SBDC Starting a Tech Business
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“Starting a Tech Business” Jim Wasson, Ph.D., MBA, BSET, PMP Technology Commercialization Business Consultant [email protected] 843-804-9026
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Transcript of SBDC Starting a Tech Business
“Starting a Tech Business”
Jim Wasson, Ph.D., MBA, BSET, PMP
Technology Commercialization Business Consultant
843-804-9026
The SC Small Business
Development Center’s Mission
“To advance South Carolina’s
economic development by helping entrepreneurs grow successful businesses.”
• Consulting
• Training
• Analysis
• Coaching
SC Small Business
Development Centers
• We are a federal and state program - funded by Congress and administered by the SBA
• We provide confidential business consulting at no charge to you
• We have 20 SC SBDC Centers
• Technology Commercialization for the coastal area is provided by the Charleston SBDC Center
SC SBDC Economic Impact
• 1,278 Jobs Created or Saved
• $52.9 Million in Capital Formation
• $1.4 Billion in Government Contract Awards
• 183 New Businesses Started
• Over 5000 Small Businesses and Individuals Served
ROI = $46.8 MM in Per Capita Income
Your Facilitator
• Founder of three small business – Growth Strategies International, LLC
– ProLink, Inc. (GPS Golf Course Management)
– Avionics Engineering Services, LLC
• Chief Technology Officer at BAE Systems
• 20 years at Boeing and GE as Director – Engineering Technology
– Program Management
– Business Development
• Chair of UOP Graduate Business and
Management College West Michigan
Technology Commercialization
Training Program
• An immersive 8-week training program integrates
the technical aspects of Minimum Viable Product
(MVP) development with Marketing Strategies to
greatly enhance the probability of success
– Concept Development and Feasibility Assessment
– MVP Prototype Development and Testing
– Market Validation and Financial Planning
• Following each workshop, an SBDC Consultant will
be available to meet with you one-on-one
http://nbdc.unomaha.edu/technology-commercialization/techventure/home.cfm
Agenda
• Personal Feasibility Plan
• Product & Market Research
• Financing Your Business
• Legal Implications
• Business Plans
• Financial Statements
Personal Feasibility Plan
Characteristics of an
Entrepreneur
Vision Passion Focus
Confidence Imagination Energy
GUTS!!
Self Assessment
• Are you a self-starter?
• How well do you get along with different personalities?
• How good are you at making your own decisions?
• Do you have the stamina to start your own business?
• How well do you plan and organize?
• Is your drive strong enough to maintain your motivation?
• How will starting this business affect your family?
Capital and assets that you are willing to risk?
Will the business work?
What is the WORST that could happen? Can you
deal with that?
Critical Questions
12
Probability of
Success
Formula
Probability
of technical
completion
Overall
probability
of success =
Probability of
commercialization
given technical
completion X
Probability of
economic
success given
commercialization X
Engineering Focus
Marketing Focus
Financial Focus
Product & Market Research
What is an MVP?
• A Minimum Viable Product has only the
minimal set of features necessary to
demonstrate the ability of the product to
satisfy a customer need
• An MVP is that version of a new product
which allows a team to collect the
maximum amount of validated learning
about customers with the least effort
• The final, complete set of features is only
designed and developed after considering
feedback from the product's initial users
MVP Key Characteristics
• It has enough value that people are willing to use it or buy it initially
• It demonstrates enough future benefit to retain early adopters
• It provides a feedback loop to guide future development
• It assumes that early adopters can see the vision of the final product and provide valuable feedback needed to guide developers forward
Invention/
Innovation
Proof of
Concept
Market
Validation
Product Development
Company
Expansion
(Jobs)
INCUBATORS: Pre-Commercial Arena
ACCELERATORS: Commercial Arena
MVP – An Iterative Process
Idea generation, prototyping, presentation, data collection, analysis and learning
How to Scale your Business
Problem Solution
Fit
Problem Market
Fit Scale
Focus: Validated learning Experiments: Hypotheses Testing & Pivoting
Focus: Growth Experiments: Optimizations
Who will buy it?
