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Innovation accounting lean startup

ap innovation and startup policy and lean startup innovation accounting
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AustinMcmahon,United Kingdom,Researcher
Published Date:16-07-2017
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Innovations, Commercialization and Startup Guide Edition IIChapter 1: First Actions Guide to Law and Policy Regarding Technology Transfer The transfer of new technology from university laboratories to the private sector has a long history. Most recently, the impetus resides in the 1980 enactment of P.L. 96-517, The Patent and Trademark Law Amendments Act, and amendments included in P.L. 98-620, enacted into law in 1984 (referred to as ‘Bayh-Dole’). In the 30 years since Bayh-Dole, universities have developed a wide range of technology transfer infrastructures to enable the expeditious and wide dissemination of university-generated technology for the public good. Guided by its altruistic mission, OTC carries out the protection and licensing of Purdue University (Purdue) intellectual property (IP). The purpose of licensing Purdue IP rights and materials is to encourage the practical application of the results of Purdue research for broad public benefit, meet Purdue obligations to sponsors of research, stimulate commercial uptake and investment, spur economic development and ensure an appropriate return of taxpayer investments in Purdue research. A Technology Disclosure Form is to be prepared and submitted by the inventor(s) to OTC, and is then completed in conjunction with OTC. It provides the basis for an assessment of patentability and market opportunity; protects IP; and, when fully completed, triggers the 6-month Innovation Assessment Process within OTC. For the first step to protect an innovation, click here. It is important to disclose an innovation as soon as possible so that the inventors, OTC and the necessary legal counsel can begin to develop a commercialization and licensing strategy. 4Gross Net Distribution Revenue Revenue Reward 300,000 to Professor Inventors Purdue University and Post-Doc 33% Policy on Intellectual Property − Revenue Distribution (Policy I.A.1) Re-Investment 1,000,000 300,000 to Innovation: iWidget Department ABC Inventors: Professor Al Post-Doc Bee University Sustainability 66% Department: ABC 300,000 to Trask Fund (endowment Legal Fees: 100,000 for Purdue tech commercialization Purdue Policy U.S. government. The federal regulations governing management of resulting IP permit Policy I.A.1 to Purdue policy I.A.1 describes the principles and be followed without amendment. Corporate and administrative procedures related to ownership of foundation sponsors of research often require Purdue inventions and written and recorded materials. It is to observe alternative IP management terms. These useful to think of the policy as applying to ‘how’ contracts are entered into by Sponsored Program an invention was created or developed, not ‘who’ Services (SPS) on behalf of Purdue. Neither Purdue developed it. Use of Purdue University resources Research Foundation nor the Office of Technology subjects inventions to the policy regardless of the Commercialization enters into sponsored research employment status of the inventor, creator or author. agreements, but such agreements can be incidental to Purdue Research Foundation is the default designee licensing of an existing invention. for Purdue IP, and, when designated, owns and Outside activities and consulting agreements entered manages the IP on behalf of Purdue. In exchange for into by and between a Purdue inventor and a third party this assignment, Purdue retains all net proceeds, i.e., that involve conveyance of intellectual property rights revenue generated from the licensing of inventions. Net may limit, hinder or prohibit performance by Purdue proceeds are distributed in accordance with the general under a sponsored research agreement with a research distribution shown in the above chart, after costs are sponsor or with Purdue Research Foundation under a recovered. license agreement with a licensee. It is important to Sponsored research agreements can potentially alter have agreements reviewed and approved by Purdue. the management of Purdue intellectual property. Today, the largest sponsor of research at Purdue is the 5Chapter 1: Protecting Your Innovation OTC Evaluation Process Patent Copyright Identify Trademark Trade Secret ‘Four Corners’ of Intellectual Tangible Research Property (Start Clock) Qualied Acknowledge Review Meet Technology and Verify and with Disclosure Funding Assess Innovators Exemplary Deliverables: 1. File patent application(s) 2. Determine commercial viability Patent 3. Execute option/license agreement Marketing IP Copyright Yes 4. Verify and perform Purdue contractual obligations Analysis Analysis Trademark Announce (Ex/ Identify (Ex/ Patentability, Trade secret Decision Sector Players, Portfolio, & Tangible Barriers, Infringement (Month 6) Research No Trends, Size) Analyses) Revert at Assessment Innovators’ Requests No (Follow reconveyance procedure. See Interacting with the Purdue Office of Technology Commercialization Disclosure completed Technology Disclosure Form sets OTC’s internal technology assessment in motion. The form is It is important for Purdue innovators to disclose their intended for inventions that are potentially patentable intellectual property (IP) as soon as possible to the and is completed in a three-part process. Purdue Office of Technology Commercialization (OTC) professionals in order to protect the IP. Such • First, information describing the invention, to the early disclosure is now particularly important since fullest extent possible at the time of submission, the enacting of the America Invents Act of 2012 and is provided by a Purdue inventor(s). This first step that Act’s “First Inventor to File or Publish” provisions can be thought of as the answer to “what is the essentially means the first inventor to file a patent invention?” Upon submission, an internal reference application may be entitled to a patent. Purdue policy number is assigned to the invention which is used I.A.1 states that “inventors shall promptly in writing throughout its life by OTC – at which point an IP disclose and assign each Invention to the University.” manager is assigned to the invention. A written OTC is established to receive invention disclosures acknowledgement is sent to the inventor(s), and subsequently manage the process of technology confirming receipt of the Technology Disclosure commercialization. OTC works with Purdue-originated Form and detailing the next steps in the process. inventions in which Purdue Research Foundation, on • Second, the IP manager reviews detailed data, behalf of the University, confirms ownership. results, diagrams, graphs, and information in Technology Disclosure Form For Inventions the public domain, and may request additional information from the inventor(s) to ensure Inventors disclose technologies to OTC by completing sufficiency of information and perform an analysis a Technology Disclosure Form. Receipt of the for patentability and commercial feasibility. 6• Third, each Purdue inventor is asked to execute an Purdue Student Innovators assignment, assigning the technology to Purdue To encourage entrepreneurship among undergraduate Research Foundation on behalf of Purdue in students, the Purdue Policy I.A.1 allows students who accordance with Purdue Policy I.A.1. develop an innovation as part of their coursework to Copyright Materials or Software Disclosures own the rights to their discovery provided that the student inventor(s) made use of resources that are Inventions, as defined in Purdue policy I.A.1, include routinely made available by the College/Department copyrightable material, with certain exceptions for administering the Purdue course; the relevant student(s) scholarly and instructional works. Copyright protection are not paid by Purdue, whether through internal funds is afforded to original works at the time the work is or under a grant or contract with a third party; and there fixed in a tangible medium. Copyrightable materials are no preexisting obligations for Purdue in connection are disclosed to OTC by completing a Copyright with the course-generated intellectual property. Disclosure Form. In the U.S., a copyrightable work is registered with the U.S. Copyright Office. While such Other Disclosure Forms registration is not necessary for protection to attach, Disclosures to OTC of other types of inventions within copyright registration makes certain other damages the scope of Purdue policy I.A.1 should be made using available. Unlike patent rights, prior disclosure does the appropriate disclosure form (also found on OTC’s not present a bar to registering a copyright. website). For example, open source distribution of 7Protecting Your Innovation certain copyrights, tangible research property (such Patent Analysis as biological materials, models, prototypes and other While each technology is assessed for patentability, proprietary tangible property) and plant varieties or patent protection is not required for commercial germplasms can be found here. viability in every industry. Confidential patentability Assessment opinions, territories to seek protection and portfolio analysis are considered in deciding if and where to seek The OTC IP managers assess all disclosures for patent protection. feasibility of intellectual property protection and commercialization as described below. Patent Process Technology Assessment Process After a decision to pursue patent protection is made, a patent attorney or agent is identified to prepare and The assessment process is depicted in the flow diagram file the patent application(s). Often a provisional on page 6. Success of any technology evaluation hinges application is filed to obtain a priority date describing on strong communication and full transparency in a the invention. The provisional application is not disclosure between inventors and project managers, examined, it is a confidential document, and expires who help define an invention. The description of 12 months from the date of filing. As of March the invention is needed for the marketability and 2013, the U.S. patent law awards patents to the patentability analyses carried out by OTC and enable first inventor(s) to file, making early disclosure of a preliminary determination of commercial viability of inventions particularly important. Therefore, if time is the technology. This process occurs within a six-month short before an upcoming public disclosure, or when an period, which starts when the Technology Disclosure innovation is to be made public, OTC can file a “stop- Form submission is fully completed and signed by gap” provisional patent application before the full the inventor(s) and verified by OTC. If OTC and the technology assessment is complete to help protect the Purdue inventor(s) arrive at a consensus to proceed invention and enable licensing managers to effectively with investment of additional resources, then the market the technology. It should be noted that a “stop- appropriate steps are taken for intellectual property