Startup Investing 101 : 9 Questions to Ask Before Investing in New Tech

Startup Investing 101 : 9 Questions to Ask Before Investing in New Tech

A sharp entrepreneur can solve for just about anything with enough time and money. But how much time and money is it worth? Some of the best qualities of an entrepreneur (relentless optimism, resiliency, and determination) can also cloud judgment on effort of implementation and execution. This makes it challenging for the entrepreneur and prospective investors to sufficiently evaluate the technology and the supporting ecosystem required to realize the technology’s potential. Here are NINE questions to ask first before diving into a technology.

1. Are you inventing something completely novel, or piecing together a proven technology in a new way?

First of all, most technologies are not unique. Those rare and disruptive technologies may come with great reward but also great risk. One of these risks and inevitable challenges is timing; the concept of right tech, wrong timing.

Start with REX to get the health vitals of the technology and more information about the technology landscape. Our natural language processing and machine learning technology filters through unstructured data and returns the most relevant information. All datasets are broken into major categories, representing the various phases in the technology’s product lifecycle: research funding, patent filings, science and research news, technology news, and business and investment news. Datasets are weighted and time is relevant. What does this mean? Patents that were issued 30 years ago, are weighted less. Trends over time within each category capture the momentum of the technology and allow users to make general assumptions about the position in the technology lifecycle. For instance, a recent and rapid increase in grant funding and science and research news could indicate a very early stage opportunity. Using variables such as the volume of documents within each category and trends over time, our algorithm will score your search parameter between 0-99 for uniqueness, commercial viability, license potential, patent potential, and rising competitive risk.

2. Is the technology patentable? Is it infringing on other patents?

Patents can be the foundation of a business’ value. And in many cases can help build stronger opposition to any new competing technologies or companies. However, patents are not the end all be all. What is more important than a good patent portfolio is the ability to execute and effectively leverage the intellectual property. Either way, you must familiarize yourself with patents that might be overlapping with your technology in any way.

3. What is the stage of the technology? Do you have a proven or established technology in the desired market?

There is a learning curve for introducing new technologies that can prolong the adoption rate significantly—keep this in mind.
4. Are there potential obsoleting technologies on the horizon?
To best defend against disruptive challengers you must pay attention to competitive advantages of the whole product, not just technical features. The ecosystem of the technology and the peripheral market can play a critical role in the success of new technologies–just consider the story of Betamax. How dependent is the technology on other innovations? Although HDTV was invented in the early 80’s it took nearly 30 years for supporting elements (from high-def cameras to broadcast standards) to emerge and enable HDTV technology.
You can start to gather a general idea of the technology landscape by running a search on your technology. Leverage artificial intelligence to make better innovation decisions. Our content engineering platform continuously crawls and ingests vast amounts of unstructured data that are used by our artificial intelligence based algorithms.

5. Are others doing something similar?

It’s not necessarily a good OR bad thing that something is completely unique and disruptive. If you are risk averse, you may find it reassuring that there have been other players and other attempts. On the other hand, if a technology market is completely saturated, it may be a good time to reevaluate commercial viability for new end markets of the technology.

6. Do you have domain expertise?

…Or can you acquire it?

7. What is the addressable market?

Who are the consumers? What is the underlying technology? What is the current industry application?

The best way to answer these questions is to review the top relevant documents in that sector. How recent are the publications?
When you run a search on REX you the “composition” of your search input by technology sectors.

Breaking into a new market/application of a technology can be exciting and risky. On one hand you have a solid/proven technology in an unproven market. Plan on increased rate of adoption for new markets that may require changes in behaviors and education.

8. What is the size of the addressable market?

9. What is the sentiment or attitude toward of the technology?

We can’t discredit the importance of qualitative evaluation of a technology. Sentiment analysis. Expert opinion.

In our attempt to include these qualitative measures in our algorithm, we measure the volume, relevancy and trends over time in the “Technology News” category. Technology News represents a unique vertical of datasets that are tech and science publications for non-experts. Datasets in this vertical are most often supported by advertising so the publishers’ goal is to deliver content that is going to drive the most traffic (and revenues). In this sense, Technology News acts as a barometer of public interest and opinion of technology topics. We are able to draw unique conclusions about the interest and attitude of the technology based on overall volume and publishing trends over time.

It’s all about risk versus reward. Not every opportunity is going to pay off overnight (or at all). You don’t have to be an expert, you just have to ask the questions.