• Who are the customers?
• What problems do they have?
• What solution are you proposing?
• Who will be your competition?
• What is your value proposition
– Why is your solution better than the
competition?
• What is the market size?
“A product must be relevant to the customer (demand pull) or so innovative that
that its existence changes the game (technology push)” MG Ted Bowlds
The Marketing Mix
Strategic Marketing Plan
Financing Your Business
Financing Your Business
• Personal Savings
• Family and Friends
• Crowdfunding
• Angel Investors and VCs
Equity
• Borrowed Money
• Bank Loans Debt
• Grants.gov
• SBIR.gov
• Fedbizops.gov
Grants &
Contracts
Typical Sources of Funds
Sources of Funds
Savings
Bank Loans
Credit Cards
Family
BusinessAcquaintances
Angels Investors
Kauffman Foundation survey of the 5,000 fastest growing companies in the U.S.
Where do you get
start-up financing?
https://www.youtube.com/watch?v=U470xXKfDyE
Start-Up Funding Sources
Equity Crowdfunding
• Unregistered Securities
• SeedInvest and Fundable
• Can raise up to $1MM per year
• Max. Investment $100K/each/yr. – Net worth or income <$100K, max 5%
– Net worth or income >$100K, max 10%
• Rules for Small Business – Must use one investment platform at a time
– Provide financial report to investors and SEC
– Independent audit if more than one round
Typical Start-Up to IPO
Angels invests their own money, where a VC invests other people’s money
Valuation versus Dilution
Staged Investments
http://www.entrepreneurship.org/Founders-School/Financing-Your-Venture-Acquiring-Angel-Investment/Angel-Investors-and-Venture-Capitalists.aspx
Share the problem your customer has. Next, map out the adventure this person took from struggling with his/her problem to becoming happier once they started using your product. Then show your data.
Financing via Equity Capital
• Fulcrum Equity Partners, www.fulcrumep.com, Frank Dalton, 770-551-6331, [email protected]
• Millennia Partners, www.bmpvc.com, Frank Silva, 617-428-5150, [email protected]
• SC Angel Network / Low County Angel Investors, http://www.scangelnetwork.com, Josh Silverman, 843-212-8482, [email protected]
• Capital A Partners, www.capitalapartners.com, David Mendez, 917-697-9345, [email protected]
• Idea Fund Partners, www.ideafundpartners.com, John Cambier, 919-804-4001, [email protected]
• GEM Capital Ventures, Geoffrey Martin, 917-691-5901, [email protected]
• Angel Capital Network: Life Science Angels and Angel Resource Institute, http://lifescienceangels.com, http://www.angelresourceinstitute.org
Loans: 6 C’s of Credit
• Character/Credit
history
• Capital/Equity
• Capacity to
Repay/Cash Flow
• Collateral
• Conditions
• Confidence
Ask your Lender about SBA Guaranteed Micro-loans up to $50,000
Loan Evaluation Criteria
Know Your Credit Scores
Reports and Scores
• 3 different scores
Correcting errors
Where to get a free credit report
• Report: Annualcreditreport.com
• Score: myfico.com
How to Talk to a Banker
• Know how much you would like to borrow
• Know how much you can afford to borrow
• Have a Loan Package
– Prepare sources and uses of funds document
• Do your homework
Loan Package Components
Business Plan Loan Request Description of
Collateral Opening Day
Balance Sheet
Summary of Start-up Costs
Sources and Uses of Capital
Personal Financial
Statement(s)
Lease Agreement
Tax Returns Resume(s)
Financing via Debt Capital
• Ameris Bank, Patton Dugas, 912-629-1629, [email protected]
• BB&T, Angela Dyer, 843-852-5850, [email protected]
• NBSC, www.bankNBSC.com, Mark Raines, 843-762-9930
• Wells Fargo, Samiyah Herman, 843-805-7115, [email protected]
• Local Development Corporation, Cindy Rourk, 843-965-4089, [email protected]
• SC Community Loan Fund, Patrick King, 843-737-6153, [email protected]
• Southern Association for Financial Empowerment (SAFE) $50,000 microloan, Sandra Page, 803-727-2245, [email protected]
Grants & Contracts
• Not a loan program – No debt burden on business
– Economic impact resulting in jobs, incomes and taxes
– Focus on high-risk, early-stage research and development
– Submission dates are typically three times per year
• Small Business owns the Intellectual Property – Government must protect the
data for at least 4 years
– Government retains royalty-free license for government use only, not for commercial applications
USC EPSCoR/IDeA Phase 0 program provides $6K for
SBIR proposal development
Small Business Innovation Research
Small Business Technology Transfer
“To support scientific excellence and
technological innovation through the
investment of Federal research funds in
critical American priorities to build a
strong national economy…one small
business at a time.”
