Developing the Business of Technology

Transcription

1 Developing the Business of Technology Brilliant Ideas and Stupid Mistakes: Tips for Phase II Proposal Success 2018 Mid Atlantic SBIR/STTR & Commercialization Conference April 26, 2018 Becky Aistrup Managing Partner bbcetc.com 1

2 Phase II Proposal Development Assumptions (since we only have 2 hours.) Phase II planning Review of key proposal components Preparing a strong Commercialization Plan Brilliant Ideas and Stupid Mistakes Introduction to SBIR/STTR Assumptions You meet the Phase II eligibility requirements You have received a Phase I award or you are doing a Fast-Track proposal You have or will have achieved your Phase I objectives/aims Funding Cycles match your commercialization goals You have a well-developed Commercialization Plan 2

3 Eligibility* for Funding Small business Established company Any legal company structure For-profit U. S. owned and controlled < 500 employees Located in the U.S. R&D must be performed in the U.S. *All at time of award 5 SBIR & STTR Size Regulations Ownership and Control >50% owned and controlled by: i. US citizens, permanent resident aliens and/or one or more domestic business concerns which themselves are >50% owned and controlled by US Citizens or permanent resident aliens..or. ii. Multiple domestic VCOCs, HFs, or PEFs, provided that no single such investor owns more than 50% (SBIR ONLY) *All at time of award 3

4 Facilities Requirement The research work to be performed by the awardee is to be conducted in: Company controlled Research space Suitable to do the work proposed? 7 *All at time of award Phase II SBIR/STTR: Where Does it Fit? 3+ Years, ~$1,150,000+ Phase I: 6 Months, $150K+ Phase II: 2 Years, ~$1,000 K+ Phase III: Commercialization (no federal SBIR/STTR $$) 8 4

5 Grants vs. Contracts. 9 Agency Differences -- Grants vs. Contracts Grants Assistance Project/proposal is welldefined, but no formal agreement Progress/final reports Broad topics funded Agency contact unlimited No Phase III opportunities with the agencies Contracts Procurement Well-defined, legally binding statement of work, obligations, responsibilities Specific deliverables defined Topic Specific Response Agency contact limited Phase III opportunities with the agencies 10 5

6 Agency Differences -- Grants vs. Contracts Grants Investigator Initiated Topics HHS (95% $$), NSF, USDA, DOE, ED Some agencies might have topic areas (aka buckets ) Open communications External peer review Contracts Agency-specified topics DoD, NASA, DHS, EPA, DOT, DOC, ED, HHS (5% $$) Must respond to a topic Limited time to prepare ( 8-12 weeks) Limited communications during open Ph I solicitation Internal review 11 Phase II Proposal Development Planning Acquire and Analyze Phase I data Demonstrated FEASIBILITY Talk to your Program Manager or TPOC* Do your homework (before Phase I ends) Plan experiments/r&d activities Convene the technical team For Phase II and beyond Secure facilities and other resources Update/Write Commercialization Plan Prepare financial systems for Phase II requirements *Technical Point of Contact 6

7 4/25/2018 Phase I Feasibility Brilliant Idea Make it clear that your Phase I demonstrated feasibility and supports the Phase II objectives/aims Phase I success = FEASIBILITY Did you achieve the Technical Objective(s) or Aims defined in your Phase I? What did you prove in order to establish feasibility? Will depend on the technology and the ultimate product to be developed Often defined for you by Contracting Agency topics Were there additional learnings that led to Phase I project adjustments? Was feasibility still demonstrated? 14 7

8 Your Program Manager/TPOC is a V.I.P. Stupid Mistake(s) Working in a vacuum during your Phase I without keeping your TPOC or Program Manager in the loop Diving into your Phase II proposal without considering that agency needs may have changed Leaving money on the table. Discuss with all agencies Did you prove feasibility in Phase I? Changes in direction, aims/objectives during Phase I Changes in Agency priorities or requirements for the technology? Is the Agency/Institute/Component willing to fund the types of activities you plan for Phase II? i.e. Clinical Trials, production scale-up, field testing, etc. What is the firm cap for the Phase II budget? Are there possibilities for Phase IIB or other follow-on or continuation funding? 16 8

