Hackney commercialization-of-redacted

3/24/2011

The Commercialization of
*REDACTED*

Or, How I Stopped Worrying and Learned to Love the
*REDACTED*

Douglas Hackney @dhackney
dhackney@egltd.com www.egltd.com

Douglas Hackney
 Serial Entrepreneur
 Founded six companies
 Part of dozens via consulting / advising / board
 Consultant
 Management
 Technology
 Startups
 VC / angel / seed

2 The Commercialization of *REDACTED* www.egltd.com

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3/24/2011

Relevant Non-*REDACTED* Projects
 DARPA
 TASC
 GE


Commercialization of *REDACTED*
 Technology / Capability
 Mix of open and declassified
 Goal is commercialization to open market


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3/24/2011

SMB Government Tech Channels
 Government Department / Agency Grants
 SBIR
 STTR
 Funding by agency to SMB/RI for development of technology /
capability
 Direct commercialization
 *REDACTED* source to market
 Typically subcontracted
 Funding or opportunity by source for commercialization of
existing technology / capability


Small Business Innovation Research (SBIR)
 Department of Agriculture
 Department of Commerce
 National Institute of Standards and Technology (NIST)
 National Oceanic and Atmospheric Administration (NOAA)
 Department of Defense (DOD)
 Department of Education
 Department of Energy (DOE)
 Department of Health & Human Services (NIH, CDC, FDA, AHRQ)
 Department of Homeland Security (DHS)
 Department of Transportation (DOT)
 Environmental Protection Agency (EPA)
 National Aeronautics & Space Administration (NASA)
 National Science Foundation (NSF)
 U.S. Small Business Administration (SBA)


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3/24/2011

Small Business Technology Transfer (STTR)
 Department of Defense (DOD)
 Department of Energy (DOE)
 Department of Health & Human Services (NIH)
 Department of Homeland Security (DHS)
 National Aeronautics & Space Administration (NASA)
 National Science Foundation (NSF)


SBIR / STTR Primary Differences
 SBIR > funding sources
 Primary Investigator (PI) requirements
 SBIR – employed by SB at award and for duration
 STTR – not stipulated
 Research Institution (RI) requirements
 STTR - Formal collaborative relationship required with SB
 STTR - Minimum 30% of work done by RI
 Intellectual Property (IP) requirements
 STTR - Requires contract for distribution / ownership of IP
between SB and RI


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3/24/2011

SBIR / STTR Similarities
 Small Business (SB) <500 employees
 Very competitive, ~10% applications awarded
 Multi-phase process
 Phase I – feasibility
 Phase II – major R&D
 Phase III – commercialization (private sector funding)
 Daunting application process
 Contract process can be lengthy, average 180 days
 DARPA testing Other Transactions for Prototype (OT) fast-
track application process (beta test yielded 37 days to close)


Direct Commercialization
 Contract (payment) to commercialize existing technology
/ capability
 Payment by *REDACTED* source or 3rd party
 Can require licensing / royalty stream to source
 Good work if you can find it
 Opportunity to commercialize existing technology /
capability
 No payment by source
 Can require licensing / royalty stream to source
 Typically via 3rd party


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3/24/2011

Primary Direct *REDACTED* Source
Channels
 Government agencies / departments / acronyms
 DARPA
 3rd Party Players


Government Agencies & Acronyms
 Typically political initiative / policy
 Short half-life common
 Default mode is obfuscation and slow-motion passive
aggressive behavior until the initiative goes away
 Very challenging to overcome obstacles within available
time window


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3/24/2011

DARPA
 Upsides
 Long tradition of commercialization
 Innovative commercialization programs and initiatives
 Existing and embedded processes and culture of
commercialization
 Downsides
 What are their metrics?
 You are very unlikely to see the good stuff


3rd Party Players
 Typically politically or revenue driven
 Beware delusions of kazillions of dollars
 Often more dream than reality
 New executive - typically from outside
 Mid-level manager / director - path to glory
 Contractual limitations often preclude commercialization
 Requires extensive due diligence
 Fail fast


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3/24/2011

The Conundrum
 Lots of very interesting technologies and capabilities
 An equal number of challenges to commercialization


Popular Perception


8

3/24/2011

Popular Perception

 007 / Spy vs. Spy
 22 stories below ground
 CSI/NCIS labs and personnel


Reality

Cubeville


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3/24/2011

A Lot Like the Commercial World
 Same core challenges
 Idea vs. problem
 Market
 Technology
 Business model
 Sales model
 Capital
 Execution

Tech Market $


Subtleties: Suitability / Viability
 Technology
 Market
 People
 Scale
 Politics

Tech Subtleties Market $


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3/24/2011

Additional Challenges
 Rivalries
 Inter- & intra-agency
 Inter- & intra- department
 Tribal
 Budget cycles
 Changing priorities
 Uncertain and ever-shifting political winds

Additional
Challenges


Added Layers
 Security
 Internationalization restrictions
 Compartmentalization
 Often walled off from inventors / developers

Additional Added
Challenges Layers


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3/24/2011

Adds Time to Market
 More time = more risk = more failure

Additional Added
Challenges Layers


Managing Expectations
 Source side
 Classified since when?
 Commercial side
 “This won’t take long”
 Both sides
 “This will be worth a billion”

Expectation Management

Additional Added
Challenges Layers


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3/24/2011

Created 1943, Declassified 2000


Not My Last *REDACTED* Paperwork
But Close


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3/24/2011

The Billion is Where?