Introducing REX equity crowdfunding investment platform, Launchmoney

Introducing REX equity crowdfunding investment platform, Launchmoney

For all you innovators, read to the end to find out how you can raise the financing you need now to take your great idea to the next level!

How often have you marveled at a great new product or technology and said to yourself, “I wish I could have invested in that at an early stage”. For most of us, the dream of early investing in promising technologies has been just that, a pipe-dream.

In its heavy-handed attempts to “protect” us, The US Government has long limited the ability of most investors who weren’t multi-millionaires to make venture capital investments in any organized fund. Venture capital funds were almost exclusively the domain of endowments, foundations, institutional investors and wealthy individuals.

As successful venture funds raised ever-larger new pools of capital, they logically focused on situations where they could invest larger sums in companies building corporate infrastructure, rather than making “seed” or “first money in” investments in promising technologies. As a result, very early stage investing has become almost completely left to angel investor groups, “friends, family and fools”, and incubator funds. An unfortunate by-product of these changes in the venture financing industry is what we, at The Research Exchange, refer to as the “Valley of Death”.

Great new potential products or companies that might be built from new scientific research at universities, research institutes, federal labs, or companies never get off the ground because the capital necessary to allow entrepreneurs to convert science to products just isn’t available.

Fortunately for investors willing to back entrepreneur teams at a very early stage, and for entrepreneurs with the skill to turn science into great new products, there have been recent changes in US laws and regulations that should increase the flow of vital early-stage capital.

In 2012, the US Congress passed the Jumpstart Our Business Startups Act, known as the JOBS Act, that, in Title III of the Act, provides the opportunity for non-multi-millionaire public investors to invest in promising new companies at an early stage through what has become known as “crowd funding”.

The crowd funding method of fund raising involves an on-line offering that is generally open to all investors, with certain limits.

You are probably aware of “Kickstarter” offerings online to fund a wide variety of projects. But the crowd funding permitted under the JOBS Act is completely different from Kickstarter. Under the JOBS Act, investors who participate in an on-line offering actually become partial owners of the enterprise. This is finally the chance for regular investors to become venture capitalists!

How does this new opportunity for venture investing work?

Entrepreneurs and investors meet through a “Funding Portal” regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). These Portals are created by financial entrepreneurs interested in establishing on-line marketplaces for venture capital. Operators of these Portals must go through a rigorous registration process and follow very stringent rules established by the regulatory bodies. The rules are set so that both entrepreneurs and investors can be comfortable that they are protected from fraud and theft, and only face the business risks associated with early stage venture funding. Because of the relatively recent advent of Crowd Funding, and the rigorous registration process, very few Funding Portals are in operation today. Unfortunately, most of the Portals in operation today are focused primarily on restaurants, micro-breweries, marijuana production, and drones. But that will change very shortly when The Research Exchange gains clearance for its Funding Portal, REX Launch MoneyTM.

When REX Launch MoneyTM debuts,
regular, non-multimillionaire investors will be able to make investments as small as $100 in promising technology based projects, or raise as much as $1,000,000 from investors to develop a product or company.

Of course, multi-millionaire so-called “accredited investors” will be welcome as well, with the only difference being these investors will be able to invest significantly higher amounts in each deal. As an investor, you will actually be a part owner of the project or company. REX will provide all the information you need to make well-researched decisions, including a direct on-line link to the entrepreneurs offering the projects for investments so that you can ask specific questions in your due diligence research. While in REX you can do the intellectual property research necessary to invest intelligently and choose from a variety of projects, all with one thing in common: they will be built on the best available intellectual property in the United States, brought to market by technically capable entrepreneurs.

At some point in the near future, a second Portal, REX Select VenturesTM, will be debuted by REX. This Portal will, unfortunately, be limited to accredited individuals and institutional investors, but will have the ability to raise much larger investment amounts for promising ventures. Like the Launch MoneyTM Portal, Select VenturesTM will be a simple, on-line tool to facilitate the flow of venture capital to promising ventures without many of the procedural and legalistic roadblocks currently limiting the flow of investment capital. You will be able to build a portfolio of promising ventures that YOU select and monitor, all without the 2.5% per year of capital invested, plus 25% to 30% of the profits fees typically charged by traditional venture fund vehicles (if you could get into these funds at all).

