A researcher's journey
The start-up adventure
Sometimes it is preferable to create a new venture or “spin-out” to manage the commercialisation of the technology or service. This can be the case where the idea has commercial potential, but is not market ready, where the technology has numerous potential applications and markets, or, where an independent company is needed to manage external equity investments. Flinders Partners has helped create a wide range of high impact start-ups, including Re-Timer, Clevertar, FlinCare, Thereitis, YourAmigo, and others.
Commercialising a new technology via a start-up is an entrepreneurial journey. It involves an iterative process of continuous hypothesis testing, analysis and validation to pass key milestones and create a scalable and sustainable solution.
When a promising invention has been demonstrated in the laboratory, Flinders Partners works with the research team to perform basic due diligence on the market, the IP, and the business model. The key here is determining whether the opportunity is novel, addresses a suitable market with acceptable competition and possesses a credible business case to support commercialisation. From this point onwards Flinders Partners places a lot of emphasis on continuous market and customer validation.
To validate the existence and scale of a market we need to validate that there are indeed customers willing to purchase the technology or products and services that embed it. To that end we work closely with the research team to contact many different proposed users and determine if a sufficiently large and accessible customer base exists. Where this is the case and we can establish both a credible business plan and strategic reasons for launching a start-up, Flinders Partners will register a new company and move forward to execution.
In the first instance, Flinders Partners will negotiate with all stakeholders, including the University, Faculty, and inventors, the terms, interests, and shareholding in the new start-up. The intellectual property and resources will be made available to the new company, a CEO will be recruited, and execution of the business plan will commence. The development and growth of the start-up will typically involve raising additional investment capital and commercial grants to cover final product development costs, additional research through the University with the research team, and marketing, production, distribution, IP, and sales costs.
A successful start-up company can achieve a number of beneficial outcomes for its stakeholders:
Additional research funding for the research team and University.
Upon launch the new company will typically have access to a product or technology that has demonstrated a good proof-of-concept or prototype, but will often need additional research, development, and testing or field trials before it can be sold successfully to customers. This additional research and testing can comprise contract research projects, ARC Linkage grants, and other sources of research project funding flowing back into the laboratory of the original research team. Increasingly, even basic research funding often demands a commercial track record and experience with patents and founding new start-up companies and prove favourable for such applications.
A new start-up company presents many opportunities for the founding team to pursue, should they wish, career development with the start-up. This can include assuming the role of a full or part-time officer of the company, consulting to the company, chairing an advisory board, or in some cases sitting on the board in a formal capacity as a Director. In the latter case Flinders Partners will advise people to complete the Company Directors Course offered by the AICD.
Should the start-up company prove successful in its marketplace, realising regular profits and maturing into a sustainable business, then it may choose to start paying its shareholders a dividend each year. This can work in a similar way to a royalty payment, and provides cash payments that can be used for the institutional benefit of the University and the personal benefit of the inventors.
Exit and Equity Stake
Given the requirement for external investment capital, the start-up is most likely positioned to grow to a stage where it can achieve an exit for investors within a reasonable timeframe. An exit event will usually comprise a trade sale to a larger company although there is the possibility for an initial public offering on a public stock exchange instead. As part of this exit event the company’s shareholders usually sell their shares to a buyer in exchange for cash. After addressing appropriate tax considerations the University and individual inventors may realise a substantial capital gain.