Fisher Space Pen

• Patented 1965 • Idea 1941, company 1952
• > $1m private development cost • $261m sales 2003
• 400 units sold to NASA, 100 to • Swiss
Russia @$2.95 ea. = $1,475


Top Challenges
 Specialization
 Scalability
 Suitability
 Security
 Speed


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3/24/2011

Specialization
 Too Much
 Created to solve a narrowly defined challenge
 Can result in a too narrowly limited market
 Very easy to fall prey to solution vs. pain trap
 Too Little
 Broad, general-science discoveries
 No specific, viable market
 Requires too much time to make market-ready

≠

Scaleability
 Materials or components too expensive
 Required processes at bench scale
 Required re-engineering for market scale reduces critical
capability
 Too costly to manufacture or re-design for general
market

≠

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3/24/2011

Suitability
 Disruptive = Startup
 Incremental = BigCo

+ = #fail

+ = #win

Security
 Can be restricted to components or sub-systems
 Multiple layers of review
 Each review layer can kill critical functionality / capability /
component
 Each review layer = time


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3/24/2011

Speed
 As always, time is the most valuable resource
 *REDACTED* commercialization includes many unknown
time variables
 Most *REDACTED* commercialization initiatives simply
run out of time


Top Failure Drivers
 We find that the biggest cause of an [NSF SBIR] project’s
commercialization failure is:
 Market too small
 Market disappeared

F.C. Thomas Allnut
Program Director and Biotechnology
Cluster Leader
SBIR/STTR Program
National Science Foundation

Source: http://www.montanabio.org/PDF/taylor%20pdf.pdf


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3/24/2011

Speed To Market

Market Fit Uncertainty

Time

Zone of Market Uncertainty (ZMU)
Market Fit Uncertainty

Time

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3/24/2011

Zone of Market Uncertainty (ZMU)
 Most effort spent on shrinking the circle
 *REDACTED* commercialization almost always takes
longer than you think
 ZMU is almost certain to grow
 ZMU management is a critical skill


ZMU Management
 Start with existential customer pain, not solutions looking
for a problem
 Manage expectations
 Require accomplishable scope
 Assume 3x time for everything
 Avoid politically driven scenarios / initiatives
 Build and sustain relationships


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3/24/2011

Case Study: Relate-o-Matic
 Client: *REDACTED*
 Technology candidate
 Real time analysis
 Language stream
 Establish, build and maintain entity relationships
 Developed for: *REDACTED*
 Project driver: Starry Eyed New Executive


 Target Pain
 Identify and surface product issues from customer service data
stream
 Challenges
 Non-English languages
 Fastest route to cash = multi-nationals / overseas markets ≠
internationalization restrictions
 Time required to integrate English language
 Source organization sensitivity / resistance


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3/24/2011

 Process
 Preliminary agreement
 Segment and isolate available technology
 Pitch concept
 Build demo
 Pitch beta customers


 Outcome
 Unclear benefits for target market
 Insufficient delta from existing, known and trusted solutions
 Required culture and process change
 Competed with “enough”
 Not commercialized


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3/24/2011

Prerequisites For Success
 Domain expertise or equivalent
 Process
$
 Patience
 Persistence Respect
 Humility Humility
 Respect Persistence
Patience
You Are Here Process
Expertise


Confidentiality Implications

Client NSA

Penalty


22

3/24/2011

*REDACTED* Summary
 All the challenges of a startup
 But wait, there’s more
 Expectation management is key
 Time is even more valuable than normal
 If it was easy, everyone would be doing it
 Pain is King


With all the Challenges, Why Do It?
 Success is Possible
 Adapx, Inc. - Multimodal Command Interaction
 BCL Technologies, Inc. - Integration of Information from
Heterogeneous Sources
 Design Interactive, Inc. - Advanced Neurophysiology for
Intelligence Text Analysis (ANITA) System
 Geosemble Technologies, Inc. - Open Source Information
Geospatial Overlay (OSIGO)
 Healthsense, Inc. - Non-Intrusive Health and Wellness
Monitoring
 J.A. Woollam Company, Inc. - In-Situ Process Sensors for Real-
Time Microcircuit Manufacturing Control


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3/24/2011

 Success is Possible
 Kinetic Art & Technology - Lightweight, Intelligent Speed
Reducers and Controllers
 Multiplex, Inc. - High Performance Lasers for Radio Frequency
Photonics Applications
 PhiloMetron, Inc. - Non-Invasive Hydration Monitoring
 Radant Technologies, Inc. - Lightweight Electronically Steerable
Antenna
 Secure Decisions Division, Applied Visions, Inc. -
MeerCAT®:Visual Analysis of Wireless Risks to Critical Cyber
Assets
 SenTech, Inc. - Compact Acoustic-Seismic Unattended Ground
Sensor


 Many potential billion dollar markets are on shelves


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3/24/2011

Or, Perhaps, In Boxes…


The New New Thing is Out There
It’s One Box Over From the
*REDACTED*


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3/24/2011

Resources
 These slides on slideshare
 Small Business Innovation Research (SBIR)
http://www.sbir.gov/
 Research Commercialization and SBIR Center
http://center.ncet2.org/
 Defense Advanced Research Projects Agency (DARPA)
http://www.darpa.mil/
 SBIR & Small Business Technology Transfer (STTR) links:
http://www.darpa.mil/Opportunities/SBIR_STTR/SBIR_ST
TR_Links.aspx
 LARTA Institute http://www.larta.org/

The Commercialization of
*REDACTED*

Or, How I Stopped Worrying and Learned to Love the
*REDACTED*

Douglas Hackney @dhackney
dhackney@egltd.com www.egltd.com

26

Hackney commercialization-of-redacted

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