From Innovation To Impact
Key Considerations
Wednesday 31st May 2017
George Murlewski
Managing Director
ideas2market
Aims of the session
1.
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5.
Introduction to myself / ideas2market
Impact and business models for research
Barriers to successful Impact & lessons learnt
Company start up basics
How to make a company a success
Background/Context (me)
• 20 years in BP – last 7 in BP Ventures (products)
• 5 years in Commercial Insurance (services)
• 18 years (and counting) Innovation Management and
Technology Commercialisation
• Marketing (not science) background
• KCL Business – Spin-Out Company Manager
• Created 8 spin-out companies – advised 12 boards
• Growth Accelerator Coach
Innovation from the UK’s universities touches all of our
lives in a fundamental way
4
There are many examples of how academic innovation
from the UK has changed the world......
Contraceptive Pill
Manchester
MRI Scanner
Nottingham
Liquid Crystal Displays
Hull
Ultrasound
Glasgow
Fibre Optic
Imperial
Keyhole surgery
Reading
Computers
Manchester
Infrared remote sensing
Oxford
Compact Discs / DVD writing
Surrey
X-ray fibre diffraction
Leeds
DNA double helix
King’s College/Cambridge
Pacemakers
Birmingham
Hip Replacement
Manchester
Blood / glucose testing
Oxford
Monoclonal Antibodies
Cambridge
Low cost satellites
Surrey
Jet Engine
Cambridge
Stem Cells
Cambridge
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But all too often the UK has struggled to benefit
commercially from this innovation......
Research
Value creation
£££££££
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Impact and
Business Models For Research
Spin Out
License
Models
Social Enterprise
Consultancy and
Collaboration
License
A license is permission to do something that, without
a license, would be an infringement of IP.
Owner of the IP
LICENSOR
Licence
Gives rights
to use the IP
Royalty
LICENSEE
User of the IP
When is a license appropriate?
Single point
technology with no
follow on
No obvious
company model
Inventor not
interested in
involvement with a
spin out
Incremental
improvement
High market entry
cost
Easily identifiable
Licensee
Barriers to reach
market
Want a fast return
Freedom to
operate issues
What is a Spin Out?
A company that is set up to make commercial use of a
new technology that has been developed in research.
Aim – to generate value and make a return for
shareholders.
Barriers to successful Impact &
lessons learnt
• Lack of leadership from the top (leading to…)
• A culture which ‘looks down’ on
entrepreneurship and commercialisation
• Reward systems which don’t incentivise
commercialisation
• Fear of failure (UK v USA)
• Insufficient/inappropriate resources to
facilitate successful commercialisation
Commercialisation Experiences
• The Good:
• Proximagen: raised £15m on float, returning £1m to KCL. The
company was subsequently bought out for $0.5 bn returning ca. £12m to
the College.
• BP Fire Suppression Project: Turned burner technology
‘upside down’. Successfully licensed on North Sea platforms.
• Vistra: World’s first biodegradable motor oil – used market research to
define product positioning across Europe.
• The Bad:
• Several therapeutic projects pursued far too long despite continued failure
to meet performance targets.
Commercialisation Experiences (cont.)
• The Ugly:
• Smoke Hood Project: Real need in market, many technical
problems overcome, successful prototype produced – failed due to
commercial interests overtaking safety concerns.
What do you need to set
up a successful company?
What do investors look for?
1. Have a strong team
• ‘Strong team’ means:
– A mix of skills
– Technical AND Commercial experience
– Constructively challenging (not a bunch of ‘yes’
men)
– Avoid ‘primadonnas’
– Outsource/buy-in any specialist knowledge gaps
2. Have a robust business plan
Key Components:
• Executive Summary
• Market opportunity
• Competition and competitive advantage
• Business model
• IP (License from University to use IP)
• Management team
• Financials
• Technical and commercial plan
• Exit plan (v important if raising finance)
Process is as important as the result. The result may
be that the project is terminated.
Business Plans –
Common Pitfalls
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•
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Too long
Too vague
Too much jargon
Not business focussed
Financials too detailed
or not detailed enough
Exit
Especially important for investors.