9 17 Before Writing a Contract Phase II Discuss with your TPOC or Program Official: ONGOING: Network, network, network about how to secure Ph III funding Programs of Record for your technology Required deliverables Government use of deliverables after Ph II Agency/Component expected Return on Investment (ROI) and Total Ownership Cost (TOC) Expected tests and acceptable threshold test results Statement of Work (SOW) review Private sector commercialization review Required Ph II proposal components Ph II contract structure (deadlines, base + option, duration) Follow on funding opportunities & process Phase IIB Competing Renewal Award NIH Caps and Follow-On Funding Phase Budget Caps Usually up to $1.5M (or higher!) for Phase II Phase IIB Competing Renewal Discovery Phase I Development Phase II Competing Renewal Award Phase IIB Commercialization Phase III $3M for up to 3 years SBIR/STTR Phase II awardees only Technologies that require extraordinary time/effort to develop, and often require FDA regulatory approval 18 Contact NIH Program Staff to discuss! 9

10 NSF Follow-On Funding Supplementary Commercialization Funding Maximum of $10,000 per Phase II award Hire a company-selected consultant to assist with commercialization Must apply within 12 months of start date of Phase II project Phase II Supplemental Research Awards Phase IIB with 1:2 NSF:Investor match funding up to $500K TECP (Technology Enhancement for Commercial Partners) up to 20% of Phase II $ Also Educational and Institutional Partnership opportunities Contact NSF Program Staff to discuss! 19 DoD Phase II Continuation Funding Phase II continuation funding is to encourage transition of SBIR research into DoD acquisition programs Phase II Enhancement/Phase II Plus SBIR/STTR matching investment funds the company obtains from non-sbir/non-sttr sources such as DoD acquisition programs or private sector Can extend Phase II contract up to 1 yr. and match up to $500K of non-sbir/non-sttr funds Sequential Phase II Phase II contractor may receive up to one additional, sequential Phase II award for continued work on the project, up to $500K TALK TO TPOC DURING Phase II 20 Contact TPOC to discuss! 10

11 Other Agencies with Follow-On Funding Department of Energy Phase IIA (topic specific) Phase IIB NASA Phase II Enhancement Phase II expanded New Pre-Phase III Check with the Agency! 21 State of the Science, State of the Market Stupid Mistake(s) Assuming that the state of the science has not changed since you wrote your Phase I Assuming that the state of the market has not changed since you wrote your Phase I 11

12 Do your homework** All agencies: Search most recent awards related to your technology Update technical literature & market analysis data Contracting agencies: Access all current information about the other Phase I awardee companies Look back at the original solicitation description of the Phase I, Phase II and Phase III objectives Search for current information based on contents of the solicitation and your Phase I discussions with TPOC/Program Officer ** and don t wait until your Phase I is done! 23 Identify Other SBIR Companies in Your Field 12

13 Research relevant companies/technologies Find the other Ph. I Contract awardees Awards Topic # Advanced Search sbir.defensebusiness.org 26 13

14 Use the Original DoD BAA to Guide You AF TITLE: Dual Band Focal Plane Array Google search: Air Force dual band focal plane array Phase II Proposal Development Planning Acquire and Analyze Phase I data Demonstrated FEASIBILITY Talk to your Program Manager or TPOC* Do your homework (before Phase I ends) Plan experiments/r&d activities Convene the technical team For Phase II and beyond Secure facilities and other resources Update/Write Commercialization Plan Prepare financial systems for Phase II requirements *Technical Point of Contact 14

15 Consider the reviewer! Brilliant Idea Know the review criteria and make it easy for the reviewer to find what they need NIH Review Criteria Significance Significant Science Significant Product Significant Commercial Opportunity Investigators Innovation Approach Environment IMPACT 30 15

16 NSF Review Criteria 31 What is the intellectual merit of the proposed activity? Feasibility demonstrated Innovation Team State-of-the-art What are the broader impacts of the proposed activity? Commercial/societal benefits Marketable product Leads to enabling technologies Provides competitive advantages Attractive for future non-sbir funding 32 Typical DoD Review Criteria Soundness, technical merit, and innovation of the proposed approach Qualifications of the proposed/key investigators, supporting staff, and consultants Potential for commercial (Gov. or private sector) application and benefits expected to accrue from this commercialization WEIGHT PH I PH II

