PREPARE to Fund Your Technology Development

Everything I Ever Learned About Funding I Learned From Andy Hardy

In the 1940’s MGM produced a series of Andy Hardy movies in which the main characters (Mickey Rooney played Andy, Judy Garland was his girlfriend and Lewis Stone played Judge Hardy, Andy’s loving but firm father) managed to solve their problems by using the device of “Putting on a Show”. Having exhausted their own meager resources, and desperately needing to raise money for a worthy cause, the talented and enthusiastic young entrepreneurs staged a musical production to raise the money they needed. The resulting musical productions were the very best the MGM Prop, Set Design and Music Departments could produce.

Today’s entrepreneurs looking to raise money lovingly construct their backdrops with business plans and PowerPoint presentations. Their intent is the same – get their audience to willingly part with their money because they like what they see and hear! It worked for Andy Hardy and his friends. They always accomplished their goals and raised the money. But they had an advantage: they were fictional characters in a movie that always had a happy ending.

What faces today’s entrepreneur?

The casual observer of the process to acquire technology funding might conclude business plan preparation, finding the sources of funding, choosing between Angels and VCs and giving brilliant PowerPoint presentations, is all that is required to win funding. Unfortunately, presentation strategies alone often fail to create the expected payoff.

There’s much more to the evaluation process than the message in your business plan and PowerPoint presentations. These components, though important, will not deliver a win by themselves. What’s missing? A firm understanding of what funding sources are available and how each potential funding source is going to evaluate you and your business.

Each Funding Source is Unique

There are many potential funding sources. The obvious ones are Angels and VCs but there are other options – many of which won’t dilute your ownership. The Small Business Innovation Research (SBIR) Program provides grants and contracts for technology development. The Texas Emerging Technology Fund (ETF) provides grants for business growth. The Department of Energy has annual Inventions and Innovations (I&I) competition providing grants for energy-sector technology development. NASA, the Department of Defense, and the Department of Homeland Security all do extensive partnering of small technology businesses with their prime-contractors who are seeking innovative technologies to integrate into their systems. Major universities, such as The University of Texas and Texas A&M actively seek small businesses with whom they can partner in the commercialization of their technologies. Which source you should target lies in the assessment of your readiness for funding.

Investors will evaluate your suitability for funding

Any potential investor will evaluate you. Two critical dimensions will be assessed. The first is the developmental status of your company’s technology. The second is your company’s maturity and ability to conduct business to realize the revenue potential of your technology. The perception of how you rate in these two areas will determine whether the investor will continue discussions with you, or take a pass.

Evaluating developmental status: the Technology Readiness Level

A convenient classification index is the Technology Readiness Level (TRL). It is one of the primary assessment tools used by the Department of Defense and NASA. A company’s TRL will range between a “1” and a “9”, with “1” being no more than a conceptual articulation of an idea and “9” being a fully developed product. Here's the TRL Index:
___________________________________________________

Level Technology Readiness Level(TRL)

1 Conceptual articulation.
2 Technology and Applications described.
3 Laboratory studies and analysis.
4 Limited capability prototype validation in laboratory (pre-alpha version).
5 Full capability prototype validation in laboratory (alpha version).
6 Prototype validation in relevant environment (pre-beta version).
7 Actual system validation in a relevant environment (beta version).
8 Initial production and rollout.
9 Full production mode.
___________________________________________________

You can be sure the funding entity will expect your company’s technology to be at a minimum readiness or TRL level for the investment to be considered appropriate for further evaluation. It’s to your advantage; therefore, to know ahead of time what each targeted funding source uses as their readiness criteria and what the minimum thresholds they expect.

Evaluating maturity: the Business Readiness Level

Similar to the TRL, another classification index, the Business Readiness Level (BRL) can be used to assess the capability of the organization to conduct business. Like the TRL, it ranges between a “1” and a “9”, with a “1” representing the proverbial “inventor with a dream” and “9” being a fully articulated business with appropriate infrastructure and staffing. Here's the BRL Index:
___________________________________________________

Level Business Readiness Level(BRL)

1 Inventor or team with a dream.
2 Paper studies and analysis produced.
3 Capability for conducting laboratory experimentation.
4 Capability to work limited-scope R&D programs with project teams.
5 Capability to support project engineering development and design
6 Capability to support development and design with a market-driven business team.
7 Capability to support limited production; full business team in place.
8 Capability to transition to full production and distribution.
9 Fully articulated business with appropriate infrastructure and staffing.
___________________________________________________

Any credible funding source will want assurance your organization has the resources and business acumen to successfully execute the plan and manage their money!

The Investor’s Evaluation Process: TRL + BRL

Every potential investor will rate your technology development and business maturity on some relative scale. They will compare your perceived rating against their preferences. For example, both the SBIR and I&I funding programs focus on TRLs of no higher than a “3” but a company having a BRL of a “4” or higher has a much better chance of getting an award. The Texas ETF is more favorable to companies with a TRL and a BRL of “5” or higher. The Federal agency partnering programs get excited when TRLs are a “6” or higher and are matched with BRLs that are at a “7” or higher.

Angels and VCs each have a unique profile that they are seeking to match. Angels might be willing to invest in a company with a low TRL when the investor has significant knowledge or experience within that technology domain. Most VCs, however, expect a TRL of a “6” or higher. Expected BRLs also vary widely -- some investors prefer a fully defined business team, others prefer to help build the team.

Let’s make a deal!