With the Launch MoneyTM and Select VenturesTM Portals in place, The Research Exchange, through REX, will help alleviate one of the most vexing problems of technology commercialization, the “Valley of Death” problem.

Solving this problem should set off a virtuous cycle of entrepreneurs, investors and consumers benefiting from US Government funding for research, which in turn, should lead to increased research funding and more great intellectual property for future products, businesses and jobs.
Find out more about all of this at

P.S. While the GetFunded portal is currently under construction, we are actively reviewing project submissions for the REXcelerator Fund! Join today and submit your proposal!

not Made in China

I recently went through the most current AUTM (Association of University Technology Managers) licensing survey and made this pretty infographic for all of you.


A couple of trends in the data that I found interesting.

  • A MASSIVE increase in startup failures. It seems TTOs are increasing more interested in startups versus licensing.  Since basically forever there has been this divergence of goals between industry versus academic institutions.  While Universities will always be grant centric, more focused on the R versus the D in R&D, and advancing knowledge, the movement toward startup creation is arguably a net positive shift that is much more market driven.
  • Increased focus on patent coverage in foreign territories. I’ll come back to this one, but first…

Anyone else have any experience using infographic generators?  Send me platforms you like and hate!

Now back to number two.  Interest in foreign markets.

I mentioned in a previous blog post that we will soon be offering a series of market tear-downs, as well as portfolio tear-downs of the top IP generating academic institutions in the country for REX users.  So I’d like to give you a little snippet of some of the information we uncovered in our first project which was analyzing the Princeton portfolio of IP.

First, we collected all of the Princeton University IP and put our machine learning/AI algorithm to work to organize the portfolio into technology “clusters”.

Just as an example, one of these technology “clusters” includes roughly 93 patents all in the same technology orbit.

Then for each of these clusters, we identified other organizations with overlapping IP (which patents specifically) in that cluster, and estimated expenditures/investment for each.  This is where you get to see what topics, patent claims, are getting more international interest from academic research institutions to large corporations.   The largest decision the owner of IP may face is whether to file a patent, and which jurisdictions to prioritize.  It would likely cost (at least) $500,000 per patent to file for coverage around the world.  So if you have a product with unique IP that you would like to sell around the world, you better make sure you are covered in all the key markets.  Given the cost to file patents in jurisdictions around the world, this kind of actionable insight for determining a patent filing strategy is gold.

This information may otherwise be used to refine patent claims to ensure appropriate scope and coverage for an invention, and identify which company portfolios and universities have the most overlap with a technology cluster.   We can’t wait to show you what we’re cooking up over here.

What else do you guys want to see in the reports?

Shoot me an email at


Not currently a member of REX? Sign up for your free trial and get on the list to receive exclusive technology reports coming soon!


How to Value a Startup Company from a Trillion Dollar Investor

How to Value a Startup Company from a Trillion Dollar Investor

Venture capital is the oxygen almost all startup companies need to survive the “Valley of Death”.  The price paid by the entrepreneur for this essential ingredient to his fledgling company’s success is, like the price in any arms-length transaction, the result of a negotiation based on facts, emotions, and circumstances unique to each negotiation.  Is the price paid by the entrepreneur really based on the “value” of his project?  Finance professors in academia are likely to argue that the “value” of a startup project can be determined empirically, if only the necessary information can be gathered.   Then does “value” exist apart from a market-determined price derived from a specific negotiation?


In this post I will cover briefly the techniques academics would use to calculate what they might call true value, and in the process illuminate the practical problems that make these tools only marginally useful to venture capital investors.  This realization leads to my central point: what some people call “value” is more properly a “price” set by a marketplace under a specific set of conditions and circumstances.  Very few things have true intrinsic “value” that can be established so precisely that there would be no disagreements among participants in an open marketplace so that there would be complete agreement on the price at which a transaction could be done.  Even the broadest markets for common commodities with complete information sometimes trade with a wide spread between bid and offering prices.