gap” provisional patent application should be filed only protection, which for patentable inventions involves the as a last resort. preparation of the patent application(s). OTC uses a provisional patent application’s 12-month Market Analysis term to work with Purdue innovators to develop a A variety of resources are employed to assess and marketing and licensing strategy. If the commercial project market size of the product or service derived potential of the technology appears to be strong, prior from an invention. Industry representatives are to expiration of the 12-month provisional term, OTC consulted to assess the target industry’s interest files either a U.S. non-provisional patent application and usefulness and feasibility of that market space. and/or an international patent application under the Other factors, e.g., regulatory hurdles, development Patent Cooperation Treaty (often referred to as a investment levels and investment trends in a target ‘PCT application’). In the case of an international industry(ies), are also considered. application, 30 months after the initial filing (31 8months in certain jurisdictions), additional "national stage" applications are filed in select countries and regions at additional expense. Some time after the filing of a non-provisional patent application, examination of the filed patent application begins at the respective patent office, which can take one or more years. If the examination of the patent application is favorable, then the allowed claimed invention (referred to as ‘claims’) issues into a Letters patent. Each country requires an independent examination of a patent application in accordance with its own national patent laws. An invention described in a pending patent application is referred to as ‘patent pending,’ and an invention described in an issued Letters patent is referred to as ‘patented.’ The term of a U.S. Letters patent is 20 years from the filing date of the earliest non-provisional application. A U.S. Letters patent requires payment of maintenance fees “Our goal with Deliberate at 3 ½, 7 ½, and 11 ½ years post-issuance to maintain Innovation for Faculty is to enforceability of the patent rights. Non-U.S. countries incorporate long-term goals require payment of annual fees (called ‘annuities’) to maintain pendency of pending patent applications and for how a technology can enforceability of issued Letters patents. help society at the research Deliberate Innovation for Faculty level so we can establish Deliberate Innovation for Faculty, or DIFF, provides positive differentiators from mentoring from successful Purdue faculty/entrepreneurs project inception. Doing to Purdue innovators who have an interest in translating their inventions to the public through this could help expedite commercialization, collaboration or entrepreneurship. the innovation’s move to To learn more about DIFF, click here. the public when it reaches fruition.” ALYSSA PANITCH, Ph.D. Founder & Board Member, Symic Biomedical Inc. Leslie A. Geddes Professor of Biomedical Engineering, Purdue University 9Chapter 2: Licensing to Existing Companies Put simply, a license is a permission given by one party (the ‘licensor’) to another party (the ‘licensee’). In the case of intellectual property (IP), that permission often takes the form of allowing the licensee to use the IP owned by the licensor in an agreed upon manner, but does not involve the licensor selling the IP or otherwise transferring ownership permanently to the licensee. In all cases, Purdue Research Foundation (PRF) aims to ensure that Purdue technologies are licensed to companies able to develop those technologies into products and services. All potential licensees must demonstrate that they have sufficient resources, management talent and plans to see the technology launched as a product. Because of their differing structures, assets and inherent risks, different approaches must be taken when licensing to established companies versus new business startups in order to achieve that same goal; this section deals with the former, the latter is discussed later in this chapter. With either type of licensee, a PRF technology license follows a consistent format. The license begins with a Preamble, which sets forth facts in the agreement, such as the identity of the parties involved and details of the technology being licensed. A definitions section follows, outlining the precise meaning of the terms used throughout. The remainder of the license includes business and legal terms that constitute the details and specifics of the agreement between the parties. The majority of terms in PRF licenses are negotiable. However, certain terms are so important as to be non-negotiable, such as the right of Purdue to use licensed 10technology for education or non-profit purposes and not patentable or copyrighted can still be indemnification of PRF and Purdue by the licensee. licensed. For example, published cell lines Yielding on these terms would negatively impact or antibodies can be licensed as a tangible the principal activities of Purdue and PRF, namely property, where the licensee is granted the education and scholarly research. Negotiable terms right to use and sell those materials that were in PRF licenses generally include such things as created at Purdue. the ability to sublicense the technology, the field • License Agreement: This agreement can of use and territory in which the license is granted, be tailored to suit many circumstances and and financial terms such as considerations due in generally represents a long-term partnership exchange for the license. PRF’s goal is to tailor