ALLIANCES & PARTNERSHIPS
“YOU CAN’T DO IT ALONE”
PRESENTATION FOR NIH SBIR/STTR CONFERENCE Bethesda, MD
KEY ELEMENTS OF A PARTNERSHIP
1. Partnerships are voluntary by nature. 2. Partnerships develop a mutual dependency that arises from sharing risks, responsibilities, resources, competencies and benefits 3. Partnerships develop synergies - the concept of value added or the total being greater than the sum of its individual parts
KEY ELEMENTS OF A PARTNERSHIP
4. Working together - in the most strategic
partnerships, the partners work together at all levels and stages, from the design and governance of the initiative to implementation and evaluation. 5. Shared competencies and resources partnerships are a mechanism to leverage different types of resources and competencies, including, but not only, money.
WHY ENTER INTO PARTNERSHIP ?
1.
2.
Strategic alliances enable business to gain competitive advantage through access to a partner's resources, including markets, technologies, capital and people. Fast growing companies rely heavily on alliances to extend their technical and operational resources. In the process, they save time and boost productivity by not having to develop their own, from scratch.
TYPES OF PARTNERSHIPS…
1.
2. 3. 4. 5. 6.
Commercializing Products Establishing Intellectual Property Relationships Providing Practical Solutions Creating Strategic Alliances Reducing Time To Market Forging Public-Private R&D/Technology Alliances
WHO ARE THE PARTNERS ?
1. 2.
3.
4.
5.
6.
NATIONAL LABORATORIES UNIVERSITY TECHNOLOGY TRANSFER SBTDC’s or SBDC’s NATIONAL TECHNOLOGY TRANSFER CENTER (http://www.nttc.edu) PRIVATE SECTOR ANGEL INVESTORS
What should be considered ?
1.
Discuss goals and aspirations. The partners' goals must be fully compatible. They do not have to be the same, but it is critical that they are harmonious. It is important for each partner's achievements to create success for the other.
What should be considered ?
2. Explore potential conflicts of interest. Only begin a strategic partnership where the interests are common. Beware of an alliance where one partner may not view success in the same terms the other does.
More to consider….
3. Examine values. If one partner conducts ethical business practices, and the other does not, then the partnership is likely to fail. Common values between partners will create an environment for success.
Still more to consider….
4. Assure that mutual trust exists. Be certain that both sides operate with high integrity. Two rules of partnership are pertinent here: Never enter into a partnership where you need a contract. Never enter a partnership without a contract.
Some final considerations….
5. Show commitment. Without full commitment on both sides, a partnership is likely to fail. To be fully committed, each partner must show an innovative attitude and become reasonably flexible. Additionally, clear and frequent communication must occur.
Last but not least to consider….
6. Enter with a win-win attitude. Both partners should see real value in the collaboration and be enthusiastic about the venture. Success should be expected and it should have a significant positive impact on all parties involved. At a minimum, there should be internal champions in both partnering firms.
Who will help ?
Networking is absolutely essential in this area of partnering.
Funding is also essential.
Why not enlist angels ?
Who are these ANGELS ?
AN ACCREDITED INVESTOR IS A PERSON WHO HAS A NET WORTH OF $1M AND OR AN ANNUAL INCOME IN EXCESS OF $200K FOR THE PREVIOUS 2 YEARS AND THE EXPECTATION OF THE SAME FOR THE NEXT YEAR.
Why are ANGELS good partners?.
Wealthy individuals – “accredited investors” “Been there and done that” entrepreneurs Have made several angel investments $25K to $250K per investment per angel More than 400,000 active angels Potential 5 million angels
FUNDING CAN BE THE BASIS FOR A PARTNERSHIP
- Friends and family ( maybe fools) then
- Angel investors, then
- Venture capitalists, then…….?
HERE ARE SOME QUICK FACTS:
in 10 Start-ups obtain angel financing <1 in 1000 Start-ups are VC financed <1 in 10,000 new companies go public <1 in 100 angel-funded companies go public via IPOs
<1
Annual Sources of Startup Funding
VCs (NASVF data)
< $3 billion
(<500 companies)
Angel
investors
(Center for Venture Research)
~$30 billion
Conclusion:
Angel investors provide about 90% of the seed and early stage outside equity capital for start up entrepreneurs. This is a combination of “lone wolves”, forums and committed funds.