17 Phase II Deliverable Brilliant Idea Describe your Phase II deliverable Where will you be at the end of Phase II How will you know you achieved the deliverable How will the outcome support/enable the next steps (i.e. Phase III) of the project Components of an NIH Ph II Introduction to Application (1pg) Specific Aims (1 pg) Research Strategy (12 pg) Significance Innovation Approach Inclusion Enrollment Report Progress report/publication List (Phase II proposals only) Protection of Human Subjects Inclusion of Women and Minorities Targeted/Planned Enrollment Table Inclusion of Children Vertebrate Animals Select Agents Multiple PD/PI Plan Consortium/Contractual Arrangements Letters of Support Resource Sharing Plans Appendix Bibliography and Refs Cited Project Summary/Abstract (30 lines) Public Health Relevance Statement/Narrative Biographical Sketches (5 pg ea.) Facilities & Other Resources Equipment Project Budget Subaward Budget Cover Letter Commercialization Plan (12 pg; Ph II & Fast Track only) Forms 17

18 NIH Research Strategy Significance Significant product Significant science/technological innovation Significant commercial opportunity Innovation Clearly state the technological innovation Will success improve the State-of-the-art, establish new research directions, change clinical practice? Approach Do experiments relate to the Specific Aims? Are the end-points/milestones clearly defined? How do they lead to the next steps for Phase III? 35 NSF SBIR/STTR Application Required Format 36 1) Cover Sheet and Certification 2) Project Summary (3 boxes; 4,600 characters MAX) 3) Project Description (maximum 15 pages) 4) References Cited 5) Biographical Sketches 6) Budget, Sub-budgets, and Budget Justification 7) Current and Pending Support of PI and Senior Personnel 8) Facilities, Equipment, and Other Resources 9) Supplementary Docs a. Letters of Support for Technology (3 max provide market validation!) b. SBA company registry c. Data management plan d. Company commercialization history e. Post doc mentoring plan f. Human subjects and vertebrate animals 18

19 NSF Project Description Limited to 15 pages 1) Elevator Pitch (recommended 1 page) 2) The Commercial Opportunity (2 to 4 pages) 3) The Innovation (1 to 3 pages) 4) The Company/Team (1 to 3 pages) 5) Technical Discussion and R&D Plan a. Minimum 5 pages; recommended 5 to 7 pages 37 The Entire Package - DoD Volume 1: Cover Sheet Volume 2: Technical Proposal Sections 1 11 Volume 3: Cost Volume Volume 4: Company Commercialization Report Completed online Required of all proposers 19

20 DoD Phase II: Tech Volume Outline* 40 Pages maximum, to include: Identification/Significance of the Problem & Ph I Results Phase II Technical Objectives Phase II Statement of Work (including Subcontractors) Related Work Relationship with Future Research or R&D Commercialization Strategy Key Personnel Foreign Citizens Facilities/Equipment Subcontractors/Consultants Prior, Current, or Pending Support of Similar Proposals or Awards *Details vary by Component Contracting Agency Technology Transition Transitioning fundamental scientific discovery to operational systems is the goal of SBIR/STTR Process from S&T to R&D to operational product is a long, non-linear process involving many government communities Objective is to provide the best possible technology to operational units at the earliest possible date at the lowest cost 40 20

21 Know Your TRLs! TRL (Technology Readiness Level) is a scale to describe maturity of a technology for a particular use: Least mature (TRL1) to most mature (TRL 9) Provides Common language and standard for assessing the maturity of a technology and plans for its future maturation Framework for evaluating technologies which helps assess risk of inserting a technology into a new or existing program 41 TRL = Technology Readiness Level Basic Technology Research TRL 1: Basic principles observed and reported Research to Prove Feasibility TRL 2: Technology concept and/or breadboard validation in a laboratory environment TRL 3: Analytical and experimental critical function and/or characteristic proof of concept Technology Development TRL 4: Component and/or breadboard validation in relevant environment Technology Demonstration TRL 5: Component and/or breadboard validation in relevant environment TRL 6: System/subsystem model or prototype demonstration in a relevant environment (ground or space) System/Subsystem Development TRL 7: System prototype demonstration in a space environment System Test, Launch and Operations TRL 8: Actual system completed and flight qualified through test and demonstration (ground or space) TRL 9: Actual system flight proven through successful mission operations 21

