Transcript The Entrepreneurial University and its City M.I.T. and

Outline of a Conversation
Commercializing Intellectual Property
from Universities
22 January 2003
Kenneth P. Morse, Senior Lecturer
and Managing Director
MIT Entrepreneurship Center
55 Hayward Street, Room E39-115
phone: +1-617-253-8653
e-mail: [email protected]
Cambridge, MA 02142 USA
fax: +1-617-253-8633
http://entrepreneurship.mit.edu
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2003 Massachusetts Institute of Technology
Desired Outcomes of this Meeting
1. Exchange Views and Experience, with the goal of
supporting your work
2. Compare/Contrast Policies, Programs, and Practices
 MIT TLO
 New Venture Creation
 Public vs. Private Approach
3. Some Best Practices in U.S. Universities, and at MIT
4. The Quality of our Students
 Steadily improving
 More and more interest in starting new ventures
 Why?
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2003 Massachusetts Institute of Technology
Caveats and Credits
1. I apologize; I have almost no knowledge of
 Norwegian IP Practices
 NTNU’s experience and interests
2. I doubt that the elements of the MIT or Stanford venture
creation system can or should be transplanted or adapted
to your University-Business situation
3. This presentation relies heavily on material prepared by
my friend and colleague Steven Brown,
Senior Technology Officer, MIT TLO, and Carl Accardo,
Senior Advisor, Office of Corporate Relations. Their
assistance is gratefully acknowledged.
4. I will use only a fractions of these slides
5. I believe that highly interactive discussions are best.
Please participate actively, STET
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2003 Massachusetts Institute of Technology
MIT’s Venture Creation Culture
1. Heritage:

“... the interest of Commerce and the Arts, as well as of General Education, call
for the most earnest cooperation of intelligent culture with industrial pursuits.”
(MIT’s founder William Barton Rogers)
2. We must all Compete:
 Recruit Best Faculty
 Recruit Best Students
 Win Funding for Research Projects
Philosophy: “Eat what you shoot.”
(if you can’t “sell,” you starve... and move along...)
3. Cultural Imperative (anti-ivory tower):
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Genius inventions are not enough. The job is not done until a
new technology is...
... reduced to practice
... effectively commercialized
... and evangelized, until
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... it becomes a global standard.
2003 Massachusetts Institute of Technology
Excerpt from MIT Charter
“ ... by the name of Massachusetts Institute of
Technology, for the purpose of instituting and
maintaining a society of arts, a museum of arts,
and a school of industrial science, and aiding
generally, by suitable means, the advancement,
development and practical application of science
in connection with arts, agriculture,
manufactures, and commerce...”
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2003 Massachusetts Institute of Technology
Mission Statement of the MIT
Entrepreneurship Center:
To train and develop leaders who will make
high tech ventures successful
“I want you to be the premier
global center for entrepreneurship,
and to be recognized as such.”
“We must not only be the best. We
must also serve as a model for
others and ensure that, together,
we all make a significant global
impact in this vital field.”
MIT President Charles M. Vest, July
1996
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2003 Massachusetts Institute of Technology
The Problem We are Working to Solve:
 There is a shortage of excellent entrepreneurs who can
make start up ventures very successful.
 MIT Engineers and Scientists are generally aware that
teamwork is essential:
 80-95% of “purely technical” spin-offs fail, while,
 80-95% of MIT teams which combine marketing, business,
and technical skills succeed.
 Talented Managers need both training and real world
experience so they know markets, know people and are
known/respected:
 undergraduate science/engineering combined with
practical experience in successful companies, and…
 management training, including entrepreneurship, followed
by, repeated sales and marketing successes in substantial
companies.
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2003 Massachusetts Institute of Technology
The MIT EDP
MIT Entrepreneurship Development Program
27 - 31 January 2003
A one-week program tailored to the needs of future
entrepreneurs, university entrepreneurship faculty
and staff, and economic development professionals
Participants learn from:
 “Live case studies” of successful MIT entrepreneurs;
 Our faculty and the MIT entrepreneurial spirit; and
 Route 128 venture capitalists, lawyers, and institutional
investors.
In 1999, 25 participants came from Taiwan, Ireland,
Cambridge (UK), Germany, Thailand, France, & US.
In 2000, 65+ persons came from 10+ countries.
In 2001, 95+ persons came from 16+ countries
In 2002, 70 persons from 13 countries
In 2003, 101+ persons……
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2003 Massachusetts Institute of Technology
Student Organizations: MIT$50K
MIT $50K
Entrepreneurship Competition
Finals on Wed, 14 May 2003.
 Designed to encourage students and researchers
in the MIT community to act on their talent, ideas,
and energy to produce tomorrow's leading firms.
 Business Plans are judged by a panel of
experienced entrepreneurs, venture capitalists, and
legal professionals.
“Not all business-plan competitions on university campuses are equal…
[the MIT $50K] is more equal than all the others.”
- Inc. Magazine, March 1998
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2003 Massachusetts Institute of Technology
Student Organizations: MIT$50K
Tomorrow’s Leading Firms
 In its thirteen-year history, the MIT $50K has created:
 59 firms and over 1800 jobs
 $275 Million in Venture Capital invested
 Aggregate market capitalization has ranged from $5.5 – $40 Billion
 Teambuilding + Mentors + Education + Networking +
Capital
 Entrants include MIT graduate and undergraduate
students as well as faculty.
 Students from every MIT School and 27 Departments
participate (Teams including Sloan students are
consistently the strongest entries….)
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2003 Massachusetts Institute of Technology
Student Organizations: MIT$50K
Every MIT School participates in the MIT
$50K Competition
Science
Humanities
Architecture
Outside
Engineering
Management
Spring ‘01 MIT $50K: 135 Entrants
Spring ’02 MIT $50K: 110 Entrants
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2003 Massachusetts Institute of Technology
Feb ’02 $1K: 125 Entrants
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Student Organizations: MIT$50K
A Few Success Stories…
•Rapid Internet Content
Delivery
•Software to improve
Internet Searching
•Internet business
•Next generation
customer support
software
•NASDAQ: AKAM
•1998 Co-Winner
solutions delivery
•1996 Winner
•Market Cap of $3.6B
•$29M Funding
•NASDAQ: CBIS
•Acquired by Cisco for
$325M in 1999
•Sold to AskJeeves for
$507 million in 2000
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•Devices to transcribe
writing to computer
•New Signal Processing
Semiconductors
•1997 Runner-Up
•1995 Participant
•$13M Funding
•Over $10M Funding
•Product Launched
•Acquired by Broadcom
for $1.19B in 2000
2003 Massachusetts Institute of Technology
•Distributed Computing
•2000 MIT $50K Runner up
•Funded by Kleiner Perkings
and Common Angels
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Student Organizations: MIT VCPI Club
01 December 2001
http://www.mitvcpi.com
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Over 200 participants came from throughout the MIT
entrepreneurship community, including:
Keynote Speakers:
 Robert Metcalfe, Venture Partner, Polaris Ventures
 Mr. Richard Testa, Co-Founder and Chairman, Testa, Hurwitz
& Thibeault
 Thomas J. Colatosti, President and CEO, Viisage
MIT Students and Entrepreneurs-to-Be
Boston-Area University Students
59 Venture Capitalists
MIT Alumni and Successful Entrepreneurs
Entrepreneurial Professional Services Organizations
2003 Massachusetts Institute of Technology
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Student Organizations: MIT VCPI Club
07 December 2002
http://www.mitvcpi.com
 MIT Keynote Speakers (already confirmed):
 Geoffrey Moore, Mohr Davidow Ventures; Author of “Crossing
the Chasm” and “Inside the Tornado”
 Clayton Christensen, Harvard Business School; Author of
“Innovator’s Dilemma” and other articles on disruptive
technology
 Over 20 partner-level VCs already committed
 Panels and tracks include: Trends in European VC, Seed
Investing, Biotechnology, Nanotechnology, Security, Corporate
VC, Private Equity, GP/LP Issues, New Venture Models, etc.
 MIT Students, Alumni, and Entrepreneurs
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2003 Massachusetts Institute of Technology
Student Organizations:
Sloan Entrepreneurs
Mission:
 To foster entrepreneurship at Sloan and help
students identify the best entrepreneurial learning
activities and opportunities
 To promote entrepreneurial networking events
within Sloan, the greater MIT community, other
local MBA programs and established Boston
organizations
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2003 Massachusetts Institute of Technology
MIT Entrepreneurship Society (1)
Mission:
 To establish an entrepreneurial support network
among MIT students and recent alumni/alumnae
 To promote productive interaction with MIT faculty,
staff, students, other alumni/alumnae, and MITrelated new ventures
 To establish a stream of funds and other
intellectual and material contributions to ensure
MIT’s continued excellence in education and
research
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2003 Massachusetts Institute of Technology
MIT Entrepreneurship Society (2)
Examples of the MIT E-Society Network at Work
Direct Hit Technologies, Inc.
http://www.DirectHit.com
 Fall 1997: Gary Culliss, at Harvard Law School, teams up
with Steven Yang, ‘98 EE to enter the MIT $50K
Entrepreneurship Competition.
 Mike Cassidy, AA ‘86, and the winner of the MIT $50K with
Stylus Innovations in 1991, joins the student team as a
mentor, then as CEO.
 May 1998: Direct Hit wins the MIT $50K.
 Mike, Gary, and Steven close $1.1 million in venture capital
financing the day after winning the $50K.
 By May 1999 AOL, Lycos, HotBot, Microsoft, ICQ, and
ZDNet are Direct Hit’s customers.
 January 2000: Direct Hit was acquired by AskJeeves for
$507 million
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2003 Massachusetts Institute of Technology
MIT Entrepreneurship Society (3)
Examples of the MIT E-Society Network at Work
NBX Corporation
http://www.nbxcorp.com
 Alex Laats, PH ‘88, working at the MIT Technology
Licensing Office meets two MIT undergraduates, Pehr
Anderson, ‘98 EE, and Chris Gadda, ‘98 EE, at a MIT $50K
seminar on intellectual property.
 July 1996: They found NBX Corp as PowerVoice.
 MIT invests in the company, and brings along Morgenthaler
Ventures. (David Morgenthaler, ME ‘40)
 March 1999: 3Com acquires NBX for $90 million.
 Bob Metcalfe, ‘68 EE/’69 MG, founded 3Com with a group of
fellow MIT alumni. (After many years as a pundit at
International Data Group, founded by Patrick McGovern,
Jr. ’59, Bob is now a Partner at Polaris Ventures.)
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2003 Massachusetts Institute of Technology
University-Business Collaboration
Myths and Realities 1/2
 Royalties are a significant source of revenue for the University.