Federal Seed Funding
Value Curve Cost
Value
Risk
University
Federal
State
Acquisitions
Syndicated
VCs
Angels
SBIR
Courtesy of www.RippleMGMT.com
Formed an Idea but have no Business Plan = Too early Product already developed and being sold = Too late Federal Need = Business Plan Objectives = Just Right
SBIR Award Dollars ($K)
DOD $838,065
HHS $652,517
DOE $169,797
NASA $139,950
NSF $95,560
USDA $16,891
DHS $12,906
ED $13,102
DOT $9,147
DOC $4,496 EPA $4,078
Other $60,443
Total Annual Budget is over $2.5 Billion!
SBIR/STTR Program Overview
• Small Business Innovation Research –A set-aside program for small business to engage in
Federal R&D – with potential for commercialization
–2.9% of the extramural research budget (FY 2015 ~ $2.0
Billion in summation) for all agencies with a budget
greater than $100M per year. Growing to 3.2% by 2017.
• Small Business Technology Transfer –A sister set-aside program to facilitate cooperative R&D
between small business concerns and U.S. research
institutions – with potential for commercialization
–0.35% of the extramural research budget (>$250 million)
for all agencies with a budget greater than $1B per year.
Growing to 0.4% by 2017.
Some SBIR-funded firms
Qualcomm Symantec
Industry Telecom. Equipment Packaged Software
Sample Product(s) 3G & 4G Wireless Tech. Norton Antivirus Software
# of Employees (2012) 26,600 (globally) 20,500 (globally)
Revenue (2012) $19.12 billion $6.73 billion
Size when received first SBIR 35 employees 5 employees
Year it received first SBIR 1986 1982
Total # of Awards 8 Phase I; 4 Phase II 1 Phase I; 1 Phase II
Total $ of Awards $1.58 million $245,000
# of Funding Agencies 3 1
“Without SBIR’s support for my radical idea, much of our economic growth would not have happened. SBIR was the ‘magic catalyst’ that opened the avenues for a wide range of new possibilities.” Gary Hendrix, Symantec founder
Financing via Grants & Contracts
• SBIR/STTR (Small Business Innovation Research and Tech Transfer) www.sbir.gov
• SCBIO Quickstart (www.scbio.org)
• SC Launch (www.sclaunch.org)
• EPSCoR/IDeA – Phase 0 SBIR/STTR proposal reimbursement $6000 www.scepscoridea.org
• Other than SBIR/STTR: www.grants.gov
Legal Implications
When to Speak to a Lawyer
• Filing a Patent
• Partnership agreements
• Exit strategies
• Incorporation
• Review of contracts and leases
• Any legal questions. Legal advice is a good investment.
