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Introduction toEntrepreneurshipwww.utep.edu/creie February 15, 2014

Gary Williams–Director; Federica Pericle-Director; Jeni Clark–Assoc. Director

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Webster’s Dictionary:

A person who organizes, manages, and assumes the risks of a business or enterprise.

What is an Entrepreneur?

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High tolerance for risk Highly motivated and ambitious Highly disciplined Leadership, planning, and management skills Proactive and take initiative Learn from mistakes

Characteristics of Entrepreneurs

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Realize that success is the only option Willing to exploit new opportunities Knowledgeable of the subject matter and willing to

learn more Committed Want to be your own boss

Characteristics (cont’d)

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CREIE VisionCREIE will be nationally recognized as both the vehicle for commercializing research and technology at UTEP and the engine for economic development in the Paso del Norte region.

CREIE will: Develop and execute a plan to stimulate innovation and unify

campus initiatives in technology transfer, entrepreneurship and commercialization.

Incorporate the commercialization strategy of UTEP to promote innovations and create new businesses and licenses.

Develop formal relationships with major corporations and other organizations in targeted industries.

CREIE Mission

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CREIE Support ServicesVarious consulting, coaching, training & networking services:

• Best-in-class innovation practices • Technology, intellectual property and patent strategies • Licensing strategies • Market research• Business strategy and plan development • Company formation, organization structures and capitalization

strategies • Fund raising • Incubation • Recruitment strategies

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The Innovation Process

www.utep.edu/creie

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The Innovation Process

Innovation Phase—What do you do with the idea?1. Market Research—single biggest reason new products fail is lack

of sufficient understanding of the market.2. Market needs have to be recognized. In a study of 567

successful product innovations, most were market-pull projects; only 21% were technology push.

3. When a technological success does not meet a specific market need, the product should be adapted to suit an identified need.

4. Proof-of-concept should be done as early as possible.

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The Innovation Process

Innovation Phase—What do you do with the idea?

5. Protect the Intellectual Property (IP) a. Invention disclosure b. Provisional patent—for one year c. Non-provisional patent

6. Use non-disclosure agreement with customer and other 3rd parties a. Protects the IP and reserves right to file new patent ideas

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What is Intellectual Property?

A Physical Embodiment of an Idea- Research data- Compounds- Materials (biological, chemical)- Publications- Presentations

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What is Patentable?

• New and useful processes• Machines• New and useful products (objects made by humans or machines)• New compositions of matter• Any New or Useful Improvement to any of the above

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What is Patentable (cont’d)?

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Patentability Test

• Novelty - Clear and complete explanation of the manner and process of making and using the invention• Utility – Advantages and Purpose• Nonobviousness – Patent Search

Is it unexpected and desirable?

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Public Disclosure

Public Disclosure is:- Presenting at a Professional Meeting- Publication in Journal, magazine, etc.- Discussions with a non-UTEP “employee”

The Law:- The US and Canada allow one year from the date of public disclosure to file a patent.- Lose the right to file in foreign countries with public disclosure.- Disclosure will compromise your invention and lose marketability without foreign patent rights.

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Protection of Patentable Ideas

• Make sure that a non-disclosure agreement (NDA) is executed or a patent is filed PRIOR to public disclosure.

• With an NDA in place, mark all related documents CONFIDENTIAL.

• Safeguard and limit access to all confidential documents.

• When transferring (biological, chemical) materials to a third party, make sure that a material transfer agreement is executed.

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Invention DisclosureBefore the Invention:• Make sure you keep proper documentation• Notebooks should be bound, pages numbered, entries dated, detailed descriptions

of tasks per researcher, and contain data, figures, photos• Important entries signed and countersigned by a witness

Once the Invention is Made:• All inventions should be reported to the Office of

Technology Transfer prior to public disclosure

If the invention was federally funded, the Office of Technology Transfer will report the invention to the agency and all subsequent actions relating to the invention

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Approaches to Innovation

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R&D defines the technical solution

Manufacturing Sales Market Need?

Marketing defines the

needsR&D Fit? Manufacturin

g Sales

Marketing & R&D defines the needs, fit, and

solutionsR&D Manufacturin

g Sales

A. Technology - Push

B. Market-Pull

C. Product/Markets (Hybrid of A&B)

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The Innovation Process Innovation Imperative

“Fast Innovation is the process of creating new products, services, processes, business models and markets with sufficient differentiation and speed such that the Company maintains above-average shareholder returns for decades.”

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Impact of Differentiated Products

Me-Too Moderate Advantage Highly Differentiated0%

10%20%30%40%50%60%70%80%90%

18%

42%

82%

Success Rate

Prob

abili

ty o

f Pro

duct

Suc

cess

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“Marketing is…” Determining what the customers wants and how to get it to them.