the between PRF and a licensee. Licenses can overall balance of these negotiable terms to fit the grant exclusive or non-exclusive rights, specifics of each individual licensee and opportunity. such as the right to make, use and sell the Examples of Licensing Agreements Offered by technology, and they normally impose Purdue Research Foundation obligations on the licensee, such as the requirement to diligently develop the • Option: A simple, short-term agreement, technology into a product or service and to usually for about 6 months, which gives the pay an agreed-upon financial consideration. first right to enter negotiation for a license A license can usually be terminated at the to a given technology. For the duration of discretion of the licensee, but PRF may only the Option, PRF will not actively market terminate that same license under predefined the technology or seek other potential conditions, usually involving a material licensees. In exchange, the party receiving breach of the agreement. Upon termination, the Option often pays a modest fee and rights to the IP revert back to PRF. typically assumes the responsibility for ongoing IP expenses during the period. This • Express License: Under the “Purdue type of agreement is generally used when Innovator Express Start-up License,” Purdue a prospective licensee wants the ability innovator(s) who are the founders of their to conduct due diligence on the market or first new venture formed to develop and technology before entering into a full license. commercialize their innovation may apply for an exclusive express license under a • Commercial Evaluation License: Often, standard form of license with pre-set terms. the diligence a prospective licensee wishes to To learn more about the express license, conduct on a technology cannot be completed click here. without access to samples or data. In this case, commercial evaluation licenses are used The key to success in licensing Purdue technology to grant the right to use a technology, under is to create a partnership between PRF and the limited circumstance and for a limited time, licensee around the mutual interest of seeing Purdue to evaluate that technology. technologies realized as commercial products and services. • Tangible Research Property License: IP takes many forms, and inventions that are 11Setting Up a Company There are several legally recognized business structures in the United States including sole proprietorships, general partnerships, C corporations (C corp), S corporations (S corp) and Limited Liability Companies (LLCs). The process of establishing a company’s existence is called “incorporation” and involves filing papers (“Articles of Incorporation” for C and S corporations and “Articles of Organization” for Limited Liability Companies) to set up a new legal entity. There are many decisions to be made at this point, and a company’s characteristics will depend on the choices made by the founders. Professionals working in the Purdue Foundry can advise and assist entrepreneurs in these early stages. While one person can form a company, it is typical for multiple entities or individuals to gain an ownership interest in the company, through a stock purchase for “Navigating through the example. Many third-party service providers can assist commercialization process is a with this process, including providing online services. daunting process for first-time Articles of Incorporation or Organization are filed at the entrepreneurs. Having access Secretary of State’s office for the state in which a person to resources such as the Purdue has chosen to set up a company, and therefore differ slightly in form and content. Check the appropriate state Foundry and its entrepreneurs- websites for further information. in-residence, the Innovation Decisions to Make at the Start: and Entrepreneurship website, and marketing and public At the outset of a new business venture, there are a relations assistance through the number of key decisions that must be made, including, but not limited to: Purdue Research Foundation is a tremendous asset.” • Company Name: This should be unique, memorable and clear of other existing businesses in similar market spaces; online search tools exist to OLIVER WENDT, Ph.D. find available names. Co-Founder & Chief Scientific Officer, SPEAK MODalities, LLC • State of Incorporation: A business can incorporate Assistant Professor of Speech, Language, and in any state, but often it incorporates in the Hearing Sciences, and Educational Studies, headquarters state. Purdue University • Corporate Structure: Many new startups often begin as LLCs, but most growth companies choose a C corp. 12• List of Founders/Members several like New York and Missouri) are important, • Mailing Address: Company headquarters can as they protect the company from certain state start in a residence, but soon moves to a separate laws that apply by default to LLCs without such space when operations begin. Post office boxes are agreements, and help avoid or resolve conflicts generally not sufficient. between members by memorializing in writing the • Website: This is a modern necessity – secure a company’s daily operations and member roles. domain name via one of the established hosting • Corporate Bylaws (C or S Corps): Typical bylaws services, and expand the website to be your include the company’s Name, Object, Members, marketing nexus. Officers, Meetings, Executive board, Committees, • Accounting/Finance System: It is important to Parliamentary authority and Amendment process comply with relevant federal, local and state tax (NOMOMECPA). requirements. Keep tax