2. `
Different Forms of
Entrepreneurship
Presented by:
Tony Redpath
Business Advisor, MaRS Discovery District
15 November 2007
Slide 2
MaRS

3. Three basic questions:
 What does my business look like ?
 What resources do I need?
 How do I fit into the rest of the world?
Slide 3
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4. Overview
 Different types of business
 Where do they fit into the rest of the world
 How do you finance your business
 What factors do investors look at
Slide 4
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5. Technology Commercialization
KNOWLEDGE
Universities / Hospitals
Government Labs
PATENTS (Novel, Useful, Non-Obvious)
Company II
R & D Project Engineering Project
Concept Production Sales
Lab Prototype Engineering Prototype
Marketplace
R & D Project Engineering Project
Concept Production Sales
Lab Prototype Engineering Prototype
Company I
Slide 5
MaRS

6. Business types - Consulting
 You
provide advice, based on your specialized
knowledge
Slide 6
MaRS

7. Technology Commercialization
KNOWLEDGE
Universities / Hospitals
Government Labs
PATENTS (Novel, Useful, Non-Obvious)
Company II
R & D Project Engineering Project
Concept Production Sales
Lab Prototype Engineering Prototype
Marketplace
R & D Project Engineering Project
Concept Production Sales
Lab Prototype Engineering Prototype
Company I
Slide 7
MaRS

8. Consulting …. Cont’d
 Can start as a one-person business
 Mayhave a technical, management, or
marketing focus
 Oftenstay small, but consulting engineering
firms can be large (e.g Hatch Associates)
 Oftenoperate via a virtual network of
consultants
 Need liability insurance
 Capital costs low
Slide 8
MaRS

9. Business types - Consulting
 Q: How much should I charge?
* A: What is the client’s alternative cost?
Slide 9
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10. Business types: Service
 You provide a service to existing businesses
Slide 10
MaRS

11. Technology Commercialization
KNOWLEDGE
Universities / Hospitals
Government Labs
PATENTS (Novel, Useful, Non-Obvious)
Company II
R & D Project Engineering Project
Concept Production Sales
Lab Prototype Engineering Prototype
Marketplace
R & D Project Engineering Project
Concept Production Sales
Lab Prototype Engineering Prototype
Company I
Slide 11
MaRS

12. Service business…. Cont’d
 Technical service businesses often provide
analytical services
 May provide custom clinical trials
 Classic IT service providers
 Can be very small or very large
 Capital costs can be quite high
Slide 12
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13. Business types: Product
 Youhave real article ( pharmaceutical
compound, medical device, consumer
product….) that you wish to take to the market
Slide 13
MaRS

14. Technology Commercialization
KNOWLEDGE
Universities / Hospitals
Government Labs
PATENTS (Novel, Useful, Non-Obvious)
Company II
R & D Project Engineering Project
Concept Production Sales
Lab Prototype Engineering Prototype
Marketplace
R & D Project Engineering Project
Concept Production Sales
Lab Prototype Engineering Prototype
Company I
Slide 14
MaRS

15. Product …. Cont’d
 Examples range from cottage industry craft
producers up to General Motors
 Capital
needs vary widely, but there will usually
be a need for at least working capital
 “Mercedes in the driveway” vs. high growth
Slide 15
MaRS

16. Types of Financing
 Debt
 You borrow from someone, using some asset as
security, an amount that will have to be repaid
 Equity
 You sell a piece of your venture to someone in
exchange for an investment in the venture
 Bootstrap
 You self-fund by using the profits of your
business to grow the business
Slide 16
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17. The Lemonade Stand Example
Assume you’re 8 years old and you need
$20 to set up a lemonade stand
Revenues Debt 50:50 Equity
Rain $10 lender loses $10 partner loses $15
entrepreneur gets $0 entrepreneur gets $5
Cloud $30 lender is even partner loses $5
entrepreneur gets $10 entrepreneur gets $15
Sun $50 lender is even partner makes $5
entrepreneur gets $30 entrepreneur gets $25
Slide 17
MaRS