Marketing Overview

“The single biggest reason for new product introduction failure is the lack of

market understanding”

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Fast Cycle Time Principles

What is Fast Cycle Time?

Fast cycle time is the ongoing ability to identify, satisfy, and be paid for meeting customer needs faster than anyone else.

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Fast Cycle Time Principles

Key elements include:

1. Create a New Products Strategy2. Identify Customer Problems3. Communicate Effectively4. Practice Good Planning and Project Management5. Process Simultaneously6. Utilize Cross-Functional Teaming7. Involve Customers on an Ongoing Basis8. Prioritize and Make Decisions as Fast as Practical9. Motivate organization and Measure key activities

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Fast Cycle Time Principles

New product strategy should include:

1. List of products to be developed2. Market sectors each will serve3. Unmet need that will be addressed4. Priority listing of development5. Channel of distribution that will be utilized

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New Product StrategyTable: New Product Strategy

Market Sector Unmet Need Technical Program Status Channel of

Distribution Sales

Product 1

Product 2

Product 3

Short Term

Long Term

ConsumerUS

Brighter color (P) Online 1: $50k3: $10k

1:$1M3:$200k

IndustrialUS

Light stable color Distributor 2: $50k3: $20k

2: $500k3: $100k

Consumer

Mexico

Brighter color (P) Online 1:$30k 1: $500k

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Key Development Targets:

In progress: (P)

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Innovation Process

SUMMARY1. Innovation is the most important aspect of the

business process.2. Differentiation, satisfying unmet needs, protecting

your intellectual property, getting to the market as quickly as possible and involving the customer every step of the way are important keys to success.

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What is important to include in a business plan?

1. Introduction of the Product & Research

2. Market Segmentation

3. Target Segmentation Strategy

4. Service Business Analysis

5. Present & Future Competition

6. Market Trends

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Business Plan Development

The Business Plan is a key document that articulates what key features will drive your business opportunity. These can include:

• Mission Statement• Key members of the Team• Technology and intellectual positions• Opportunities and market summary• Business model: entry and growth strategy• Competition• Five-year goals and objectives• Five-year financial plan• Risks and rewards

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Business Models

Wikipedia: A business model describes the rationale of how an organization creates, delivers and captures economic, social or other forms of value. The process of business model design is part of the business strategy.

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Building Blocks

• There are 9 basic business model building blocks (Osterwalder, Alexander &Pigneur, Yves . Business Model Generation: John Wiley & Sons, Inc. 2010) that address:

• What are you going to make and sell, or service, and how will you do it??

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Building Blocks (cont’d)

The 9 basic business model building blocks include:

• 1) Value Propositions• 2) Key Activities• 3) Key Resources• 4) Key Partners• 5) Customer segments• 6) Channels—sales and distribution• 7) Customer Relationships• 8) Cost Structure• 9) Revenue Streams

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OVERVIEWVALUE PROPOSITIONS CHANNELS--SALES & DISTRIB.

KEY ACTIVITIES CUSTOMER RELATIONSHIPS

KEY RESOURCES COST STRUCTURE

KEY PARTNERS REVENUE STREAMS

CUSTOMER SEGMENTS COMMENTS

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Value Propositions

a) What will you do to solve customer problems and satisfy the customer’s unmet needs?

b) What will you do to differentiate your product and/or service?

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Key Partners

a) Strategic alliances between non-competitors

b) Strategic partnerships between competitors

c) Joint Ventures

d) Buyer-supplier relationships

e) Outsourcing manufacturing

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Channels

How will a company communicate with and reach its customer segments

a)Awareness of our products and services

b)Evaluation of the Value Propositionsc) Purchase (of specific products?)d)Delivery of Value Propositione)After Sales Support

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Financial Analysis Definition

Profit and Loss Statement: A statement showing the revenues, expenses and income of a company. Also known as income statement.

Balance Sheet: A quantitative summary of a company's financial condition including assets, liabilities and net worth. The first part of a balance sheet shows all the productive assets a company owns and the second part shows all the financing methods.

Cash Flow Statement: A summary of where a company’s money came from and where it went.

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NEWCO(x 000)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Revenues                    

