Have a Bright Idea?
In any area of research the process starts with "disclosing" an idea to the University of Iowa Research Foundation (UIRF). UIRF screens the invention for its technical and market potential and assists in patent, copyright and trade secret applications. Whether to license a technology to a third party or to start a venture, UIRF offers assistance. Don't understand the business side? Want help negotiating and managing the license? Need management assistance? UIRF has educational and process assistance for each step.
Before forming a venture you need to define the product or service you are going to deliver. It can be fairly general at this point and refined later. (ex: a better surgical device). A Mission Statement is a few sentences to describe what you are trying to achieve with the product and company. Finally, a Commercialization Roadmap is the bulleted steps (in as much detail as possible), needed to achieve the Mission Statement.
The FIRST STEP in the Commercialization Roadmap is to decide who will lead the new venture. Will one of the inventors be CEO? Will co-inventors be active in management? Or are you want to bring in an interim or permanent experienced management team? Often the inventors will get things started, then attract replacement managers. Developing a Commercialization Roadmap will help determine, how, when, and who should be involved in the venture's management.
The following sections highlight the progression of a new venture regardless of who manages the new venture. The New Venture Cheat Sheet has more details.
Select the co-owners you want to work with. (The Founders are not necessarily the same people on the research team).These are people critical to your success. Often you need their assistance but can’t pay them, so you give them equity. Employees come later. The Founders all need to agree on the Mission Statement (or modify it).
The Founders also need to develop a Business Model. Mainly, how will the venture make money to be sustainable? This is not the company form (LLC, etc.) but the overall organization. (Will this be a virtual company with most of the work contracted out, or will employees be hired to do the things in-house? Will we sell direct or through distributors? What roles are there and how do we fill them?)
In parallel, a team of Advisors should be selected (not the board). Advisors are used as needed for outside guidance and perspective. They advise for free because they are interested in your success. The following advisors are recommended: Legal, Business, Marketing, and Technical. The technical advisor should be someone who understands the technology but is not directly related to the company. Do not choose a “big name” who will not be available when you need them.
Once you have your game plan in place and partners selected, you are ready to incorporate. The Business Model will determine the best corporate structure, (LLC, S-Corp or C-Corp). Actual registration with the State is only a few hundred dollars and can be done on the web. However, see the next several steps before incorporating yourself.
As the company is being incorporated, a business plan should be written. A Business Plan is a living document that incorporates the Mission Statement, Commercialization Roadmap, and adds financial statements (called the Pro Forma – a best effort guess of what’s it going to cost, when will it make money, and how much it will return to investors). The exercise of building the BP brings the management together with one vision, even if no one else sees it. Never more than 20 pages long; there is lots of assistance available to help write a BP. A business plan is the sum of its parts which usually includes:
- Executive Summary
- Description of the problem and the product as a solution
- Business Model
- Market Analysis
- Competitor Analysis
- Projected Expenses and Revenues
- Finally, the "Ask", exit strategy and Return on Investment (ROI) (if investors are needed)
Once you are a legal entity you can option or license the technology from the university. Your Business Plan will determine if you want an exclusive or non-exclusive option or license, sub-licensing, terms and conditions, and performance milestones. Your Pro Forma financials will assist in negotiating how much the license is worth. Conflict of interest and use of university facilities must also be reviewed.
These are just a few of the items to be considered when starting an new venture. For more information on the process visit the New Venture Cheat Sheet