22 People Brilliant Idea Expand your R&D team Phase II deliverables Post-Phase II R&D Integration into the Market Build/Expand your Commercialization Team & Resources Are you a real company? Do you have marketing and business expertise? If not, how and when will you bring it into the company 44 22

23 Key Research Personnel: Build a Strong TEAM! Your (the SBC s) employees Subcontractor s employees Consultants Other Significant Contributors e.g. advisors ; 0% effort on project (think ahead to Phase II continuation funding and Phase III Commercialization) Commercialization Team Management Expertise Executive Officers Board of Directors Business Advisors Commercialization Resources Legal Financial Regulatory/Reimbursement Support Organizations Recruiting Plans 46 23

24 SBIR/STTR Reviewer Considerations The Company and Team How well is the team positioned to take this innovation to market? To work with key partners? Have they taken similar products to market? Do they have additional outside advisors, mentors, partners, and stakeholders? Is the corporate structure consistent with the Company s stage and vision? Are key success milestones clearly identified? 47 Budget Stupid Mistake(s) Not developing an appropriate and comprehensive budget that addresses all of the project costs and is well justified e.g.: we ll impress the reviewers by asking more direct costs and less indirect costs e.g.: lets ask for more money because we can 24

25 4/25/2018 Phase II Budget limitations Guidelines: $1,000,000 Phase II Limits max 150% of guidelines, therefore: $1,500,000 Phase II Rules: REFER TO AGENCY SOLICITATION! DoD Phase II typically follows guidelines NSF Phase II maximum = $750,000/24 months NIH Phase II = $1,000,000 to $1,500,000/24+ months NIH Solicitation includes SBA Approved Waiver Topics Always talk to program staff! 49 Budgets Direct Costs E.g., Salaries, supplies, equipment, travel, consultants fees, subcontract costs Indirect Costs (F&A) Fee Understand your company s indirect costs Know your agency s policies re. capturing indirect costs Typically 7% of total costs (direct and indirect) Know your agency s policies Unallowable Costs 50 25

26 Budget Direct Costs Indirect Costs FEES 51 Phase II Proposal Development Planning Acquire and Analyze Phase I data Demonstrated FEASIBILITY Talk to your Program Manager or TPOC* Do your homework (before Phase I ends) Plan experiments/r&d activities Convene the technical team For Phase II and beyond Secure facilities and other resources Update/Write Commercialization Plan Prepare financial systems for Phase II requirements *Technical Point of Contact 26

27 Commercialization Plan Brilliant Idea Develop your detailed commercialization plan as soon as you get your Phase I funded (if not before) Commercialization Strategy Stupid Mistake(s) Having the Build it and they will come commercialization strategy 27

28 Typical build it and they will come example: Q: Briefly describe your commercialization strategy, e.g. how do you anticipate getting your product to market? A: While there are a wide range of potential applications including, x, y, and z, a successful commercialization strategy depends on targeting early adopters. Towards this effort, we believe that x is the most appropriate market to focus on. This is because blah, blah. Moreover additional procedures including q, r, and s, could greatly benefit from our product, as could other routine procedures. After obtaining significant penetration in the x market we will be able to expand to additional areas of intervention. Another build it and they will come example: Q: Briefly describe your commercialization strategy: A: Our commercialization strategy consists of developing technology to license to larger organizations for license or acquisition. Our initial market research has identified the clinical laboratory diagnostics industry as a $300 billion global market. We conservatively estimate that our licensees will capture 0.2% (or $600 M) of the market with our devices. Our licensing fees will be no less than 10% of the estimated after tax capture of the market. We could make approximately $40 M net revenue. 28