Sales $40 $500 $1,000 $1,500 $3,000 $4,500 $6,000 $7,500 $9,000 $10,500

Grants  $100               

Sub-total $40 $600 $1,000 $1,500 $3,000 $4,500 $6,000 $7,500 $9,000 $10,500                   

COGS $16 $206 $401 $609 $1,234 $1,800 $2,432 $3,082 $3,594 $4,067

Gross Margin $24 $394 $599 $891 $1,766 $2,700 $3,568 $4,418 $5,406 $6,433

GM,% 60.0% 58.8% 59.9% 59.4% 58.9% 60.0% 59.5% 58.9% 60.1% 61.3%                   

SARs $176 $352 $430 $568 $600 $810 $1,080 $1,350 $1,620 $1,890

% SAR 440% 70% 43% 38% 20% 18% 18% 18% 18% 18%                   

Operating Income -$152 $42 $169 $323 $1,166 $1,890 $2,488 $3,068 $3,786 $4,543

Other Income                   

Taxes $0 $0 $40 $113 $408 $662 $871 $1,074 $1,325 $1,590

Net Income -$152 $42 $129 $210 $758 $1,229 $1,617 $1,994 $2,461 $2,953

Profit & Loss Statement

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NEWCO (000)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Revenues $40 $500 $1,000 $1,500 $3,000 $4,500 $6,000 $7,500 $9,000 $10,500

Grants                   Sub-total $40 $500 $1,000 $1,500 $3,000 $4,500 $6,000 $7,500 $9,000 $10,500

                   COGS $13 $165 $321 $487 $987 $1,440 $1,946 $2,466 $2,875 $3,254

Gross Margin $27 $335 $679 $1,013 $2,013 $3,060 $4,054 $5,034 $6,125 $7,246

SARs $176 $352 $430 $568 $600 $810 $1,080 $1,350 $1,620 $1,890                   

Operating Income -$149 -$17 $249 $445 $1,413 $2,250 $2,974 $3,684 $4,505 $5,356Other Income                   

Taxes $0 $0 $87 $156 $495 $788 $1,041 $1,289 $1,577 $1,875Net Income -$149 -$17 $162 $289 $918 $1,463 $1,933 $2,395 $2,928 $3,481

                   Working Cap change -$1 -$13 -$14 -$27 -$56 -$64 -$98 -$108 -$132 -$139

Cash from Operations -$150 -$30 $148 $262 $862 $1,399 $1,835 $2,287 $2,796 $3,342Capital -$35                 

Investment $200                 Cash Flow $15 -$30 $148 $262 $862 $1,399 $1,835 $2,287 $2,796 $3,342

Year-End Cash $15 -$15 $133 $395 $1,257 $2,656 $4,491 $6,778 $9,574 $12,916

Cash Flow Statement

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Balance Sheet--#1 (3rd Year)                       

ASSETS LIABILITIESCurrent Assets   Current Liabilities  Cash $130,000  Accounts payable $10,000 Accounts receivable $15,000  Short-term notes    

(less doubtful accounts)     Current portion of long-term notes    Inventory $25,000  Interest payable    Temporary investment     Taxes payable $5,000 Prepaid expenses     Accrued payroll    

Total Current Assets $170,000  Total Current Liabilities $15,000    

Fixed Assets   Long-term Liabilities  Start-up Costs $100,000  Mortgage    Patent Costs $20,000  Other long-term liabilities $100,000 Buildings     Total Long-Term Liabilities $100,000 

(less accumulated depreciation)      Equipment and Computers $65,000  Total Liabilities $115,000 

(less accumulated depreciation)      Furniture and fixtures $10,000  SHAREHOLDERS' EQUITY  

(less accumulated depreciation)     Capital stock $500,000 Total Net Fixed Assets $195,000  Retained earnings -$250,000 

  Total Shareholders' Equity $250,000  

   TOTAL ASSETS $365,000  TOTAL LIABILITIES & EQUITY $365,000 

   Balance Sheet Check OK

RATIOSCurrent Ratio 11.33 Current Ratio = Current Assets/Current LiabilitiesQuick Ratio 9.67 Quick Ratio = (Current Assets-Inventories)/ Current LiabilitiesCash Ratio 8.67 Cash Ratio = Cash/Current LiabilitiesWorking Capital $155,000 Working Capital = Current Assets - Current Liabilities

Balance Sheet #1 (3rd Year)

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Hub of Human InnovationA Technology Incubator serving El Paso/West Texas, Ciudad Juarez, Chihuahua, and Southern New Mexico

Technology meets Market

Focused on technology and high growth entrepreneurial businesses (early-mid stage)

Contributes to economic development of the region particularly in high-wage job growth

Develop a culture of innovation and entrepreneurship in the Paso del Norte border region

Based on a collaborative community model

Business planning &

Development

Entrepreneur Development

Facilities Network Development

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Year 50

102030405060708090

100

Non-incubated

Incubated

New Business Survival Success Rate

%

Approx. 84% of business incubator graduates conduct business within 20 miles of the incubators.

Business incubation creates wealth and improves community and national competitiveness.

Business incubation programs help build healthy, lasting firms for a low cost.

Business incubators provide communities with significantly more jobs (up to 20 times more) at far less cost than other public works.

Incubator Market Analysis

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Introduction toEntrepreneurshipwww.utep.edu/creie February 15, 2014

Gary Williams–Director; Federica Pericle-Director; Jeni Clark–Assoc. Director