1. Enhancing the Commercialization Pipeline from Idea to Market Stephen Brown July 16 th, 2007 Summary of IAG Analysis

2. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Introduction Why do some regions generate more new companies (startups) than others? How can regions change their environment to support more innovation? COF™ analysis can suggest some ways

3. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com What is COF™ ? It is the cost of failure –How much damage will be done to our reputation? –How much money will we lose? –How long will it take to recover from our failure? –Two different people looking at the same situation will have different COF™ –The same person at different times will have different COF™

4. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com The Two Components of COF™ The Actual Cost of Failure – The Reality - ACOF™ The Perceived Cost – The Perception - PCOF™ Reducing COF™ means focusing on both: –The actual cost of failure –The individual’s perception of the cost of failure Many regions have already reduced the actual cost of failure by offering extensive programs for entrepreneurs But have neglected to consider PCOF ™

5. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Why worry about COF™, shouldn’t we be focused on success COF™ is important because many startups fail to achieve their first business plan milestones Few in my ten years of working at MIT with over 100 startups have met their original milestones So we need to concentrate on reducing COF™ since the majority “fail” initially

6. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com When COF™ is Lower The startup has the freedom to fail And perhaps fail again Until they ultimately succeed

7. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com What is the Role of Culture? Entrepreneurs in Berlin, for ex., were very risk adverse because COF™ in Germany was so high Same entrepreneurs are much less risk adverse in Boston or Silicon Valley because both ACOF™ and PCOF™ are much lower Their “culture” was not a barrier to taking risks in a region with a lower COF™

8. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com How do you reduce a regions COF™ Use the IAG™( Innovation Assessment Grid ™) The basic idea is to increase the strength and diversity of the CONNECTORS between the needed ELEMENTS for new companies and the available RESOURCES Identify where startups are lost in the commercialization pipeline The next six slides develop this approach

9. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Basic steps –Identify the weak or missing ELEMENTS needed for entrepreneurship –Identify ways to reduce the cost of obtaining these ELEMENTS –Identify organizations and leaders that have the RESOURCES to provide these ELEMENTS –Identify ways for these leaders to advance their own goals but also increase the probability of linking these RESOURCES with the needed ELEMENTS

10. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Essential ELEMENTS Needed for Entrepreneurship People –Inventors and Idea Generators –Role Models who have failed and then succeeded –Entrepreneurs and Serial Entrepreneurs –Employees with previous startup experience –Mentors who have “been there, done that” Events –Dense Frequent Heterogeneous Networking –Entrepreneurial “How to” Knowledge –Opportunities for Feedback on Products and Strategy from Customers and Funders Assets –Proof Funding (for ex. Friends, Family, Contests or Programs) –Seed Funding (Angels or Government) –Series Funding (VC, Suppliers or Customers –Real Estate (short term leases, needed equipment, etc.) –Sustainable Advantage (Patents, etc.) Necessary Infrastructure –Accessible Markets –Needed communications, transportation –Supportive laws that reduce risk

11. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com SOURCES for these ELEMENTS Universities Research Institutions Hospitals Government NGOs Associations Clubs Large Companies Small Companies Joint Ventures Potential Suppliers Potential Customers Service Providers Venture firms

12. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com ELEMENTS are linked to RESOURCES through CONNECTORS People –Friends –Colleagues –Colleagues of Colleagues –Professionals –Suppliers or Customers –Investors –Alumni –Family Events –Conferences –Contests –Courses –Research Exchanges –Visits –Web, Email, Print, Media

13. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Idea Entrepreneur Market validation Full team with complementary skills assembled Prototype Repeat profitable sales to main markets Sustainable competitive advantage validated Initial sales to early adopters Significant funding IPO or Acquisition

14. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com For Companies –Identify and create commercial opportunities for inventions How can it be used, Who will commercialize or purchase –Develop intellectual property strategies for long term competitive advantage Deciding what, how, when, and where to patent For Organizations and Regions –Identify opportunities to enhance the commercialization rate for new ideas

15. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Observations of Successful Startups at MIT Frequently inventors initially don’t identify the first commercially successful application Initial applications can be small and not particularly profitable –But proof of concept reduces commercialization risk Initial business models often change based on market feedback Patents that previous firms fail to commercialize are later successfully commercialized by others Startup opportunities exist for older unexploited inventions Startups shunned by investors initially often receive funding later when their area becomes “hot”

16. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Observations of Successful Startups at MIT Junior people often lead many startups initially Generally one or more of the founding team leave within the first three years for a variety of reasons Inventors are seldom the CEO’s Therefore Metrics and Milestones if set too rigidly can increase the COF™

17. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Examples of reducing COF™ in Regions and Organizations Create dense heterogeneous regional networking on neutral turf –Increases the probability of potential founders interacting Make organizational boundaries very permeable inter and intra –Increases idea flow and increases mixing of diverse people with complementary skills and experience Provide easy mechanisms to identify new ideas being generated in the region Make collaborations easy to form and dissolve inside and outside of organizations –If projects don’t work, easy to shut down, without damage to reputation –Easier to initiate a new venture while initial euphoria is high

18. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com More examples of reducing COF™ in Regions and Organizations Reduce hierarchy and create multiple paths to accomplish goals –One executive or one committee can’t kill the good concept Accept bounded chaos –Freedom to explore but bright boundaries Temper reaction to initial “failure” in meeting milestones

19. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Examples of reducing ACOF™ Service providers taking deferred payment or equity payment Mentoring by successful regional leaders Providing for scaleable facilities with opportunities to sublease for short periods Supporting contract services - design, prototype, manufacturing

20. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Examples of Reducing PCOF™ Publicizing entrepreneurs failures and ultimate successes –Familiarity with others successfully taking entrepreneurial risks reduces our PCOF™ Making entrepreneurship “holographic” in the region so that –Many know of successful entrepreneurs –Many know what is needed to create startups –Workforce is willing to take risks If this job doesn’t work out there will be others Employers will value their experience in a failed startup

21. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com More Examples of Reducing PCOF™ Publicizing success by angel, seed, venture capital, suppliers, customers who have invested in startups Supportive culture “you’re not crazy– you’ve got a good idea” – entrepreneur, angel, venture capital networks, small business associations, start-up clinics, etc

22. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Next Steps Use the Innovation Assessment Grid

23. ©2006 Stephen Brown, I4G, Innovate 4 Growth Consulting, sfbrown67@gmail.com Approach Initial small meetings with key stakeholders to gather data regarding IAG ™ analysis Summarize analysis results to group of key leaders Recommend interventions to reduce both ACOF™ and PCOF™ Suggest and help implement solutions