29 The Philosophy of Commercialization Life is sales! Know thy customer SBIR/STTR Three Phase Program Phase III Commercialization phase Derives from, extends or logically concludes efforts performed under prior SBIR/STTR funding agreements from any agency Must be funded by sources outside of SBIR/STTR (private sector and/or non-sbir Government) Develop prototype into viable product/service for sale in military and/or private sector markets Often initial customer is prime contractor for a major system or program of record 58 29

30 Requirements for Commercialization Plans SBIR/STTR Agency Phase I Phase II Health & Human Services ½ page 12 pages Department of Energy 3-5 pages 15 pages National Science Foundation 6-8 pages 15 pages Department of Agriculture (SBIR only) ~1 page 10 pages Department of Defense ~1 page Varies 59 NIH Phase II Commercialization Plan NIH Proposed Layout* a. Value of SBIR/STTR project b. Company information c. Market, Customer, Competition d. Intellectual Property Protection e. Finance Plan f. Revenue Stream No more than 12 pages 60 30

31 NSF Phase II Commercialization Plan NSF Proposed Layout 61 Market Opportunity Product & need addressed Customer Business Model Company/Team Origins, structure, size Capitalization & revenue Management & hiring plans Commercial experience Additional resources Not to exceed 15 pages Product/Technology & Competition Customer pain points Current/future competitors Value proposition Production cost & assumptions IP strategy Finance & Revenue Model Staged finance plan Follow on funding commitments 5 years of pro forma financial statements Assumptions and validation DoD Commercialization Plan** Proposed layout Product description/system application Advocacy letters Letters of intent or commitment Business models/procurement mechanisms Market/Customer sets/value proposition Primary & niche markets Market & growth trends Competitive assessment Funding requirements & plans Sales projections & quantitative commercialization results Expertise/Qualifications of team/company readiness 62 **Specific requirements may vary by component 31

32 Typical Commercialization Plan Components The Market Opportunity Problem & its Significance Customer & Pain Competition with Advantages & Shortcomings Product/Technology The Innovation & its Disruptive Potential The Value Proposition Intellectual Property & the Competitive Landscape Financing and Revenue Model Business Model Operational Plan & Projections The Company/Team Experience & Track Record 63 Important Problem Opportunity Assessment Who has the Problem? Customer How do they deal with it? Competition How do we compare? How many with the problem? Value Proposition Market 64 32

33 Do your homework (a.k.a. MARKET RESEARCH) For the computer savvy (i.e. Secondary Research) For the socially adept (i.e. Primary Research) 65 Market intelligence. For the computer savvy: Industry Trade Associations Non-profit Organizations Government Agencies Industry reports Stock analysts Commercial market research reports 66 33

34 Trade Associations Trade Publications 68 34

35 Government Sources Patent searching 35

36 Patent searching-quick Search Market Research Reports - Table of Contents Chemical Sensors to 2008 : Liquid, Gas & Biosensors - Market Size, Market Share, Market Leaders, Demand Forecast, Sales, Company Profiles, Market Research, Industry Trends Bharat Book Bureau, 2004 III. TECHNOLOGY Basic Sensor Technology Chemical Sensor Technology Electrochemical Optical Infrared Biomimetic Photoionization Emergent Technologies Semiconductor Catalytic Pellistor Other Biosensors MEMS & Other Microsystems Nanotechnology Electronic Noses & Tongues Electronic Noses Electronic Tongues VI. MARKETS Medical/Diagnostic Glucose Tests Diabetes Trends Products Suppliers Other Diagnostic Tests Cardiac Risk/Cholesterol Renal/UTI & Other Patient Monitoring Equipment Industrial Motor Vehicles Oxygen Sensors Other Process Industries HVAC & Other Equipment Environmental Monitoring Industrial Safety & Emissions Portable & Fixed Safety Systems Emissions Monitoring Water & Wastewater Home Safety & Security Automobile Emissions Testing Other Environmental Monitoring Other Markets Company Profiles Abbott Laboratories Alphasense Limited AMETEK Incorporated Analytical Sensors Incorporated ATMI Incorporated Bayer AG Biacore AB Draegerwerk AG e2v technologies Limited Emerson Electric Company International Biomedical Incorporated Johnson & Johnson Marconi Corporation plc Optical Sensors Incorporated Osmetech plc Polymer Technology Systems Incorporated Quantum Group Incorporated RAE Systems Incorporated Roche Holding Limited Sensorex Siemens AG Spectris plc Teledyne Technologies Incorporated Texas Instruments Incorporated TheraSense Incorporated 36

