job creation strategy. The conclusion was that incubators had a public sector cost per direct job created that ranged from $3,500 to $10,000 significantly less than “traditional industrial recruitment programs,” which had an average public sector cost per job of over $40,000.

Dr. Shahram Yazdani Industrial Estate Business Park Science Park Managed Workplace Enterprise Center Innovation Center Business Incubator Business & Technology Incubator Technology Incubator Technology Support Management Support Low Medium High Low Medium High A more complex classification

Dr. Shahram Yazdani Population Ratio Approach US to I.R.Iran Population Ratio 300,000,000 vs. 70,000,000 Approximately 4 : 1

Dr. Shahram Yazdani US Infrastructure US have 900 Incubator US have 400 Technology Incubator US have 300 Science Park 36,000,000,000 $ Venture Capital US have 2500/100,000 Researcher

Dr. Shahram Yazdani I.R.Iran Estimated Needs Iran Needs 250 Incubator Iran Needs 100 Technology Incubator Iran Needs 70 Science Park Iran Needs 10,000,000,000 $ Venture Capital Investment Iran Needs 1,000,000 more researcher

Dr. Shahram Yazdani “Number of Ideas to Support” Approach

Dr. Shahram Yazdani The Origin (Quantity) of Entrepreneurial Ideas That Potentially Deserves Support Yearly 1,800,000 Young Adult of 18 Years Old Yearly More Than 800,000 University Graduate More Than 30,000 University Faculty Member 70,000 R&D Worker

Dr. Shahram Yazdani How Many Incubators is Needed to Support 1000 Entrepreneurial Ideas in Iran For supporting 1000 Idea per year We Need 300 Incubators (1000/3.3) To Support 1000 Idea at Seed Phase we Need 75,000,000 $ Seed Finance (1000 * 75,000 $)

Dr. Shahram Yazdani Supporting Organization Research Institutes Science & Technology Parks Science & Technology Parks Technology Incubators Technology Incubators Universities Main Role Seed Finance Seed Finance Start-up Venture Capital Start-up Venture Capital Expansion Venture Capital Expansion Venture Capital Mezzanine Finance Mezzanine Finance New Firm Mature SME Large Company Product Research Founders Research Founders Angel Investors Angel Investors Venture Capital Firm Venture Capital Firm Corporate Investors Banks Corporate Investors Banks IPO Acquisition IPO Acquisition Researcher Inventor Entrepreneur Businessman Research Grants Research Grants Business Plan Propositional Knowledge Propositional Knowledge Prescriptive Knowledge Prescriptive Knowledge Basic Research Basic Research Applied Research Applied Research Product Design & Development Product Design & Development Manufacturing Pre-production Prototype Pre-production Prototype Engineering Prototype Engineering Prototype Innovation Process Concept Map Supports Business Plan Development Start-up Coaching Specialized Technical Advice Facility Management Business Incubators Business Incubators

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