1. FROM START-UPS TO JOINT VENTURES
Tony Eastham, Matthew Yuen, Claudia Xu, Rocky Law & Shirley Woo
The Hong Kong University of Science & Technology

2. NO OF TECHNOLOGY-BASED SMEs : LOW
POPULATION : 7 MILLION
NO. OF SMEs : 300,000
NO OF TECHNOLOGY-BASED SMEs : LOW
HKUST

3. ENTREPRENEURSHIP ECONOMIC GROWTH COMPETITIVENESS HI-TECH CREATIVITY
JOB CREATION
INNOVATION
ENTREPRENEURSHIP
R&D
SUSTAINABILITY
VALUE-ADDED
PRODUCTIVITY
TECHNOLOGY

4. Innovation, creativity and technology play vital roles in enhancing productivity and competitiveness.
Research, development and entrepreneurship are crucial factors in creating value-added jobs and sustainable long-term economic growth

5. UNIVERSITY THE MODERN UNIVERSITY
trains human resources with the knowledge, skills, creativity and entrepreneurial attitude needed for a sustainable economy
conducts world-class basic research and applied R&D attuned to the needs of (and creating opportunities for) regional industry
forges collaborative linkages between academia and industry; protects and markets intellectual property; and diffuses, transfers and commercializes technology
assists start-up and spin-out companies as new drivers of growth for the regional economy

7. RISKY BUSINESS Idea to IPO Plan to IPO VC Funded to IPO 6 in 1,000,000
Source: Saratoga Venture Finance

8. ENTREPRENEURIAL INITIATIVES AT HKUST
ENTREPRENEURSHIP SEMINAR SERIES
for all university community
HIGH-TECH ENTREPRENEURSHIP COURSE
for senior engineering students
DUAL DEGREE PROGRAM
technology and management
ENTREPRENEURSHIP CENTER
incubation of tech-based start-up companies
VENTURE CAPITAL FUND
seed funding for start-up companies

9. HKUST’s ENTREPRENEURSHIP PROGRAM
Introduced :
• July 1999
Purpose :
• to assist faculty, staff and students to start-up technology-based companies
Services :
• furnished space, at modest cost
• central office services
• utilities, and Internet connectivity
• Advisory Committee
• introductions to potential investors
• access to University facilities and resources

10. WHAT DOES THE START-UP COMPANY GIVE TO HKUST ?
3% of issued shares at time of entry into the Entrepreneurship Program
as the company increases its share capital over three years, HKUST’s ownership position remains at 3% until the fully paid-up value of its shareholding reaches HK$300,000
additional equity for seed funding and technology transfer if tangible University-owned intellectual property is needed

11. MANAGEMENT ISSUES
Maintain clear separation between academic / educational / research environment of the University, and its commercial / business activities
Must be sensitive to issues of accountability, conflict of interest, conflict of commitment, and use of public funds for private gain
Need clear policies and management practices

12. PRIVATE EQUITY INVESTORS
FUNDING
(log scale)
GROWTH
IPO
CONSOLIDATION
VCs
START-UP
FUNDING GAP
(Dead Valley)
PRIVATE EQUITY INVESTORS
THINKING,
PLANNING
SERAP,
SEED FUNDING
OWN
RESOURCES
TIME

13. DEATH VALLEY Viable Opportunity Discovery
UBC University-Industry Liaison Office

14. EXPERIENCE No. of applications 67 No. of acceptances 42 Of these 42:
No. of spin-off companies
No. of companies in incubation facility 16
No. of companies gone quiet

15. LESSONS LEARNED not easy takes commitment
people just as important as technology
competitive advantage
need flexibility
market driven

16. WHAT SHOULD WE DO ?
a better job at pre-screening applicants to our incubation facilities
provide more seed funding
need better network of early-stage investors; the right money at the right time
a better job at monitoring progress, health check, assess weaknesses, and mentoring
look for leading rather than lagging health indicators
Joint ventures √ ?
bi-annually 

17. “Commercializing tomorrow’s cell based therapeutics today”
A Case Study
SteMing Ltd.
“Commercializing tomorrow’s cell based therapeutics today”

18. SELECTION OF JV PARTNER
Not as simple as finding a licensee
Long-term commitment
All starts with “mutual trust”
Strategic partner with synergy
Not necessary to find a current market player
“Not to marry” better than “Divorce because mis- understanding”

19. MILESTONES OF SETTING UP A JV
Conception
Licensing or JV?
Not immediately sparkle
Need time to develop
Building up the team
Look for CEO, COO, CFO…etc.

20. MILESTONES OF SETTING UP A JV
Legal documents
JV Agreement, Licensing Agreement
Company MA, AA, Shares allotment document…etc.
Operations
Draft business plan
Seek additional funds
On-going research projects
Set up more research and business collaborations

21. PROs and CONs PROs Greater chance of success
More proactive company as expertise can function better and more efficiently and effectively
Avoid jack-of-all-trades situation, professors can focus on IP creation activities and leave Management to operate the company
Maintain the same IP protection and value but have potential to create more value
IP is transferred through licensing not assignment. It maybe negotiated to create higher value of the JV company, upon IPO

22. PROs and CONs PROs More financial reward
Basically by having more equity of the company, the University has a much better financial position in the future
Create more bargaining power for both sides
University can deal with the outside commercial world much more effectively through this JV arm.
Company can reach out for funding easier, either investment from the private sector or research assistance from Government, as University active involvement provides extra credibility to the JV company

23. PROs and CONs CONs More commitment and responsibility
From negotiation, to forming the company, then to running the company, Tech Transfer people need to provide more hands-on assistance to the whole process
More gain, more risk
Having a substantial portion of equity, University will be exposed to more risk and liability
More complicated in all aspects
Setting up a company only costs about US$1,000 and a few days, but JV document settlement takes much longer

24. CRUCIAL FACTORS An extensive business network
A pool of potential partners
Trustworthy people and build up mutual trust.
Hands-on operation while building up the JV
As the JV is started from ground zero, the University must provide support to train and coach the new team.

25. CRUCIAL FACTORS
Fully utilize the strengths of the partners to create synergies
Need more resources from outside, e.g. collaboration partners and funding agents. Information can be provided by University, and the actual promotion and negotiation work can be done by the JV management team, as they are in a better position to speak for preferred commercial terms
Must be focused :
As the JV is still, in its early stage, a one technology company, focus on commercialization of this unique technology to launch a product for revenue as soon as possible is vitally important.

26. THANK YOU