37 Market Research Reports - Follow-on Information Google the author s name Look for articles in trade publications that summarize key data from the market research study Note the names of publicly-traded companies in the target market Review their latest 10K reports to SEC ( 73 Corporate 10K Reports to SEC Often contain sales by market segment, product line and geography Analyze reports over a 5-6 year period to develop an overview of the Company s sales history, pricing strategy, and market trends For larger companies it might be difficult to extract detailed data on specific products unless they represent a significant fraction of the total business Note report of new strategic alliances or equity investments that might signal new business initiatives 37

38 Corporate 10K Reports to SEC Market Research Stupid Mistake(s) Convincing yourself of the value of the solution (e.g. product) to the problem (e.g., market) based solely on secondary market research (e.g. numbers) Don t outsource your primary market research 38

39 2 Market Research: Lesson Learned It sounded like a great idea at the time. What it isn t. A Market Analysis is NOT a Commercialization Plan Large Market Commercialization 78 39

40 Primary Market Intelligence. For the socially adept: End users and customers Trade shows Scientific meetings CRITICAL for decision making 79 1 Market Research: Lesson Leaned ABC Medical Device Co:.But I wouldn t actually use it 40

41 Put your product description through the so what test We don t have any competition Stupid Mistake(s) Thinking that you are the only game in town Forgetting technologies/products that are still in development 41

42 Competition Analyze competition from the customer s perspective What are the alternative ways of addressing the problem? Other products, services Ignore-the-problem What companies/products offer solutions or may when we get to market? Advantages and disadvantages Focus on your most direct competitors Strengths and weaknesses but don t forget alternative approaches 83 Your likely competition 42

43 Competitive Analysis Company A Company B Our Company Product Feature Zephyr Innovant Scan DS Capacity Speed Price 85 Product Description Provide a vivid description of your product, when it is developed Not a system, a platform, or a solution Place it in a familiar category, if possible Device, service, SaaS, etc. Describe how the target customer would use the product 86 43

44 Intellectual Property Protection How will you protect IP that results from this innovation What actions might you consider that will constitute at least a temporal barrier to others aiming to provide a similar solution Existing IP List and describe importance to THIS project Clearly explain the company s right to use the intellectual property Discuss how the IP fits into the broader base of IP in the competitive landscape HOW DOES YOUR IP ENABLE YOUR BUSINESS STRATEGY?? 87 SBIR/STTR Reviewer Considerations Product/Competition Will the product features provide a compelling value proposition to Agency/End Customer? Does the company fully understand transition requirements and regulatory hurdles? What market validation is there about this value proposition? Does the proposal demonstrate knowledge of the competitive landscape? On what basis will the Company compete? Does the Company understand its position in the IP landscape? 88 44

45 Commercialization Assumptions Brilliant Idea Validate your commercialization assumptions** Especially the financing ones E.g., know when when is **Such as Investors will fund us Strategic partners will engage with us The market wants this The market will pay for this Goal of SBIR/STTR Programs a.k.a. Come Back When Source: SBIR and the Phase III Challenge of Commercialization: Report of a Symposium. NAS,

46 Finance Plan Describe necessary fundraising to commercialize the product, process or service Plans to raise requisite financing to launch into Phase III and begin revenue stream Fundraising timeline Demonstrate through: Letters of commitment of funding Letters of intent or evidence of negotiations Letter of support and/or in-kind commitment Specific steps to secure Phase II funding Business Model What is the vision for the company? vs. Commercialization Strategy How will we make money from this innovation? 92 46

47 Commercialization This is NOT a feasible business model: Technology 93 Business Model What Combination of Business Activities? Decision Manufacturing Marketing Sales Product Development Research 47

