At this stage, the innovation would have graduated to a level in which the focus is “the product” and “the vehicle” in which to drive it. The vehicle is a small business or “startup” in which an entrepreneur(s) see value in this innovation to serve a viable solution to a previously – identified problem. The entrepreneur(s) is(are) usually the inventor(s) but it is not a requirement and sometimes discouraged. It would depend on many factors such as the intense focus and time requirement to develop the business endeavour. For example, the inventor could be a research professor that would not have the capability to throw oneself into a business that requires intense focus. In this case, then, the inventor may acquire a seasoned entrepreneur that believes in the value of the innovation and has the energy and passion to scale a startup and the associated innovation. The UILO can help with this process (see Commercialization Services) due to its extensive expertise in industry and creating companies. The funds sought are more substantial, usually dilutive to the company position and require more time and effort to acquire. At this stage, the due diligence from either government sources (ie NRC) or the private sector (ie. Angels) is more intense.
NRC - IRAP / BCIP
The National Research Council (NRC) supports the needs of small and medium sized firms (“SMEs) engaged in innovative or technology-driven activities. It assists firms to develop, adapt and adopt technologies and incorporate them into competitive products and services. Their business model serves the continuum of innovation in the following areas: business advice, networking, intellectual property, market assessments, strategic planning, partnership development, funding programs.
IRAP: Industrial Research Assistance Program. Fund projects that benefit Canada socio-economically. The eligible For-Profit company is revenue-generating and consists of <500 employees. They fund up to $1M per annum for regular applied R&D projects and up to $300K per annum for youth internships. The scope of activities include: Feasibility Studies; Lean Manufacturing; Licensing and Commercialization Strategies; Patent Filings; Market Research and Competitive Intelligence Studies.
BCIP: Build in Canada Innovation Program. This program assists in the bridging of the pre-commercialization gap. It offers an opportunity for real-world evaluations of pre-commercial goods and services. By doing so, it improves the efficiency and effectiveness of government operations. There are 5 streams – ENVIRONMENT / HEALTH / SAFETY AND SECURITY / ENABLING TECHNOLOGIES / PROTECTING THE SOLDIER. The BCIP is presently an open call. The funds available are between $500K and $1M and stipulate that the proposal must fit into the prescribed streams, have at least 80% Canadian content, show IP ownership and rights, and the associated product has not previously been sold commercially. The BCIP program narrows in on usable innovation (ie “MRL 7-9”). The criteria used to evaluate the proposal is based on the value of the innovation, the test plan, the readiness of the innovation (ie “The MRL”) and the commercialization capacity.
Family - Friends – Founders (The “3Fs”)
This is the “boot-strapping” stage in which the entrepreneurs self-fund and supplement by acquiring funds from trusted Family and Friends.
“Angels” are high net-worth individuals that actively fund early-stage companies. They usually invest in a portfolio of companies to increase the odds of success (ie “Return-on-Investment”). They invest alone or together with other investors ie “Angel Networks”). Usually, the process to “pitch” your idea to the investor is a thorough process in which an intermediary (ie. A “Managing Director”) initially screens the introductions and their presentation pitch decks and investor summary sheets. If the entrepreneur passes this stage – gate then they are invited to give a brief presentation to the Angel(s). Be well prepared for any questions and be up-front as to your expectations and current state of the company and the innovation. Don’t expect a “signing” to happen immediately. The process may take up to 12 months in which the investors ask for more due diligence documents to assist in their decision whether to fund or not fund. If they do not fund, they will provide some great feedback that will help you re-tool or think of other avenues to pursue. Once they agree to fund your startup concept, they will negotiate with you using a “Term Sheet” in which it lists the terms of the relationship will be described.
Some Angels are “hands-off” others are “hands-on” with respect to business matters. They may ask for a Board position within the Company so that they have some control in the direction of the product development. It is a great opportunity to acquire such a member as they could provide the entrepreneur with contact sources, more funding avenues to tap and essential advice along the way. Angels do not stay in the company for an extended period as their modus operandi is for an early exit with a return multiple of 2-5X. A next round of funding (ie “financing”) is usually the trigger for an exit although some Angels “follow” into the next round.
This type of funding originated in the Art World in which it gained in popularity between musicians and artists. After ArtistShare[tm] in 2003, the platform exploded with the likes of IndieGoGo[TM] and KickStarter[TM]. The premise is the acquisitions of funds or equity via an online platform in which the entrepreneur pitches their product in hopes of using the proceeds to develop their product or service. Many variants exist in many sectors such as FinTech, Agriculture, Customer-based Products, Science Technology, Real Estate, Angel Investment. There are benefits and risks to the opportunity such as – Managing the Investor Pool, IP Protection, Donor exhaustion, Substantial funds raised to develop the product, Government Regulations.