Industrial sponsors are convinced that technology licensing revenue
provides major funding to university and make our inventors wealthy.
 Companies expect a quick return on technology transfer
investment.

Just license the technology and wait for the royalty checks to start
pouring in.
 Companies are eager to accept new technology from
universities.

Universities are full of great product inventions that simply need to be
manufactured and brought to market.
 Universities should broadcast availability of technology for
licensing.

Why don’t you put all your inventions on your web page?
 The technology transfer office easily finds the licensee.

Just pick up the telephone and call the obvious companies.
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2003 Massachusetts Institute of Technology
University-Business Collaboration
Myths and Realities 2/2
 With the exception of the very occasional “blockbuster,”
university licensing revenues are small.




UCSF-Stanford: Cohen/Boyer (gene splice), Yamaha (music synthesis)
Florida State: Taxol (cancer drug): Wisconsin: vitamin D, Warfarin (anti-coagulant)
Columbia: Axel (gene expression); Michigan State: Cis-platin (cancer)
University of Florida: Gatorade (sports beverage)
 Don’t expect product royalties for 8-10 years.

Technologies are embryonic; they take time to develop and gain market acceptance.
 Most companies (and especially VCs) want quick time-tomarket.
 Publishing lists of available technology is not effective; a
targeted approach is much more successful.