So, the search for a true value for a startup company is probably a fool’s errand.  What needs to be developed is a price at which investors are willing to risk capital, and at which an entrepreneur is willing to share the rewards of his great idea with those investors.  Whether or not this price is anywhere near true value (even if such a thing could be determined) is completely irrelevant.  If there is no agreement on price, there is no investment, and thus, no new company.  This leads to my personal opinion of the bottom line of new venture pricing that I will flesh-out in more detail later:


Venture Capital Pricing =       60% Negotiation

20% Personal Evaluation of the entrepreneur

20% Numerical Analysis


Almost all of the factors in venture pricing are based on experience, intuition, domain knowledge, and unique circumstances.  Most are qualitative assessments.  The two parties to the negotiation, the investor and the entrepreneur, often come into the discussions with very different levels of bargaining power.  Marketplace conditions will very likely change markedly both during and after discussions.  But, in order for a deal to be struck, both sides will need to be comfortable that whatever price is set will allow each to meet his financial objectives.  That is the art of the deal.


The Science of Establishing True Value: Classical Finance Theory


One of the most accepted facts of investment finance is that the value of an asset is the sum of all future cash flows from that asset adjusted for the time value of money and the risks associated with those uncertain future cash flows.  In math terminology:




V = Value of an Asset or Company

n = Year

CFn = The amount of cash flow available to equity owners in Year n

R = Discount rate

8  = Forever


In order to use this formula to value a startup, we would need to make the following estimates:

  • Annual earnings available to equity holders for every year that the new company exists, forever ….
  • If the company is acquired at some point in the future, the acquisition price
  • Market interest rates for each year in the future that the company exists
  • Some rational method for adjusting for the following risks:
    • Estimation risk for all those future numbers
    • The risk of company failure; timing of failure
    • Dilution risks from required future capital infusions


Right …..


I won’t go through all the problems associated with coming up with reasonable estimates of these numbers.  Most would agree that forecasting even 3 to 5 years into the future at this detail level is extremely difficult, even for an established company, but for a startup?  Just the process of developing these estimates might actually lower the confidence of a potential investor with any humility.  If you want more details on the advantages and disadvantages of this approach, refer to thisthis, or this.


The Science of Establishing True Value: Practical Approximations


Recognizing the futility of deriving the necessary estimates to apply the classical finance valuation tools, some investors fall back to what is often referred to as the “comparable multiples approach”.  This approach takes advantage of the fact that capital markets exist to allow investors to trade securities, and that the prices set in these free markets are the best approximation of true value at any point in time.  This means that simple multiples (ratios) such as price/earnings or revenue/price are available for a wide variety of publicly traded companies.  All one needs to do to value a non-public company is to find a comparable publicly traded company, and then apply the public company multiples to the earnings or revenues of the non-public company to derive the estimate of the non-public company price.   Practitioners look for young public companies in the same industry, with similar capital structures, as the startups they are trying to value.


Of course, the problems with this approach in valuing startup companies should be obvious.  Startups are unlike publicly traded companies in many important ways: they are much more fragile in that they typically rely on a single product and a small management team, they are often breaking new technological or business model ground, and are far less liquid than public companies.  For these reasons alone, despite the fact that this approach appears far more reasonable than the classical finance valuation approach, it will, at best, provide only a gross approximation of the true value, or even the appropriate market price, of a startup company.


So, where does this leave the valuation issue, art or science?  I think it’s clear that almost all company valuations, and especially valuations of startups, are solidly in the art, or more correctly, negotiation camp.  But, investors and company owners can’t just pull numbers out of thin air and hope to reach some sort of agreement on price, so valuation theory must play a role, albeit as a check on reality rather than as the definitive method of reaching agreement.  Practitioners in venture capital, and to a lesser extent private equity, have developed techniques that bridge the art versus science valuation gap to assist the negotiations between themselves and entrepreneurs to set startup company valuations.


 Practical Valuation: The Venture Capital Model


It is worth reiterating a central concept at the heart of the so-called venture capital valuation model: the “value” of a startup company is nothing more or less than the “price” agreed by the entrepreneur and the investor team.  The price is decided through negotiations educated by valuation parameters and the experience of the investor team.  The venture capital model valuation process has four essential parts:


  1. Work with the entrepreneur to develop reasonable financial projections for the next 3 to 5 years or until expected profitability. These projections focus on the essential ingredients for success for the particular company being evaluated.  In some cases, the essential factors will be market penetration and share, in other cases the factors might be profit margins or cash burn required to sustain the expected growth.
  2. The investor team then translates the numbers from the financial business plan in step 1 into an expected “market value” that could occur from a public offering or a trade sale of the company at the point of profitability estimated in step 1. This translation typically uses the more simplistic comparable multiples approach described above rather than a full-blown discounted cash flow model.  There is also typically much back and forth between the entrepreneur and investor teams about this projected value, with the entrepreneur usually trying to demonstrate why the investor numbers are too low.
  3. Throughout steps 1 and 2, the investor team assesses the quality of the entrepreneur team to determine if additional talent will need to be added immediately at some additional expense, and how much help and guidance will be required from the investor. An important purpose of this assessment is to gauge a key element of the overall risk to the investment.  It is only fair to point out that, at some level, this becomes a binary assessment.  That is, there is an absolute minimum level of perceived entrepreneur team quality below which no deal can be done no matter how attractive the project.  This level is, obviously, different for each investor team.  Some investors may try to work with the entrepreneur to shore up the team; others will just walk away.  In any event, it is in the investor’s best interests to get to this assessment as quickly as possible so that there is no wasted team time on a project that just is not going to get financed.
  4. The final step is to translate the future “maybe” value of the company to a price the investor is willing to pay today in the form of a capital investment. Mathematically, this is a simple process:



CV0 = Today’s Value

FVn = Expected future value at year n

n = Year at which future value is calculated

R = Investor’s required annual rate of return


Perhaps the most important variable in this formula is R, the required return to the investor to finance the project.  The investor’s required return is a complex function of expected time to payout, confidence in the numbers from the financial business plan, confidence in the entrepreneur team, competition from other investor teams for the deal, the negotiating skills of the entrepreneur, general capital market conditions, and often, factors unique to the investor team such as how performance has tracked on other investments the team has made from the fund that would be making this investment.


Typically, an investor team would work from a basic pricing matrix similar to the one below as a starting point (this matrix is for example only and may not be indicative of current market conditions) and then make adjustments based on the factors listed above:



Defining each column in the matrix:


State of Company Development:  As a practical way of consolidating several risk factors, investors typically categorize the development level of an investment prospect company.  In this example, the diagram below illustrates how a venture investor might define a set of such categories:

(R) Required Annual Rate of Return: This is the discount rate at which the future expected value of the startup company will be discounted to compensate for the time value of money and for the risks associated with the investment, including the possibility of total loss, to determine the price the entrepreneur pays today to obtain the capital he needs to build the company.  This is the annual return the investor would receive if the future worked out exactly as planned.  In fact, that would be a rare event.  Some investments do better than expected; some do far worse.  The returns venture investors actually have received, on average, are far lower than the numbers shown in the table.  Total losses do occur, and investors must assume that they will.  So, they naturally build a bit of a cushion into the prices they pay for investments to make up for the disappointments.   On the other hand, the entrepreneur tries to keep the cost of capital as low as possible so that he can enjoy the rewards of his idea.  This is the area where give and take (typically hard negotiations) occurs to get the point where both sides are satisfied with the price to be paid.  The numbers in this table are definitely not static, either across time or across venture investors.  They are subject to a wide range of situations and market conditions, and are very difficult to “observe” without actually being in a negotiation.


Implied MOIC:  MOIC is an abbreviation for “Multiple of Invested Capital”, which is simply the total value of an investment at some future date divided by the original investment amount.  This return measure is preferred by some investors because it captures the effects of both annual return and the time period over which the return was earned.  An investment capable of delivering a 100% annual return over 5 years (MOIC = 32.0 times) would obviously be preferable to an investment capable of delivering the same 100% annual return, but only for 3 years, not 5 (MOIC = 8.0 times).  Since 100% annual return investments are very rare, almost every investor would prefer the 5 year investment to the 3 year investment.  The MOIC columns in the matrix translate the annual return expectations to MOIC expectations over a 3 year and a 5 year time horizon.


With all the pieces in place for a Venture Capital Method Valuation, take a look at the example below:



  • “Pre-seed” development level company
  • Expect to make a trade sale (through acquisition) of the company when it becomes profitable in 3 years
  • Confidence level in projections is average
  • Entrepreneur team is good, but not great, and will require some hands-on assistance from the venture team


With these assumptions, the investor team is likely to require pricing so that it can achieve an annual return at the upper end of the return range, for a “pre-seed” company, say 70%, leading to the valuation for today of $61 million as shown below. This is known as the “Pre Money Valuation”.


Note that if the entrepreneur is able to convince the investor to accept a mid-range required return for this investment through effective negotiations, the today valuation would increase to more than $73 million.


