Vancouver

1
Vancouvers Advantages and Challenges

• Advantages
• High quality of life
• Excellent universities
• Skilled technical staff and project managers ,
  low development costs
• Few leaders competing for new markets with new
  product concepts.
• Threats
• Brain Drain impacts design, marketing, and
  business resources.
• Many investors are unfamiliar with technology
  opportunities.
• Conservative business culture limits risk-taking
• Challenges
• Effective investment and business strategy
  requires insider understanding of markets and
  competitors
• Business plan execution requires rapid
  user-centred design and risk reduction software
  engineering know-how

2
Understanding Tech Markets and Competitors

• Supporting the business plan competition and
  evaluation process
• Market briefs and competitive analysis research
  for judges and competitors bring them up-to-date
  on latest market trends, new technologies,
  competitive environment
• Technical feasibility analysis and estimates of
  development cost and time-to-market will identify
  the most cost-effective opportunities
• Helping new companies to create a unique selling
  proposition
• Understanding the customer opportunity and
  building a competitive strategy
• Identification of critical success factors and
  needed assets
• Merging and partnering companies, ideas, and
  teams for best opportunities

3
Business Plan Execution

• Create a process for building new technology
  solutions for customer needs
• Refining the business plan with marketing
  analyses, business modeling and earnings
  forecasts
• Design plans and prototypes, independent and
  accurate timelines and cost estimates,
  risk-reduction development models
• Project management support
• Overcoming investor reluctance
• Solid market, strategy, and design models build
  investor confidence
• Facilitating potential business partners and
  customer contacts
• Search for financial partners
• Facilitation of IPO
• Alternative commercialization models
• Auctioning of the idea and business plan on the
  Internet
• Merger with new or existing project/company

4
Core Capabilities of Support Organization

• Ongoing customer research to anticipate market
  opportunities
• Expertise in customer-centred design and user
  experience assessment targets opportunities with
  solutions
• State-of-the-art risk reduction and rapid
  development software engineering methods gives
• TIMELINESS First mover advantage
• WIDE CHANCES platform to combine ideas, recycle
  old ideas, technology, and market
  information
• WHOLE_PRODUCT DESIGNS Design for evolving
  markets
• Competitive Intelligence and flexible
  design/execution models synergize for rapid
  response to competitors

5
Support Process
Execution
Outputs
Inputs
Matching Ideas withEntrepreneurs, Design
Professionals Project Management and MBA staff
and student support
Business Model Competition
New Companies
Ideas from University staff and students
Ideas and Business Plans for Sale through
Internet Auction
Research spin-offs from companies

• University labs and faculty experts
• Financial partners and sponsors
• Back-office and legal services providers
• Entrepreneurs and Business Gurus
• University staff and students
• University industry liaison offices

6
Focus Areas
The -BC business plan competition will be
open to all kind of ideas, however the support
organization will initially be focused on
internet and related technology-based offerings.

• Initially Telelearning, Internet, New media and
  entertainment products and services
• Expand or clone for new opportunities
• Information appliance software and hardware
• New energy products and services
• New Bio-pharmacy and Medical offerings

7
Key Aspects of Entrepreneur Support Inc.

• Time-sharing experts spreads the expertise over
  may startups
• Create business and design documents that can be
  implemented offline by local talent
• Checkups and booster shots for young
  companies as needed
• Processes, knowledge assets build over time to
  further enhance effectiveness
• Stable teams of experts outperform consultants,
  new groups
• Efficiency of model enables ESI to hire, incent,
  and retain top talent.
• Challenging work and diversification of share
  options retains them
• University links give access to business, design,
  customer understanding and technology talent and
  IP

8
Impact of User Experience Research

• "Usability is critical for any application, but
  for mass-market software, usability spells
  success or failure more clearly than any other
  feature." Dr. Jerold M. Grochow, Chief
  Technology Officer, American Management Systems
• Industry data show that each dollar spent on
  user studies during product design saves 10 on
  problem fixes during product development, or 100
  or more in rework after product release... It's
  estimated that 80 of maintenance costs are spent
  on unforeseen user requirements, while only 20
  are due to bugs. IBM Web Site
• Massive, new effort is needed in HCI education,
  research, and practice... Universities should be
  encouraged to perceive HCI as a critical
  technology and the accompanying skills and
  knowledge as fundamental to a student's education
  and preparation for jobs in the information age.
  1994 report of the US National Science Foundation
  Interactive Systems and Applications of Advanced
  Technology Program, in collaboration with the
  Software and Intelligent Systems Technology
  Office, Advanced Research Projects Agency