records for a minimum of • Employment Agreements: Often overlooked three years. at the start, these are helpful when dealing with • Employer Identification Number (EIN): An EIN disagreements or conflicts between founders and (also known as a Federal Tax Identification number) early employees. These agreements should discuss is obtained from the IRS and is required for opening roles and responsibilities, titles, compensation, any bank accounts or processing payroll. equity and vesting terms, duration of employment, • Dun & Bradstreet D-U-N-S® Number: This grounds for termination, any applicable non- free unique identifier for each business location is compete clauses, confidentiality of company necessary to receive government grants or contracts information, work product ownership and dispute such as Small Business Innovative Research grants resolution. (SBIRs). • Non-Disclosure Agreements: Most licenses require • Sales Tax Permit: From the state of company Purdue or PRF confidential information (such headquarters. as patent applications) to be protected if shared • Business License: From city/county; grants the with investors or potential new management team right to conduct business in that jurisdiction. members. • Business Insurance: To protect the business. Finally, it is important to select service providers in the Licenses from OTC require proof of insurance. early days to assist with legal representation and the • Federal Drug Manufacture Permit: If applicable, accounting and human resources functions. from the Food and Drug Administration (FDA). • Company Logo/Branding Materials: These can Business Entity Guide be developed after the company is established, but Typically, sole proprietorships and general partnerships should be in place prior to web or product launch. are used in single-person businesses or businesses with This includes trademarks on the company name and a small number of partners. These structures are usually logo. not suitable for a university-based startup company, Other Documents: which is more often incorporated as a C corp, S corp or LLC. A corporate structure comparison table is provided • Operating/Partnership Agreements (LLCs): in the Appendix on page 30. These agreements, while technically optional in many states including Indiana (but mandatory in 13Business Plans The Purdue Foundry out — at which time it will have different resources and abilities, greater profitability and increased assets. The Purdue Foundry is an entrepreneurship and plan shows how the business will get from here to there. commercialization hub in Discovery Park’s Burton D. Morgan Center for Entrepreneurship whose Purdue Research Foundation (PRF) requires all professionals assist entrepreneurs with business plans, potential licensees to submit their plans for the product ideation, market analysis, funding, grant technology when desiring to enter license negotiations. writing and legal counsel. A startup becomes a Foundry When the potential licensee is a startup, a business plan Certified Startup once it has completed an assistance is requested, and for a previously existing company, a program called the LaunchBox. After completing this commercialization plan is requested. These plans are program, an entrepreneur can begin licensing their critical to the licensing process because they provide the technology through the Purdue Office of Technology starting points for the business and financial terms in the Commercialization (OTC). license agreements. Business Plan Executive Summary A business plan is a written description of a business’ An executive summary should clearly tell the reader future, explaining what the business will do and how about the business, the problem it is solving, the it will do it. Business plans are inherently strategic and magnitude of the market and how it intends to generate should detail a business’ current resources and abilities. sales. The executive summary also clearly states what This is followed by a clear description of the business the business needs from the reader, and in general, at a point in the future — usually three to five years should be short, typically around two pages. 14Business Description Operations and Management Plan The business description focuses on the current and The operations and management plan describes how future state of the industry, especially the opportunities the business will function on a continuing basis. The for the business. All addressable markets should be plan highlights the logistics of the organization such as described. the various responsibilities of the management team. Each team member’s résumé should be included in the Market Strategies appendix. Market strategies are derived from a meticulous market Financial Plan analysis. A market analysis forces a business to become familiar with all aspects of the market so the target The financial plan is the last section of the business market can be defined, a clear profile of the customer is plan. It demonstrates projected company growth, depicted and the company can be positioned to enter the financial management and resource allocation, which is industry and capture a significant share of the business critical to a successful plan. This section brings together in that commercial space. the information in the prior sections to illustrate how the business will expend capital, generate revenue and Competitive Analysis realize profits over the timeframe of the business plan. The purpose of the competitive analysis is to determine The Business Model the strengths and weaknesses of the competitors within a market. Strategies that provide