Attracts many “unqualified” inquiries
Appropriate licensee needs to be found and convinced
Companies come looking for specific technologies and are receptive
Requires the involvement of the inventor
 At MIT, the inventor is the best source for leads.

Well over 50% of the time, the inventor identifies the licensee.
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2003 Massachusetts Institute of Technology
Critical Success Factors –
Commercializing University IP 1/4
 Quality of technology



Strong patent(s)
Supports several new products
Large market potential
 Quality of management

Focused strategy

Thorough market understanding

Realistic product development plan
 Quality investors

Track record building successful businesses

Network of connections with partners/customers

Personal involvement with business

Access to money over long term
 Passion



Technologists
Management
Investors
Net: People are the most important part of the process.
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2003 Massachusetts Institute of Technology
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Critical Success Factors –
Commercializing University IP 2/4
 Targeted marketing of technology

Focus on very few companies.

Build and maintain relationship with inventors, potential licensees, entrepreneurs, and
venture capitalists.
Source for leads

Inventor
56%

Licensing Officer
20%

Company inquiry
15%

Research sponsor
6%

 Having found a potential licensee, tailor the terms to fit

Shared risk

Low initial fees

Equity in partial-lieu of royalty

Reasonable royalty rates

Diligence provisions

Minimum investment, $$ and personnel

Product development milestones

Sales milestones

Sublicensing requirements
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2003 Massachusetts Institute of Technology
Critical Success Factors –
Commercializing University IP 3/4
 Environment
 Legal


Low cost to early stage companies
Mentoring
 Financial



Seed capital
Angels
Inexpensive insurance
 Contract services



Design
Prototyping
Manufacturing
 Supportive culture




MIT Entrepreneurship Center
MIT Enterprise Forum
Network of Business Angel/Venture Capitalists
Network of Entrepreneurs
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2003 Massachusetts Institute of Technology
Critical Success Factors –
Commercializing University IP 4/4
 Strong University support for technology transfer office

Permits hiring staff with significant industrial experience

Financial support for office infrastructure

Ability to invest in patents that will take years to provide return.
 Holistic Approach to support by University

