PREPARE to Fund Your Technology Development
PREPARE to Fund Your Technology Development
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
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
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Dave KurlanDave 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 |
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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 Fred Patterson (Visit Fred's Website) Fred Patterson has been involved with guiding companies through technology development into commercialization for over forty years, including having worked with the SBIR Program and all of its aspects virtually since its inception. Currently enjoying a well-recognized nationwide consulting practice as “The SBIR Coach”, Fred teaches his dozens of client companies the SBIR “ropes” and guides them in the process of producing clearly articulated and reviewer-focused proposals, effectively doubling their chances of obtaining funding. In addition to SBIR and other Federal government sponsored funding programs, Fred also works with several State sponsored technology accelerator initiatives, as well as with many Angel, Venture Capital, and other private sector investment sources to continually refine its trademarked “Funding Readiness Level (FRL)®” index (a combination of Technology Readiness, Business Readiness, and DealsmanshipTM) that the company uses to help its clients prepare for the challenges of seeking, securing, and managing funding for commercialization and growth.
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