Positive
Negative
Trade Sale
Managed close down
Merger
Liquidation
Public listing (IPO)
(Licensing)
Trade Sale & IPO
Trade Sale: Purchase of one business by another
IPO - Initial Public Offering:
Why float:
•
Access to capital
•
Profile and credibility
•
Valuation
•
No need for profit
Long process – need to make sure that you are fully prepared (3 months) – important
internal and legal audit
Need nominated advisors and brokers
6-10% of the money you raise will be spend on fees
3. Secure Funding
Need a financial strategy
Final Product
Prototype
IP
Partners
Prototype
Clinical
validation
or Test Mkt
VALUE INFLECTION POINTS
Final
product
Sales
4. Agree Shareholding (Ltd)
• If the company will be limited by shares, who is
going to hold shares.
• Shareholders’ Agreement – setting out rights and
responsibilities of shareholders.
• Name the Directors.
• Allocate a Company secretary – this is not a legal
requirement now, but is good practice.
IP and Know-How License
Agreement with the University to use the IP.
Sometimes have a pipeline IP agreement.
5. Determine Company Name
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•
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Is your name available?
Check Companies House Register .
Is the domain name available (whois.com)
6. Register your company (Ltd)
1.
2.
3.
Application form IN01 to register a company.
Memorandum of Association - giving the names of each subscriber and
authentication that they have agreed to become members of that company.
Articles of Association – describing how the company will be run, the rights of
the shareholders, any restrictions if they have any and details of the directors'
powers.
(£40 online, £2000 via a solicitor)
Other things to set up early........
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Bank accounts
Accountants - Management accounts
VAT registration
Register for corporation tax
Purchase domain names (website, email)
Employment contracts
Insurance – Employment, Prod. Liability, D&O
7. Keep up to date
Task
Monthly
•
•
Board meetings (articles dictate).
Employee PAYE and NIC.
Quarterly
•
VAT return.
Annually
•
File statutory accounts (9 months before
year end).
Confirmation Statement (12 months) –
shows current company's set up –
shareholding etc.
R and D tax credits.
Employee benefit tax.
Corporation tax.
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What is a board of
directors and why is the
board so important?
The Board of Directors (1)
•
Shareholders own limited companies, but directors
run them.
Determining
strategic
objectives
Monitoring
progress
Appointing
senior
management
Accounting for
company
activities to
relevant parties
e.g.
shareholders
The Board of Directors (2)
When you are appointed a director of a company you
become an officer with extensive legal responsibilities.
The Companies Act 2006 sets out a statement of your
general duties.
•
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Fiduciary duties.
Duty of skill and care.
Directors may incur personal liability, both civil and
criminal for their acts or omissions in directing a
company – health and safety, insolvency and
fraudulent trading.
The Board of Directors (3)
Fiduciary Duties (highest standard of care)
1. A director must not put himself in a position where
the interests of the company conflict with his
personal interest or his duty to a third party.
2. A director must not make profit out of his position
unless the company permits him to do so.
3. A director must act in good faith in the interest of
the company.
Typical Investment
Early stage
Seed
Investment
Series A
investment
Listing or
Series B,
C....
£10K£100K
£100K£750K
£750K £3M
+£3M
VC Investment Process
1
2
3
4
5
• Write a business plan
• Identify investors
• Pitch to investors
• Agree term sheet
• Negotiate legals
• Get the cash in the bank
Create Value
Team
Technical
Commercial
Strong board with relevant
experience
Make progress and reach
milestones
Sell product
Incentivised and
committed employees
Pass regulatory hurdles
Secure partnerships
Support of key opinion
leaders
Make new valuable
inventions
Get IP granted
Network with customers,
investors and partners
Maintain focus
In-license additional IP
Out license to generate
revenues
Maintain market
knowledge
Secure soft funding
Be aware of the risks
Spin Out Considerations
BUT There are lots of benefits
Conflict –
academic
careers
Time
commitments
– work life
balance
Make (lots
of) cash
Meet new
people
Letting go –
you may not
be the best
person to run
the company
High chance
of failure
Benefit
society
Career
development
Key Points
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Develop a robust business plan early.
Get advice.
Secure an experienced management team.
Look at all funding options and see what is the best
for your company, be aware of the risks and benefits.
• Be aware of the impact and time commitments of
being involved in a spin out.