48 Define the Business Model What do you sell? License Component Full product How much do you charge? What are the costs you ll incur? How is your pricing constrained by competition? How do you get it to the customer? Licensing partner Prime contractor or Tier X supplier OEM, contract manufacturer Distributor or sales force Fully integrated 95 Revenue Model Revenue projections for profit-and-loss (P&L) projections Categories of revenue streams Do NOT include debt or equity as revenue Choose logical start and end dates Consistent with business model, IP strategy and commercialization strategy Clearly state assumptions Use text in your proposal to highlight the key points 96 48

49 Sample Revenue Model Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Grant revenue 115,000 43, , ,000 Licensing fees 10,000 25,000 25,000 20,000 20,000 20,000 Milestone payments 75,000 40, , ,000 Product sales 66, , ,000 Royalties 13,000 47, , ,000 Total Revenue $115,000 $53,000 $777,000 $305,000 $283,000 $573,000 $738,000 Item Grant Revenue License fees Milestone payments Product Sales Royalties Assumption One Phase I & one Phase II SBIR $10k upfront; $5k/yr thereafter Pre-negotiated Average selling price X # units 5% of licensee s net sales Financing Sources $ SBIR/STTR firm itself $ Private investors or "angels" $ Venture capital firms $ Investment companies $ Joint ventures, R&D limited partnerships, Strategic alliances $ Research contracts $ Corporate investment $ SBA Loans $ Sales of prototypes (built as part of this project) $ Public offering $ State finance programs $ Non SBIR-funded R&D or production commitments from a Federal agency with the intention that the results will be used by the United States government $ Other industrial firms 49

50 Other Sources $ Personal assets $ 4 F s (Founders, Friends, Family, Fools) $ Vegas baby, Vegas! Finance Plan Describe necessary fundraising to commercialize the product, process or service Plans to raise requisite financing to launch into Phase III and begin revenue stream Fundraising timeline Demonstrate through: Letters of commitment of funding Letters of intent or evidence of negotiations Letter of support and/or in-kind commitment Specific steps to secure Phase II funding

51 Letters of Support* Validate your resources & commercial opportunity Consultants (required); must include: Role, Rate Time Subcontractors Other Significant Contributors Research Resources, e.g. Facilities, equipment not on budget or owned by company Commercialization Resources (critical for Phase II) Strategic Partners Investors Key Customers Potential Licensees Key Opinion Leaders *Contingent Commitment 101 Letters of Commitment Phase II From prospective investors, strategic partners, customers, licensees, etc. Commitment of tangible resources (e.g., funding, services, licensing discussion, business agreements) Estimate dollar value Describe achievements/milestones necessary to secure the commitment

52 SBIR/STTR Reviewer Considerations Financing & Revenue Model Is there an adequate understanding of the financial resources needed to take the innovation to market? Is there a plan to bring reasonable resources to bear to get the innovation to market? How and how soon will the innovation generate revenue? How will the company survive until then? 103 Common Issues with Commercialization Plan Finance and Revenue Model 104 Limited understanding of funding required to take technology from concept to market Lack of supporting letters from key collaborators (primes, federal labs, investors, etc.) Inadequate time allowed to receive the letters Financial models don t differentiate between revenue generation and financing Superficial treatment of financials (or none) Limited or no assumptions provided Appropriate considerations not made for business model Role of Prime Contractor License: timing, IP risk, sources of income Manufacturing: Cost to set up production, cost of goods, channels of distribution, working capital requirements Approvals, clearances & regulatory requirements 52

53 Commercialization Plan Overview Activity Year 1 Year 2 Year 3 Year 4 Year 5 Conduct Phase II R&D project xxxxxxxxxxxxxxx xxxxxxxxxxxxxxx Execute a joint development agreement * Jointly complete product development xxxxxxxxxxxxxxx xxxxxxxx Execute a licensing agreement * Identify prospective investors xxxxxx xxxxxxxxxxxxxxx xxxxx Close Series A financing * Recruit marketing manager xxxxxxxxxxx * Identify contract manufacturer xxxxxxxx * Sign up international distributors xxxxxxxx xxxxxx Launch product internationally * 105 Common Issues with Commercialization Plan Often starts with the technology push rather than market pull Too much technology detail, not enough target market information Must focus on Agency/End Customer NEED Role of collaborators not acknowledged (i.e. Primes, Collaborators) End PRODUCT not clearly articulated Target markets are described too broadly Focus more on your niche Business model to generate revenue from the innovation is unclear or not articulated High growth rates assumed without substantiation No references used to support market analysis Assumptions not stated