There’s a third component involved in finding and dealing with a funding source. We call it Dealsmanship TM. It’s all about your understanding of the deal process and your skill in negotiating favorable terms and conditions. If you can’t negotiate a funding agreement that protects your company’s best interests, then everyone associated with the investment loses.

A strategy for success: Raise your Funding Readiness Level(FRL)® appropriately

For successful funding, the company must objectively evaluate its TRL and BRL, know the profile and preferences of potential investors, and be prepared to make deals that position the company for profitable growth.

There’s no point in making a presentation to a VC, for example, who expects a TRL of 6+ and a BRL of 5+ if you’re at a level 3 on both scales. However, an Angel who has experience in your technology area might be very interested. At the same time, you might consider the SBIR Program and plan on applying for Texas ETF funds in a year or two when your TRL and BRL have both risen.

To be successful you need a funding preparation strategy that includes research and evaluation of all potential funding sources, generate a roadmap to raise your TRL and BRL levels to match targeted funding sources, and develop a strong dealsmanship capability. The basis of the strategy: raise your Funding Readiness Level(FRL)® to the appropriate level to be successful.

Let’s Put On a Show!!

Now what about that business plan and PowerPoint presentation? These are the “Show” you produce to attract and convince possible investors. A good show with “props and music” will keep the investor interested and talking. Without the show, you’ll never get the chance to demonstrate the reality of your technology’s developmental status, capabilities, and potential. After all, that’s what the investor is “buying”. And, frankly, a poor show is an indication of a lack of business maturity.

Andy Hardy had the right idea after all!

Come to think of it, Andy Hardy and his friends certainly had a high enough TRL to put on a block-buster show, and Judge Hardy served to bolster their rather weak BRL. Andy’s dealsmanship skills, moreover, always helped him get his way. Despite being fiction, these movies did offer valuable business principles and a blueprint to modern entrepreneurs that are relevant after all!

Break a leg!



PREPARE to Fund Your Technology Development - To learn more about this author, visit Fred Patterson's Website.

Like this article? Share it with your friends

E-Mail | Print | More

Related Articles
The Africa Enterprise Challenge Fund: a better way to make poverty history
	Behind the headlines and campaigns, the key to making poverty history in Africa actually lies with its indigenous entrepreneurs. Not only an engine for economic growth, small businesses are also the source of most j...
9.3.2 The Small Industries Development Organization: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
	SIDO, with an office in 20 of the 21 regions of the mainland, is a large provider of financial and non-financial services to MSEs. They have 70,000 credit-delivery clients and reach 300,000 MSEs through their smal...
George Ayittey conversation about a Cheetah sustainable fund
	I had a wonderful conversation with George Ayittey last friday about the recent TED conference in Arusha, Tanzania. I have profound respect for George because he is a old-school pragmatic thinker. Dr. Ayittey is tra...
5.2.1 The MIT-SME section: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
	Prior to 1997, the small business development function rested within a Unit whose status was equivalent to that of a department and reported to a deputy minister.
Nigerian Government Creates $426m Microcredit Development Fund
	Nigerian President Alhaji Musa Yar’Adua announced the creation of an N50 billion (the equivalent of over USD 426 million) microcredit development fund to be administered by the Central Bank of Nigeria (CBN). The new...

---

Related Forum Posts
	Seek Venture Capital & Funding
	Re: Funding Question
	MAZE INC NETWORKING GROUP
	Top 50 People to Follow on Twitter
	BDC
	Re: BDC
	International Technology Exchange
	Outsourcing Software Development India

---

Related Businesses - Evan Elite Authors

Vwodek Wojczynski Business Coach and Consultant Vwodek Wojczynski (pronounced Voy-chin-ski) brings fun, awareness, accountability and fresh perspectives based on his diverse experiences in life and business. Born in Poland and educated in Greece and Canada, he is trilingual with 8 years experience in business development with clients in Canada, USA, Switzerland and Poland. His approach is systematic and process-driven. He fuses the know-how of proven business methods with his commitment that entrepreneurs experience satisfaction and joy based on their values, motivations and strengths. He believes that businesses succeed based on their ability to generate value by providing what’s needed and wanted. Ultimately, he trains executives and true business owners - people who work less, produce more, own businesses that run automatically after a while and make a difference globally. His current research focus is the development of intelligent business systems and the application of emerging artificial intelligence technologies in business. He is also an avid traveler, spoken word performer and visual artist. He resides in Toronto, Canada. - Visit Vwodek Wojczynski's Website

Dianne Crampton Dianne Crampton is an Executive Leadership Coach and Team Building Consultant and creator of the TIGERS team development model. For the past twenty years she has helped leaders and teams achieve goals with high levels of collaboration and teamwork. Crampton is a published author. Her contribution to Working Together: Diversity As Opportunity was endorsed by Stephen Covey. She has written for trade magazines. Merrill Lynch nominated her business for Inc. Magazine’s regional small business and entrepreneurial awards. Her work with Native Americans was recognized at a United Nations sponsored conference in 1994. The TIGERS model passed two rigorous validation studies in 1992 and 1994. The TIGERS Survey is able to measure and track team development over time. Dianne is also the creator and distributor of the TIGERS Team Wheel game. This game helps groups identify behaviors that build collaborative groups and behaviors that cause conflict, morale problems, production failures, and misunderstandings. For more information, or to subscribe to TigerTracks, a free monthly leadership and team newsletter go to http://www.corevalues.com - Visit Dianne Crampton's Website

Dave Kurlan Dave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website

The Evan Elite Authors program is currently in beta phase. For details please contact us.