1. Commercialization Strategies Jenny C. Servo 1

2. Overview What is commercialization? What is a commercialization Strategy? Factors that effect your choice of a strategy Sample strategies 2

3. What is commercialization? » “The process of developing markets and producing and delivering products or services for sale (whether by the originating party or by others)... commercialization includes both government and non- government markets.” -National Science Foundation SBIR Solicitation 3

4. What is a commercialization strategy? Not defined in solicitations...but alluded to “...your company’s strategy for converting your proposed SBIR research into a product or non-R&D service with widespread commercial use - including private sector and/or military markets.” - DoD SBIR solicitation 4

5. Commercialization Strategy MilestonesHow funded? Concept DevelopmentPhase 1 Business Case AnalysisG&A Prototype DevelopmentPhase II Intellectual Property ProtectionRetained Earnings Beta TestingCorporate Partners U/L approvalRetained earnings Test Market Introduction??? Marketing??? Scale Up Production??? The series of financing options that a company entertains to move its technology from concept to the marketplace 5

6. SBIR and STTR Funding High Risk Basic Science NSF NIH Mission DoD NASA Hybrid DOE Applied DHS DOT EPA ED USDA Financing Roadmap $ Brokers Consultants Databases Print Media Accounts Association Attorneys Bankers Sweat Equity Science for Hire Debt Equity Profit Founders Leasing On spec Federal State Corporations Family friends Banks Economic Dev. Licensing Partnerships Subcontracts Business angels Venture capital Investment Banker 6

7. Strategy Selection Process » Iterative... build and test » Articulate at the outset and » Revisit › as you collect additional market data › as you develop the business case › during negotiations with partner/investor 7

8. Commercialization Choices Factors which effect your choice of a commercialization strategy » Mission » Vision » Business philosophy » Your current situation » Window of opportunity » Competitors 8

9. Mission » Identity Statement › Business functions › Products and technologies › Markets served › Sustainable competitive advantage » For a company or a strategic business unit (SBU) 9

10. Elements of Vision » 5-years out › Financial goals - revenue goals, profit margin goals › Market goals - customers served, market niche, geographic region, market share › Products and services › Image- How will you be perceived by customers, competitors, employees, community 10

11. Typology of Visions RevenuesEmployeesPurposePubic/Private Life Style $3M20Support owners Private Foundation $10-30M200+Start new industry Private High Potential Venture $30 - $100 M500+Create valuePublic The numbers are meant to be relative, not absolute 11

12. Sample Strategy - Licensing MILESTONESFUNDING MECHANISM Start UpSweat equity Concept DevelopmentSBIR Intellectual Property ProtectionRetained Earnings Application DevelopmentLicensee ProductionLicensee VISION: Life-Style CompanyBUSINESS PHILOSOPHY Do what I enjoy 12

13. Sample Strategy – Strategic Alliance MILESTONESFUNDING MECHANISM Start-UpSweat equity Concept DevelopmentSBIR Intellectual Property ProtectionRetained Earnings Prototype DevelopmentSBIR Production Scale UpEquity investor, converted to debt Marketing and SalesStrategic ally VISION: Foundation Company BUSINESS PHILOSOPHY R&D and Manufacturing Conservative 13

14. Sample Strategy - IPO MILESTONESFUNDING MECHANISM Concept DevelopmentFederal funding Prototype DevelopmentSeed financing from angels Market TestRetained earnings Market IntroductionEquity investment from Fortune 500 Scale UpSecond Round Financing from VC New FacilityPrivate Placement ExpansionLine of credit, profits Market PenetrationsIPO VISION: High Potential Venture BUSINESS PHILOSOPHY I want to try it all 14