9
Impact of Risk-reduction Development

• The Standish Group research shows a staggering
  31.1 of (software) projects will be canceled
  before they ever get completed. Further results
  indicate 52.7 of projects will cost 189 of
  their original estimates... The three major
  reasons that a project will succeed are user
  involvement, executive management support, and a
  clear statement of requirements. The Chaos
  Report Standish Group 1995
• Some examples of impact on profits and
  productivity of a focus on improving software
  development processes (IEEE Computer 1995)
• Lockheed cut development costs by 75, reduced
  time-to-market by 40 and defects by 90 by
  implementing advanced design methods
• Raytheon tripled productivity and increased ROI
  8 fold
• Similar results from Hughes, Loral, Motorola,
  Xerox

10
Impact of Competitive Intelligence

• Competitive intelligence plays a crucial role
  in explaining why some companies won 67 of the
  contracts they went after, compared to the
  industry average of 18 Price Waterhouse TQM/100
  study, 1993
• For the most part, information services and
  technology companies dominated the list of
  businesses that survey respondents believe make
  good use of business or competitive
  intelligence1997 Top Companies 1 Microsoft,
  2Motorola, 3 IBM, 4 Proctor and Gamble, 5 GE,
  6 Hewlett-Packard, 7 Coca-cola, 8 Intel
  Futures group survey, 1997
• Compared to other countries, Canada scores lower
  on the percentage of firms conducting world-class
  CI, training in CI, CI partnerships,, and CI
  culture. Industry Canada/Canadian Management
  Network 1999

11
Alliances and relationships

• Build alliances with incubators and think-tanks
  in Canada and US
• Explore enhanced relationship with familiar
  collaborators Philips, HRL, Sun, etc.
• Seek closer ties to Canadian and US investors
• Seek off-campus location, perhaps in False Creek
  tech park

12
Projected Start-up Budget

• October 1999 - April 2000
• Staff and Consultants Fees 100,000
• Office Supplies/Rentals 25,000
• Preparatory Expenses 50,000
• Promotion 50,000
• Travel and other expenses 25,000
• TOTAL 250,000
• April 2000 - year-end
• Salaries and board remuneration 1,000,000
• Direct support new Entrepreneurs 1,000,000 )
• Office Supplies/Rentals 1,000,000
• Travel Expenses 75,000
• Office Rental 100,000
• Promotion 75,000
• TOTAL 3,250,000
• Ongoing yearly requirements next 2 years
  gt 5,000,000
• ) Note average investment in an incubator-based
  firm will be 150-500,000, much smaller than a
  typical venture investment

13
Goals of Financing Model

• Share market rates for buyout give an insider
  index of company prospects for investors
• Better companies buy out for fewer shares creates
  an incentive to merger of early-stage ideas
• Share market rates for buyout gives investors an
  incentive to spread their money and risk--
  reduces cherry picking.

• Share value linked to value of any/all potential
  startups
• Shares give seed-level ROI, but distribute risk
  over a number of companies
• Share maturation time keeps money in incubator
• Short-term shares allow rapid buy-in at
  additional cost
• Shares provide incentive to attract and retain
  skilled staff
• incentives can be issued early, based on overall
  productivity (not company /project-bound)

14
Financing Sequence

• First step is to guarantee launching capital from
  start-up sponsors by late 1999/early 2000
• Next, in May 2000, issuing 5 million of equity
  through sale of shares (to Venture Capitalists,
  Companies, Individuals, Institutions and others)
• Second wave of ?? million by year-end
  2000/early 2001
• New companies must pay their bill in cash from
  investors through sale of shares and/or with
  shares as negotiated.
• Board members, employees and key staff are given
  stock-options based upon performance as evaluated
  by colleagues and spin-off companies. For these
  stock-options a subordinate class of stock will
  be created. Options from this class will mature
  within 3 years.

15
Alternative Financing model
Investors chose companies that fit their
strategic interests and bid incubator shares for
company shares
Incubator
Company A

Investors
Company Shares
Company B
Convertible shares
Shares
Company C
Staff Fellows Associates Partners in
Business Design Management
Company D
Investors purchase Convertible shares which can
be bid when mature. Long maturation funds are
cheap, short term funds more expensive. Shares
are also given as incentives to Board, employees
and partners
New companies must buy their way out for an
agreed upon number of Incubator shares, procured
by trading company shares on the market (or for
cash in the case of a auction or sale of an idea)
16
Questions

• Under whose banner should this be launched
  Government, Business Council BC, SFU, Vancouver
  Enterprise Forum, new independent joint
  initiative?
• Staffing and board participation?
• How to deal with intellectual property University
• Who can help with lobbying for launching
  sponsors?
• How to involve UBC and BC-IT?
• How to involve other local incubators e.g.
  IdeaPark?
• How to increase attractiveness for investors -
  local Venture Capitalists and others?
• How to attract more capital from elsewhere
  (Toronto, US, Europe)?