The final calculations to be done are “Post Money Valuation” and the amount of equity the entrepreneur must give up to raise various levels of venture financing:


Post Money Valuation = Pre Money Valuation + Capital Provided by Investor


% of Equity Acquired by Investor = Capital Provided by Investor / Post Money Valuation


The table below provides examples of these measures for various levels of venture investment:



This table clearly indicates that while it is very important for the entrepreneur to negotiate the best deal he can with the investor regarding valuation, it is far more important that the entrepreneur limit the amount of capital he accepts to the amount he actually needs to reach the three-year milestone.  Frugality here will pay off handsomely three years down the road!


One of the most important tools in REXtm to accelerate the development of new products and companies from scientific research is the Launch Moneytmportal created to help entrepreneurs raise pre-seed investment funds for their projects.   Within Launch Moneytm, there are guidelines to assist entrepreneurs in setting the prices at which equity shares can be offered to investors.  These guidelines are based on the Venture Capital Model described above.  However, since entrepreneurs using our Launch Moneytm portal will not be negotiating one on one with an experienced venture investor, but will instead be posting offering prices for investors to take or leave, we will provide current readings of the marketplace to assist entrepreneurs much like the “Required Rate of Return” matrix shown above.  By providing this information to entrepreneurs we hope to assure investors that the offering prices on Launch Moneytm are fair and reflective of current market conditions.


Quit Dating Frogs

Quit Dating Frogs

The most widely cited problem for startup failure is lack of market need.  It’s easy to blame the market.  What this more often means is that the founders built a product to their grand vision was not in alignment with a validated market need, or there was a disconnect between the product and the addressable market.

Growing a startup is an iterative process, and it’s my observation that most are almost certain to fail in their first attempt.  I am often reminded of a quotation by Thomas Edison after many unsuccessful attempts to create an incandescent light bulb “I have not failed.  I’ve just found 10,000 ways that won’t work”.

The sentiment is similar among VC’s.  Experienced venture capitalists will point out, you have to kiss a lot of frogs to find a prince.


Ultimately finding out what can’t work will sooner lead you to finding out what can work.   The question becomes, how can we fail (and hopefully ultimately succeed) as quickly as possible with the least investment of time and money?

You might have the best idea in the world, but you need to first consider whether there’s a market. Here are a couple of things to consider when determining whether your great idea is feasible:


  1. A strong understanding of customer problems and validation of the idea will help clarify the addressable markets (or potential markets). Just because the solution to a problem is interesting to you, does not mean it is driven by a validated market need.  



One of the main causes of failure is untested assumptions.   Bottom line: a full understanding of the problems is crucial in the discovery of potential target markets.



  1. Do your homework. Start with Google.  Interview prospective users/customers.   Research competing IP and solutions. A patent attorney can perform a patent search to make sure there are no existing patents or inventions similar to your own. Or let REX help you develop a data driven strategy.  Search on existing patent number(s), blocks of text, keywords, URLs or PDF documents to find semantically similar academic literature, research grants, and patents, and IP within minutes.

For disruptive technologies and companies, it can be very difficult to identify an addressable market in the first place.  Perhaps you have not (and should not) ruled out the possibility of new applications/markets for an existing technology.   The REX radar chart will dynamically analyze and build a natural clustering of content based on technology taxonomy.  Here is a sample rendering for a specific technology in the cryptocurrency space that is broken down into three major categories: 25% electronic sciences, 24% computing sciences, 17% energy sciences.  Clicking on any of these major categories on the left side will display a radar chart that is dynamically organized into sub-categories.  Color gradients indicate relevancy for each of the segments with in a sub-category.  You may click on any segment in the radar chart to drill down into correlated and/or competing technologies (semantically similar documents) in that technology space.

Identify a technology in a highly developed form, and see where there might be an opportunity to reposition for new applications (in new sectors and new markets).   So say you have two technologies, a therapeutic and a very specific type of delivery agent that on their own may have a commercialization gap, but together they are much more viable.   How can research be “combined” to create a more compelling and viable commercialization opportunity?   We want to improve the ability to take great ideas to market.  We can help you with this step.


One final thing to note is that validating a problem is one thing, identifying a solution that people will pay for (and determining how much?) is another.  Research where people are investing their money in the orbit of your technology/IP.  Take cues from the best and brightest innovators on REX and track what types of projects are listed on the GetFunded portal.   What types of projects are getting launched?  Who is investing now?  How much?