a company with a In recent years, many leaders in the startup community distinct advantage, barriers that can be developed to have switched their focus from a business plan to a prevent competition from entering the market and any business model. The latter de-emphasizes detailed weaknesses that can be exploited within the product pro forma financials and lengthy market assessments. development cycle should be considered during Instead, it concentrates on the key issues of customer competitive analysis. discovery (Who will buy?), customer validation (Is the product what they want?) and generating revenue. Design and Development Plan Either a business plan or a business model can be The design and development plan provides the reader submitted to OTC to demonstrate the company’s with a description of the product’s design and charts resources and ability to fulfill its commitments under a its development within the context of production, proposed license agreement. marketing and sales. All regulatory steps and strategies to achieve key milestones should be clearly defined. 15Licensing to Startups Purdue Research Foundation Policies and territory to give the startup company the greatest Agreements flexibility in identifying and pursuing the appropriate market opportunity. The business plan of a startup Not all technologies or market opportunities can company should describe how opportunities in all the support a startup company, but when they can, startups identified market segments will be pursued. can be a more rapid, powerful and rewarding way for a technology to impact the public when compared There are several specific agreements that PRF has to trying to license to existing companies. There are made available, under defined conditions, to Purdue many key differences between a new, untested business faculty, staff and student innovators in an effort to give venture and an established business, such as structure, Purdue entrepreneurs the greatest chance of success in culture and financial capability. In recognition of commercialization of Purdue technologies. these differences, the Purdue Research Foundation Examples of Startup Licensing Agreements Offered (PRF) uses a success-based model to license Purdue by PRF University technologies to new startup companies with minimal fees taken from the startup company • SBIR/STTR Option: PRF offers a zero-initial fee during development. Every effort is made to ensure option for startups with direct involvement from that a startup company is given the greatest chance to Purdue innovators that are awarded Small Business thrive, and that PRF and the innovators can share in the Innovation Research (SBIR) or Small Business company’s later success. To that end, PRF has created Technology Transfer (STTR) funding, and use at a variety of policies and agreements designed to get least 30 percent of the granted budget to support startup companies access to the technology they need further R&D at Purdue. to develop without hindering their ability to succeed. • Express License: Purdue innovators who are All startup companies require a well-developed founders of the first new venture formed to develop business plan or business model to demonstrate and commercialize their innovation may be that the founders have thought of the critical issues eligible for an exclusive express license with preset surrounding the market opportunity of interest. PRF terms. This license has no upfront fees, defers understands that this plan is a living document that reimbursement of patent costs and provides a quick will change based on the contemporary fact pattern. and easy option for licensing innovations that are PRF and Purdue have dedicated a number of resources not encumbered by third-party obligations. that are made freely available to Purdue faculty, staff Startups are important to PRF, both as a key indicator and students to educate and assist them in the process of PRF’s success in developing the entrepreneurial of developing a business plan or model. For more ecosystem at Purdue and in their economic impact information, contact OTC and the Purdue Foundry. on the region and State of Indiana. It is PRF’s clear As with licensing to existing companies, there are intention to make the process of starting a new some terms in PRF licenses to startup companies that venture based on a Purdue technology as simple are still non-negotiable, but agreements can be crafted and transparent as possible, while providing the to fit the particular needs of the startup company and support necessary through OTC and the Foundry for circumstances of the license. Startup company licenses entrepreneurs to develop their ideas into prosperous are generally exclusive, meaning the technology cannot companies. be licensed to another party and often have broad scope in terms of the technical field of use and geographic 16Outside Activity Policies service to an entity other than Purdue, including to a startup. Reportable outside activities and conflicts For Purdue faculty and staff considering forming a of commitment are managed by Purdue’s Office of startup, it is important to remember Purdue’s Policy the Vice President for Ethics and Compliance, as set III.B.1: Conflicts of Commitment and Reportable forth in Purdue policy III.B.1. This policy describes Outside Activities. The primary intent of this policy outside activities in more detail and gives instructions is to avoid conflicts of commitment arising between on how to ensure that startup-related activity is the outside activity and the faculty or staff member’s managed appropriately to avoid any possible conflicts responsibilities as a Purdue employee and to protect the of commitment. Since a Purdue faculty or staff academic experience of any students involved. member’s primary commitment is to Purdue, one key “Reportable outside activities” generally are area in which conflicts of commitment can arise is in considered to be anything that could give rise to a license negotiations between PRF and a faculty or staff conflict of commitment, such as any work, advice or member acting as a representative of a company. 