18. Sources of Debt Financing
 You – your mortgage
 You – your credit cards
 The 3 F’s – Friends, Family and Fools
 Banks
 Can lend to you (e.g. line of credit) or to your venture
 Lend against assets or receivables
 Venture Debt funds
Slide 18
MaRS

19. Sources of Equity Financing
 The 3F’s again – Friends, Family and Fools
 Angels (aka high net worth individuals)
 Generally like to invest in areas that they have worked in
or are comfortable with
 Can add valuable hands-on experience
 http://www.angelinvestor.ca/
 http://www.mapleleafangels.com/186103_186104.html
 Venture Capital Funds
 Different funds invest at different stages in the growth of
a company
 http://www.cvca.ca/
Slide 19
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20. Special Financing Sources
 Proof of Principle / Idea to Innovation
 http://www.researchnet-
recherchenet.ca/rnr16/viewOpportunityDetails.do?pro
g=205&view=search&terms=proof+of+principle&org=
CIHR&type=AND&resultCount=25NSERC Idea to
Innovation (I2I) Program
 http://www.nserc.ca/professors_e.asp?nav=profnav&l
bi=b4
 NRC - IRAP
 http://irap-pari.nrc-cnrc.gc.ca/main_e.html
Slide 20
MaRS

21. The Financing Life Cycle
Public Markets
Venture Capital
Seed Funds
t
en
Angels
m
st
ve
Grants
s
In
le
Sa
R is k
Concept Start-up Growth Expansion
Slide 21
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22. The Financing Life Cycle
Public Markets
Venture Capital
Seed Funds
t
en
Angels
m
st
ve
Grants
In
R is k
s
le
Sa
Concept Start-up Growth Expansion
Slide 22
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23. The Financing Life Cycle
R is k
a n t:
f in e n
ce
lf - t m
Se ves
In
s
Grants
le
Sa
Concept Start-up Growth Expansion
Slide 23
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24. What do Financing Sources Look
For ?
Technology Risk
• Stage of Development
• Impact & Application
• Sustainable Advantage
Slide 24
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25. Technology Risks
 Stageof Development (concept ? proof of concept ?
prototype of product)
 Product development path (costs and “risks”)
 Technology impact
 Scope of application
 Competitive technologies
 Disruptive technologies
 Reliance on infrastructure
 Ease of scale-up, technology transfer, copy
 Manufacturability and costs Slide 25
MaRS

26. Due Diligence and Valuation
Criteria
Technology Risk
• Stage of Development
• Impact & Application
• Sustainable Advantage
IP Risk Market Risk
• Nature and Scope • Size and Growth
• IP Form • Dynamics
• Ownership • Competition
• Enforceability • Customers
• IP Building • Distribution Channels
• Freedom to Operate
Execution Risk
• Reputation / Leadership
• Commitment
• Market Knowledge
• Experience
Slide 26
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27. Intellectual Property Risks
 Nature of the invention
 Scope of the invention
 IP form: Patent, know-how, software
 Ownership of IP - Lingering rights of funding
agencies or students
 Level of IP protection – NA, worldwide
 Competitive research activity, patent activity,
availability of Licensees
 Prior disclosure - publications or conferences
 Enforceability
Slide 27
MaRS

28. Market Risks
 Market size, dynamics and growth potential
 Route to market, access, scalability
 USPs of the products or services
 Nature of the customers
 Lead customers
 Market or industry drivers
 Competitive landscape and profit margins
 Regulatory barriers or opportunities
Slide 28
MaRS

29. Execution Risk
 Management vision for the company
 Management leadership ability
 Commitment and drive
 Recognized technology expertise
 Knowledge of the market, networks
 Skills required to move the technology through
all stages of development and product launch
 Reputation in the marketplace
Slide 29
MaRS