TECHNOLOGIES AND START-UP COMPANIES
Under some circumstances, it may be preferable to take a technology to the marketplace through a start-up company. University policy allows faculty to be shareholders, advisors/consultants or directors in such a company, but they may not be an officer of the corporation or have direct responsibility for operation of the company while maintaining a full-time faculty position. Before a license is granted to a start-up company, the company must demonstrate its capabilities to properly commercialize the technology.
A Business Plan must be submitted and approved. The plan must include a well-balanced management team, identification of the target market, a plan and schedule for product development, a marketing plan, financial documents that cover company operations until profitability is expected, and commitments for the required financing.
A license agreement will be negotiated with the start-up company that will be very similar to agreements with established companies; however, the licensing fee will usually be in the form of stock in the company in order to conserve the cash needed for company operations.
There is a sequence of questions to be answered prior to making a decision of creating a start-up venture. Some of them are:
- Is there a good reason for licensing the technology to a start-up corporation instead of established corporation?
- What level of authority will be needed for each of the decisions to be made (policy, licensing, oversight)?
- Who should be consulted or informed?
- If approved, how will the proposed relationship be monitored?
- Who will do it?
- What will be the relationship of the proposed company and the principals to the University?
- How will the technology related issues (ownership, pre-existing rights, intellectual property protection, licensing) be evaluated, handled, and negotiated in the process?
- Have all possible conflicts of interest, real and apparent, been considered?
- How will disclosed information be handled?
- Have the decisions been documented for the files?
Commercialization via Start-Up Company
Increasingly, at universities, faculty, staff and students are interested in seeing their research results reach the marketplace by starting a new company rather than the more traditional way of licensing the technology to an existing company. Innovation Commercialization staff is prepared to assist in this process by offering the following services:
- Identification of Commercialization Options: Through an initial meeting and follow-up, the OIC staff learns about the business opportunity and discusses various ways to move it forward. OIC staff present and discuss the attached Checklist of issues for a start-up company at UNCG.
- Business Opportunity Analysis: Following an agreement to work together, OIC staff will work with the researcher to understand the research background and its applicability to particular markets. A Business Opportunity Document will be prepared which, in 1 -2 pages, describes: the opportunity (how the products will make money); the technology; the intellectual property situation; the products/services arising from the technology; the markets; the commercialization process; and next steps.
- Preparation of a Commercialization Plan: A brief document outlining why a start-up company is appropriate, how ownership might be apportioned, legal incorporation of a company; company site, financing of the company, Business Plan preparation, and company management.
- Dealing with the University: OIC staff can assist researchers to address and resolve the following issues:
- internal UNCG sign-off/information to appropriate administrators.
- how to provide a portion of commercialization proceeds to all parties who have such an expectation – students, other faculty, the University.
- UNCG may have an interest in the intellectual property through policy or prior funding. This needs to be resolved and documented in an agreement.
- structural relationships with UNCG – will UNCG hold equity, will the company launch initial activities while housed at the university, technology transfer into the company, etc.
- Preparation of the Business Plan: A plan is required to run the company, and provide performance milestones for any license. OIC staff can assist researchers in its preparation. A plan normally discusses how the necessary human and financial resources can be gathered to create a product flow, which is put into the market to satisfy a need and create a cash flow, which allows the company to survive and grow. This document is an expansion of the Business Opportunity Document, but provides more description, details the financial projections including cash flow, as well as describing the investment opportunity. Such a plan has a series of action plans for product development; market development including sales and marketing; obtaining investment; strategic partnering, etc. There must be specific information about governance (Board of Directors) and advice (business mentors and advisors). The individuals who will manage the company prepare the plan. The staff of the OIC can provide comments on a draft plan.
- Launching Company Activities: As company activities increase, hands-on involvement by the OIC will decrease – – the sooner the company has its own employees and advisors, the better it will survive in the marketplace. The OIC will monitor company activities in a manner, which is negotiated, and can continue to provide advice and assistance as mutually agreed upon.eived by the University.
Looking to start a business of your own? This section highlights the stages of starting your business and problems that may arise during each stage.
As an entrepreneur you will have to learn to identify your company’s strengths and weaknesses and analyze the market opportunity and threats. You must know how to compete and thrive in a dynamic, uncertain and risky environment, and to manage resource effectively to meet the challenges.
As a guide, we have outlined the four stages of small businesses and the common problems associated with each.
Characteristics: Startups often operate with minimal support staff and struggle to survive. The true main goal of the business, more often than not, is to give a financial assurance to the startup owner.
Problems: Most businesses fail in the early stage from the lack of management skills, poor marketing, lack of financing, and cash flow problems. Major concerns are in expansion of company, recruitment of employees and safety environment.
Characteristics: A company has refined its business plan, has some of its management team in place and is starting to develop products and sales. The value of the business has grown to a point where is it necessary to protect and preserve the business.
Problems: Many businesses fail in the growth stage because they lack the knowledge to face continual challenges and to recognize a time-sensitive opportunities. The primary concerns are cash flow, hiring and retaining key employees and growth.
Characteristics: A company has made good progress on its plan, sales have started to increase and the business is expanding. Cash flow reaches break-even point and the business is able to examine ways to finance future growth. The primary concern is with the expansion of the business. If this issue has not been addressed, attention turns to providing complete employee benefit packages to all employees, as well as additional selective benefits that are needed to reward and retain key people.
Problems: Many businesses fail in the prematurity stage because they do not understand the importance of expanding or finding successful ways to duplicate products or to penetrate the markets. Again, expansion and recruiting often top the list of concerns, followed by safety, personal benefits and the transfer of the business.
Characteristics: At this stage, the business has reached the point where the fruits of labor can be realized. The company has done well, attacked its market, refined its product and is gearing up for an initial public offering or other major progress. By this point, the owner has some decision to make. Does he/she concentrate on continuing to run a successful venture, pursue new ventures, or devise a plan for succession of the business so he/she can retire.
Problems: Many businesses fail in the maturity stage from the lack of experience in managing their financial and human capital aspects. Taxation may become a concern, as well as the transfer of the business.