54 Phase II Proposal Development Planning Acquire and Analyze Phase I data Demonstrated FEASIBILITY Talk to your Program Manager or TPOC* Do your homework (before Phase I ends) Plan experiments/r&d activities Convene the technical team For Phase II and beyond Secure facilities and other resources Update/Write Commercialization Plan Prepare financial systems for Phase II requirements *Technical Point of Contact Phase II Agency Budget & Cost Considerations Examples of Agency Procedures 108 NSF Pre award accounting review Includes review of proposed budget & company financial capabilities Conducted by responding to specific certification questions and providing the supporting documents DoD Full financial review & indirect costs proposal review Includes company policies and procedures, financial capabilities, indirect cost proposal, accounting systems and time and effort reporting process Conducted by DCAA or an appointed auditor. NIH Accounting systems evaluation and certification Conducted by responding to a questionnaire. 54

55 NIH JIT Just in Time Information This is NOT a notice of grant award nor should it be construed as an indicator of possible award. Financial Statements Line of Credit Chart of accounts Demonstrate the ability to record costs by project Time & Reporting Internal Controls Procurement Policy Travel Policy Conflict of Interest Other and Pending Support (all key persons) Human Subjects Assurance Number IRB Approval Document of required education of human subjects IACUC verification/letter SBIR/STTR Verification Budget Signed lease Sub award agreement Typical NSF Phase II JIT Questions 110 Company Details Capitalization table Current Balance Sheet indicating current cash on hand IP Current IP strategy and status including status of licensing negotiations Administrative Items Reconfirm SAM registration, personnel assurances, availability of facilities, timekeeping procedures Budget Detailed info for indirect cost rate, rationale to support all direct expenses and salaries Confirmation salaries do not exceed the Dept. of Labor rates Consultant justification (proof of bid or sole source justification) NSF Lineage Potential Technical Questions/Clarification 55

56 Typical DoD Phase II PreAward Questions Must undergo a pre-award accounting system audit SF1408: Preaward Survey of Prospective Contractor - Accounting System Financial Assurances Grantee organizations are required to have: Policies and procedures for managing funds Policies and procedures for personnel Roles and responsibilities for financial mgmt. Accounting, internal controls, and budgetary controls Demonstration of management capabilities "Evaluation of Financial Management Systems." 45 CFR

57 Financial Management System Provide answers to: Chart of Accounts Cost ledgers Time & effort system Financial statements annually Line of credit Budget controls Internal controls 113 Current & Pending Support Purpose: Sufficient levels of effort are committed to support the approved project. There is no scientific, budgetary, or commitment overlap. Required for all senior key persons Support of research Federal Commercial Insitutional

58 SBIR/STTR Verification Form Eligibility is at time of award Ownership 51% owned by individuals Small business size standards Company controlled research space Research performed in the US PI employment Will not use funds for market research/literary search Policy and procedures in place 115 Animals & Human Assurances IACUC (Animal Studies) Approval date Imposed changes IRB (Human Studies) Certification date Human subjects education

59 Other Assurances Awarding agency may also request: Lease Budget Proof of employment Proof of company Human subject or animal revisions 117 Final Words. Remember why the SBIR/STTR program is funding your company! Develop your Commercialization Plan with the same scrutiny you give your Research Plan Identify reasonable assumptions Provide external validation Go for the IMPACT!

60 But more importantly. Remember that you are running a company! 11 9 It s better to

61 For more assistance: SBIR/STTR Assessment Form at

62 BBC s Grant Assistance Assessment of competencies and capabilities Strategic planning Training on all aspects of the process including in-depth proposal preparation Proposal development tools Pre-submission review and editing Assistance with revision and resubmission Post-award administrative assistance and grant management 123 Brilliant Ideas and Stupid Mistakes: Tips for Phase II Proposal Success 2018 Mid Atlantic SBIR/STTR & Commercialization Conference April 26, 2018 Becky Aistrup Managing Partner becky@bbcetc.com bbcetc.com 62