Forms of Organization
• Sole Proprietorship
• Partnership
• “C” Corporation
• “S” Corporation
• Limited Liability Company (LLC)
Legal Structure Matrix
Ease of
Formation
Personal
Liability
Taxed Ease of Owner
Transfer
Sole Proprietor 1 - Easiest FULL Personal No
General
Partner
2 FULL Personal No
Limited Partner 3 LIMITED* Personal No
Limited Liability
Company
(LLC)
4 LIMITED* As Elected for
each Member
Depends on
Organizational
Agreement
S Corporation 5 LIMITED* Personal Common Stock
≤ 100 Owners
C Corporation 6 - Most
Difficult
LIMITED* Corporate/
Personal
Common and
Preferred Stock
*Limited meaning limited to the amount of your investment
Registration and Licensing
Registration and Licensing
• Business License *
– (cities and/or counties)
• Retail License
– (Sales Tax license from SC Department of Revenue)
• Special Licenses
– (Department of Labor, DHEC, OSHA, etc.)
• Zoning Permit (where necessary)
– (cities and/or counties)
http://sc.gov/Business/Pages/licensePermitsAndRegistration.aspx *
License/Registration Contact
Business License City/County Hall
Incorporation or LLC Secretary of State
State Income Tax SC Department of
Revenue and Taxation
State Retail License SC Department of
Revenue and Taxation
Sales and Use Tax
Permit
SC Department of
Revenue and Taxation
State Unemployment
Tax
SC Employment Security
Commission
Federal Employer
Identification Number
Internal Revenue Service
License/Registration Contact
FICA (Employer and
Employee Social
Security Taxes)
Internal Revenue
Service
FUTA (Federal
Unemployment Tax)
Internal Revenue
Service
Special Licenses SC Department of
Consumer Affairs
Certificate of
Occupancy
Local City or County
Government
Planning and Zoning Planning and Zoning
Board
Food Handling DHEC
Business Plans
Why do I need a Business Plan?
• Road map
• Gives basic structure
• Translates your thoughts and ideas to paper
• Forces you to make a budget
• Necessary item for almost every Funding Source
Business Plan Components
• Executive
Summary
• Company
• Product/Service
• Target Customer
• Market Analysis
• Competition
• Business Strategy
• Advertising
• Strategic
Alliances
• Organization
• Financial Analysis
• Future Plans
Financial Statements
• Start Up Costs
– List of all the items that you need to purchase in order to get the business running
– Working capital based on projections
• Balance Sheet
– Shows what you own and your equity
• Profit/Loss Statement
– Determines tax liabilities
Are you profitable?
• Gross Profit Margin How much do you have left to pay fixed
costs?
• Net Profit Margin How much do you have left…period!
• Return on Total Assets How much do you make on the
investment you have in the company?
Income Statement (Sales – COGS = GPM) (Gross Margin – Operating Expenses, Interest and Taxes = NPM)
Balance Sheet (Profit + Interest Income / Total Assets = ROTA)
Tips for Success
• Educate yourself.
• Maintain complete and accurate records.
• Business = team. Everyone should be working toward a common goal.
• Be flexible and open minded.
Useful Websites
• Credit Score/Report:
– www.annualcreditreport.com
– www.myfico.com
– www.equifax.com
– www.experian.com
– www.transunion.com
• License/Registration
– www.scsos.com
– www.uspto.com
– www.irs.gov
– www.scbos.com
– www.sctax.org
More Useful Websites
• www.sba.gov
• www.nolo.com
• www.infousa.com
• www.fasttracsc.org
• www.planabiz.org
• www.sc.gov
• www.scsbdc.com
• http://inventorspot.com
• http://www.intellectualventures.com
Financing
Technical
Management
Marketing
Feasibility Assessment Concept Development
R&D / Prototyping Product Development
Market Assessment Customer Acquisition
Business Development
Intellectual Property (patents, copyrights, trademarks) Commercialization Planning (manufacturing or licensing)
Project Management, Business Planning and Growth Strategies
Financial Assistance (angel investors)
Government Funding (R&D grants & contracts)
Technology Commercialization
Consulting Services
Please call for an appointment
Jim Wasson, PhD, MBA, BSET, PMP Technology Commercialization Business Consultant
Small Business Development Center 6296 Rivers Avenue, Suite 300
North Charleston, SC 29406 843-804-9026
http://www.scsbdc.com/Technology.php www.facebook.com/SCSBDC
Thank you for your time