And don’t forget: Kiss a lot of frogs, but never date a frog.

If you’re an entrepreneur in search of your “prince”, click here to develop your data-driven strategy.

Purdue University’s Million Dollar Kill.

Purdue University’s Million Dollar Kill. 

A while back I shared some thoughts on express licensing.  And I heard back from quite a few of you… there seem to be a LOT of opinions out there on this topic.

Let’s look at a real life example of express licensing in action. Your opinion might change after reading this article.

Purdue has become a powerhouse for producing start-ups (hint: partially involving express licensing), and quickly increased its rankings on national surveys relating to performance in technology transfer.

Highlights of the game plan

*Commercialization accelerator program: the Foundry was designed to train innovators to take ideas to market.

* Purdue Ventures: founded in 2015 oversees three funds ranging from $2-12M.  Purdue Ventures also sources talent and mentors for these startups with a focus on Purdue alumni with compatible skills.

* Express License: Purdue Office of Technology Commercialization implemented an express license (since 2014) which is simple and transparent, and offers participants a more cost efficient fast track to transfer a technology to market.

* Trask Innovation Fund: offers grant money to (very) early stage company ideas.

*Creating a culture of entrepreneurship.

What Is Purdue Doing That Other Universities Shouldn’t Ignore?

All of this ^ seems to be working.

In the past three years Purdue’s invention disclosures have climbed 15 percent, while patents and licensing deals have increased from 65 percent and 55 percent.*

One interesting thing to note is that while licensing deals have increased, licensing revenue is down 25 percent over that time (from $8M to $6M).  This suggests that the payoff on licensing deals is not as high is as it used to be.  It also suggests that Purdue is honing in on that sweet spot between licensing revenue and startup creation, the latter which can take several years to mature and start producing revenue streams.

Based on 2015 data, Purdue ranked 6th in the country for creation of 25 startups that year (up from 15th place for 6 new startups in 2005).  Purdue is making itself a hotbed of entrepreneurship to lure top researchers and students looking to make a difference.  AUTM data has also shown over time that most startups built on academic IP remain in (the same) state.

Perhaps most importantly, the underlying trend we are seeing is that top performing universities (like Purdue) are breaking down barriers to actively work with investors, companies, and entrepreneurs.  Together, they are connecting research, talent and sources of funding to create commercially viable opportunities and to unlock the potential of university research for economic development.

Look for Patterns. Validate. Rinse and Repeat.

Look for Patterns. Validate. Rinse and Repeat.

Today I want to tell you all an inspiring story of (successful) challenge-driven innovation at work.  This story is about a group of students at Stanford University that tackled the issues of cost and access to care for the twenty million low birth weight preterm infants that are born annually, globally.  The infant warmer looks like a miniature sleeping bag and functions as a low cost incubator to help with temperature regulation, which can be the greatest threat to survival among preterm infants.  Apparently the students tested the sleeping bags by filling them with big Ziplock bags full of butter.  If the butter stayed nice and soft overnight, they had an effective product.  At the end of the article, the author makes an interesting point: “the idea of creating and designing a product that incorporates existing simple technology and proprietary materials driven by human ingenuity and passion to bring to market affordable disruptive healthcare products brings into focus something overlooked in today’s sycophantic startup environment.”

These brilliant students, whether they realized it or not, completed the most difficult step in the technology lifecycle: validation.  While inventors may clearly understand the science and technology itself, they are often missing the pain point and the market validation.  So for example one question to ask would be: could the technology solve the problem in in a given market?  What is the market?

Conversely, the investors and buyers may fully understand the market, but lack the product validation: is this a robust technology, does it work, and is it highly regarded by experts in the field (peer reviewed)?  And often there is a product or technology is is in limbo between these worlds; the somewhere in between proper product validation, problem validation, and market validation.  Is this a real challenge for real people?  What kind of product would relieve the pain points?  And of course the final step: can I make money selling this?  Is it worth the time, effort, and money to build?

Validation is arguably the most difficult step in the technology lifecycle.  At the same time, if validation were properly executed, we probably wouldn’t see the crippling failure rate of 90%+ among new technology products and companies.  We can work backwards or forwards in this process.

Have you come across any inspiring stories of people discovering amazing technologies? What stage of the technology lifecycle are they in? Let me know in the comments!