17Conflicts of Interest Purdue University and Purdue Research Foundation activities such as the collection, analysis and support and encourage faculty/researchers and students interpretation of data, the hiring of staff, procurement who want to be entrepreneurs. Entrepreneurial of materials, sharing of results, choice of research activities may result in real or apparent financial protocol, involvement of human subjects, use of conflicts of interest when individuals with outside statistical methods, and the use of university facilities, financial interests are in a position to influence the personnel, equipment, IT Resources, confidential and university’s business, research (including the design, proprietary information and other resources. conduct and reporting of research), or procurement Disclosure and transparency are crucial to successful decisions in ways that could directly or indirectly lead management of conflicts of interest. For example, if a to financial gain for the employee or the employee’s Purdue faculty or researcher is named as an inventor/ dependents. innovator of a Purdue technology that is the subject of Conflicts of interest for Purdue employees, whether a patent application filed by and at the expense of OTC real or perceived, must be disclosed and managed and the Purdue employee/innovator decides to start in accordance with Purdue’s policy on Individual a company to realize commercial aspirations for the Financial Conflicts of Interest (III.B.2) . For faculty/ Purdue invention, what is the next step? researcher/student entrepreneurs, the bias resulting The researcher should engage the department head or from such conflicts may conceivably affect research 18unit head and discuss implications on teaching, student • Questions about use of Purdue equipment and research, obligations to current research sponsors and facilities for a commercial endeavor such as a impact on future obligations, balance of commitment startup can be directed to Sponsored Program level(s) – whether a leave of absence is appropriate Services, which includes cross-functional teams – use of Purdue equipment and facilities, and other from the Office of Sponsored Research and Office matters relevant to appropriate management of time of Business Services to assist with proposals, award commitment to outside activities, and real or apparent management, contract negotiation, data access financial conflicts of interest related to research and support services, research administration, and university procurement of goods and services. regulatory compliance, and agricultural and Resources are available to help inform this discussion: international programs. • Questions about reportable outside activities can As a general rule, Purdue resources, including be directed to the Vice President for Ethics and equipment and facilities, used for purposes other than Compliance ( The reportable teaching or academic research must be paid for by the outside activities form must be completed annually user. In this instance, the Purdue inventor/employee by the Purdue employee and approved by the using such resources for the startup’s purposes must employee’s unit head and the Outside Activities compensate Purdue at fair market rates. Use of Purdue- Officer. The Reportable Outside Activities form can licensed software must be approved in advance of any be accessed online. use by the startup. A guide to policies and procedures is available online. • Questions about a leave of absence should be discussed with your department/unit head. The These resources are available to Purdue graduate request for leave of absence form can be found students and post-doctoral trainees having an interest online. in founding a startup. Students and post-doctoral researchers should discuss with their research advisor • Questions about the implications on research many of the same matters to ensure that compliance awards, current and pending, should be discussed with Purdue policies, contract obligations, mission with the Office of the Executive Vice President objectives and the research objectives are maintained for Research and Partnerships (please e-mail your and actively managed. question to or call 765-494- 6840). Research-related disclosures of significant financial interests in a sponsored research project should be made online. A table summarizing research related financial conflict of interest documents (forms, disclosures, management plans) and software/online applications can be found online. The table lists documents and explains who needs to file the forms, when to file the forms, what specifically is approved or disclosed, and where to find each form (with hyperlinks to forms). 