Why do angel investors make such risky investments? Here is one reason
Seed vs Alternative Investments
25 20
22.4
Historical 20 Year Returns for Alternative Assets
14.9 13.2
Returns
15 10
18.7
18.7
16.5
5
0
Seed Fund s
All Venture
Hedg Buyouts e Funds
S&P 500
NASDAQ
Source: Venture Economics, HFRI Equity Hedge Index
Motivation for Angel Partners…
Angels Staying involved into “codgerhood” (sense of usefulness) Give-back Affection for Entrepreneurs Return on Investment
PICK YOUR ANGELS WISELY
almost like getting married…. Know the Angel’s strengths and weaknesses. Its more than just money….. Where is the sweet spot ?
Its
THE KEY IS TO DO YOUR HOMEWORK !
WHERE YOUR ANGEL PARTNERS ARE NOT
$1M TO $5M GAP Scarce capital – very few deals Wealthy, solo, private investors Boutique VCs - many new, small VCs Unique alliances between angels and VCs
Go Where the Investing Partners Are!
Number of Investors
Angels
GAP
VCs $5 million $10 million
Investment (one round)
INITIAL CONSIDERATIONS…..
YOU HAVE AN IDEA….. NOW WHAT DO YOU DO?
PARTNERS NEED TO KNOW WHAT YOU WANT !
MORE IMPORTANTLY…. HOW ARE YOU GOING TO ASK FOR IT ?
COMMUNICATING TO THE WORLD….. AND YOUR STRATEGIC PARTNERS
THE BASIS WILL BE YOUR BUSINESS PLAN….. MOST IMPORTANTLY - THE SUMMARY AND PITCH !
What constitutes good communication?
a.
b.
Is the Executive Summary clear and concise ?
If a partner read the summary, would they understand exactly what your business is all about ? Does the summary create a high level of interest ? Think about being at a cocktail party and having someone ask you “what does your business do?” Could you answer concisely in 2 minutes or less?
c. d.
All your partners need to know…
Summarize the plan: like the jacket cover on a novel, tell the reader in a CLEAR, CONCISE and COMPELLING way, enough about the contents to convince them to read on. Show the need: Explain the problem in search of a solution, the extent of the problem, and the desire in the marketplace for the solution. Draw the partner into the need.
Describe your solution: Provide a description of your offering, explaining how it meets the market need in a better manner than any of the possible alternatives. Show how your partner can contribute and benefit.
Establish credibility: describe your enterprise, key personnel, history of success and measurable objectives.
Explain your delivery methods: keep in mind that a better mousetrap doesn't guarantee success. Be prepared to describe planned promotions, sales techniques, channels of distribution and post sales support. Where does the partner fit in?
Acknowledge barriers to success: Explain the how you will deal with expected or potential market resistance, difficulties of access to the market and competitive reactions to your offering. How can the partner help ?
State requirements for long term success: assuming initial market acceptance of your offering, describe your need to handle growth, improving the initial offering and developing new offerings. The value added from the partner.
SUMMARY AND CONCLUSION
We have reviewed the basis and value for strategic partnerships. We have outlined some examples. We have determined that funding is a common thread through out. We can use Angel investors as strategic partners. We have described the critical communications piece….Executive Summary and Pitch….what partners and/or investors need to hear.
QUESTIONS ?
SOME RESOUCES:
1. THE ANGEL INVESTOR’S HANDBOOK BY GERALD A. BENJAMIN & JOEL MARGULIS 2. NATIONAL TECHNOLOGY TRANSFER CENTER (http://www.nttc.edu) 3. WWW.ASPATORE.COM 4. WWW. ANGELCAPITAL ASSOCIATION.COM 5. WWW.INCEPTIONMICROANGELFUND.COM
APPENDIX OF CHARTS AND GRAPHS
Median Pre-Money by Stage-FACTOID
$100 $80
$60 $40 $20 $30 $21
$101
Later Rounds Second Round First Round
$44 $29 $15 $7 $2
$14
$8 $6 $2 $0 3Q98 1Q99 3Q99 1Q00 3Q00 1Q01 3Q01
Seed Round
Source: PWC MoneyTree