19Chapter 3: Support for Purdue Startups Funding Sources for Purdue Innovations companies that are based on Purdue technology or expertise in the areas of human and animal health PRF provides support through four initiatives for and plant sciences. startups, speeding the process from innovation to commercialization. • Elevate Purdue Foundry Fund - A 2 million • Trask Innovation Fund - The Purdue Research fund created through a collaboration among Foundation-managed Trask Innovation Fund Purdue Foundry, Elevate Ventures and the Indiana (TIF) is a Purdue development mechanism to Economic Development Corporation. Qualified assist faculty with work to further commercial Purdue-affiliated startups may apply for two tiers of potential of technologies disclosed to the Office funding: the “Black Award,” a 20,000 convertible of Technology Commercialization (OTC). Funds nonrecourse note, and the “Gold Award,” for up to are awarded under the advisement of the TIF an additional 80,000 debt or equity. Advisory Council and financial support is designed For further assistance in identifying funding sources, to provide an individual technology portfolio up to contact the Purdue Foundry. 50,000 for a period of six months. • Foundry Investment Fund - Established through a partnership between Purdue Research Foundation and Cook Medical, the 12 million not-for-profit fund seeks to join with other investors to fund 20Purdue Foundry Purdue Foundry Engagement seeks to identify experienced Purdue alumni who are willing to provide advice to new The Purdue Foundry (Foundry) exists to help companies and entrepreneurs based on their specific inventors, entrepreneurs and researchers turn their technical, business and entrepreneurial experiences. ideas into startups. The Foundry mobilizes Purdue’s With both the Entrepreneurs-in-Residence and the entrepreneurial resources that are aimed at launching Director of Alumni Engagement, the Foundry is new ventures. Located in the Burton D. Morgan leveraging vast networks in order to provide insight Center for Entrepreneurship, the Foundry builds on and direction to new ventures. the strong entrepreneurial activities already taking place in the center and has created an entrepreneurship If Purdue innovators have a new idea, the Foundry and commercialization hub ‘where learning becomes team can help them think through the pathways to doing.’ create a new company. Assistance for Entrepreneurs Purdue Foundry professionals offer an The process at the Foundry begins with ideation entrepreneurial assistance program activities aimed at refining and determining value called LaunchBox. The program provides propositions for the idea and potential pathways to the entrepreneurs with resources and services marketplace. aimed at accelerating the progress of a The Foundry team includes Entrepreneurs-in- startup and helping to improve chances Residence and a Director of Alumni Engagement. The for success including key elements of Entrepreneurs-in-Residence draw on their own articulating a value proposition, creating entrepreneurial experiences in order to advise and a business model and developing an assist companies as they seek to create and implement investor slide deck. their unique business model. The Director of Alumni 21Entrepreneurial Considerations The life of an entrepreneur can be challenging and be real, and the ability to gain market share must be rewarding, but it is often fraught with paradox. There based on solid, early customer feedback rather than a are many considerations that ultimately lead to the simple percentage of the market. Entrepreneurs with success of an entrepreneur and startup. A few key deep market understanding are best positioned to success factors are highlighted below. articulate their value proposition. Demonstrating the value proposition through a working prototype is a Commitment is an absolute requirement. An critical step to introducing an idea into the marketplace. entrepreneur who truly believes in an idea and wants Startups should be prepared to partner as market others to do the same must be “all in.” Seeing an idea strategy often extends beyond the existing company to fruition requires an honest assessment, which will or team, requiring partnerships with companies with drive and shape the company and team. That level existing market share or imbedded sales forces. of commitment and passion will build relationships, secure partnerships and drive an equal commitment Execution of an idea requires a dedication to success. from the team. That dedication ultimately will require a full-time CEO with experience. Entrepreneurs are often faced with Building the Team may be more important than the the realization that their skills are better utilized in idea itself. Successful companies are built on great non-CEO roles in the company. An entrepreneur will teams with diverse skills and experience that can mold, likely have more good ideas than resources and will be shape and adapt ideas to make a company successful. forced to focus and choose. It is unlikely that there is When building a team, entrepreneurs should be aware only one right way to proceed, making it important to of the weaknesses within themselves and their team, find opportunities and move forward. Listening to the and carefully consider how to balance them with team and customer is of critical importance. Customer people who want to make a difference and solve interaction should not be delegated, as early feedback problems. Establishing trust will help navigate the will help the team improve execution. Milestones inevitable challenges ahead. The sequence of adding are a critical part of execution, but also may require team members should be informed by the sequence of flexibility as knowledge and experience increase. established goals and milestones. Be prepared for course corrections and some initial failures that will inform how the company navigates Go-to-Market Plans require a deep understanding through obstacles in the future. of the market and market segments. The market must 22