Real Estate Office

Industrial Liaison Program

Freedom for Professors to engage in entrepreneurial ventures

Strong Faculty and Practitioners in Entrepreneurship Center
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2003 Massachusetts Institute of Technology
M.I.T. Royalty Policy:
Incentives for all Participants
 Royalty distribution
1.
First, deduct 15% to cover operating expenses of TLO
2.
Then, deduct out-of-pocket expenses, usually patent costs
3.
Distribute one-third of what’s left to inventors (equally, unless
agreed otherwise)
4.
Adjust remainder with respect to TLO actual operating
expenses
5.
Subtract out-of-pocket expenses for unmarketable patents
(write off bad inventory)
6.
Divide remainder equally:
½ to MIT Department (Mechanical Engineering, EE, etc
½ to M.I.T. General Fund
1
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2003 Massachusetts Institute of Technology
Matching University IP to Corporations
 People and Dialogue are Key
 Published lists of IP are not very useful
 Inventors provide ~50% of the leads
 Our graduates are very helpful
 What they initially ask for is seldom what they need
 What we initially offer is seldom what they will use
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2003 Massachusetts Institute of Technology
Bringing University IP to Market
“It never works well with big companies.
They focus their energy on showing why the
new technology won’t work. I always prefer
to start a new company; focus, energy and
commitment.”
Professor Robert Langer, Langer Lab
Kenneth J. Germeshausen Professor of Chemical and Biomedical Engineering
Keynote Speaker, MIT Venture Capital Conference (07 December 2002)
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2003 Massachusetts Institute of Technology
Emphasize Proactive
Personal Contact:
 For the inventors, investigators and TLO team
 With serial entrepreneurs, and their networks
 Small/medium sized companies
 Multinationals
 Service providers (Accounting, Legal, ...)
 Venture Capitalists, Business Angels
 Identify the champion
 Collect and share contacts liberally (network node)
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2003 Massachusetts Institute of Technology
M.I.T. TLO:
Negotiating Startup Licenses
 Public disclosure, NDA, Option, License
 Cash/equity and terms f(busplan)
 No two licenses the same (deal making skills)
 Simpler structure preferred (company building skills)
 Make introductions to people, $, services
 Competition: no preferred providers (VC’s, legal, etc.)
 Follow due diligence provisions closely
 Renegotiate when needed to improve success
 MIT does not want a board seat
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2003 Massachusetts Institute of Technology
MIT TLO: Typical Startup Equity Terms
Single digit % of equity
% maintained thru $5 to $10M raised
Proportional antidilution thereafter
Future participation rights
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2003 Massachusetts Institute of Technology
MIT TLO: Typical Startup Equity Terms
Components
 Issue fees
 Maintenance fees
 Diligence
 Royalty as % of Sales
 Patent costs
 Research sponsorship
 Discovered products
Typical costs
 $5K to $50K
 ~50% of expected RR
 Can’t leave on shelf
 1% to 8%
 $25K to $200K
 Not required
 Variable
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2003 Massachusetts Institute of Technology
MIT TLO: License Negotiation Issues
Scope of the Field of Use
Exclusive, Co-exclusive or Non-Exclusive
Licensed Product Definition
Diligence Terms
Mandatory Sublicensing (if all fields of use)
Warrantees, Insurance
Royalties, Maintenance, Issue Fee, Equity,
Anti-Dilution
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2003 Massachusetts Institute of Technology
Conflict of Interest
Issues with Startups
MIT Policy:
Inventor can’t receive research funding from
Company if inventor has equity
Inventor must first meet educational responsibility
to students
Inventor may not consult to Company more than
1 day in 7
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2003 Massachusetts Institute of Technology
Ownership Issues with Startups
M.I.T. owns the patent or copyright, except
(in rare cases) when:
Not invented under Government or
Business sponsorship, and
No significant use of M.I.T. funds or
facilities
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2003 Massachusetts Institute of Technology
Publication Issues with Startups
Mission of the University is to produce
knowledge and provide it to the public.
The right and freedom to publish is more
important in an academic setting than
financial goals.
Faculty can’t delay publication of results
that startup would like to keep confidential
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2003 Massachusetts Institute of Technology
MIT Startup History
 20 to 30 startups/yr with MIT technology
 ~2/3’s still in business over last 10yrs
 ~1/3 have had a liquidity event
 Many acquired by larger organizations
(does not include firms started by MIT alumni without MIT licenses)
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2003 Massachusetts Institute of Technology
M.I.T. Start-Ups by Category
40
20
Robotics
Semiconductors
Mechanical
0
Materials
10
Biotech/Pharma
Number of
Start-ups
30
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2003 Massachusetts Institute of Technology
M.I.T. Start-Ups by Location
100
One each in:
Colorado
Florida
Idaho
Maryland
New Hampshire
North Carolina
Virginia
CANADA
75
50
Texas
New York
Connecticut
Pennsylvania
New Jersey
California
0
Massachusetts
25
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2003 Massachusetts Institute of Technology
Some Examples of Purchases
 3Com bought Voice Power “voice over IP”
 Phillips bought Active Impulse “laser ultrasonics”
 Adobe bought NFX “face morphing”
 Data Security bought RSA “encryption software”
 Goodman bought LightLabs “optical coherence
tomography”
 Alkermes bought AIR “controlled release inhalation
therapy”
 Mentor Graphics bought Virtual Machine Works
“semiconductor design software”
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2003 Massachusetts Institute of Technology
Corporate Participation Options
Direct licensing of identified patent from
university – traditional
Sublicense total package from startup
Fund projects with startups and obtain rights
Direct equity investment in startup
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2003 Massachusetts Institute of Technology
Corporate Participation Options
Joint venture with startup
Major (>M$) seed funding but peer reviewed
Incubate startup in local laboratory
Precompetitive industry consortiums
MIT Media Lab
 BioProcess Engineering Center (BPEC)
 Others
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2003 Massachusetts Institute of Technology
MIT’s Patent and Licensing Goals
 Creation and dissemination of knowledge [primary]
 Tech Transfer and Company Startups [secondary]
 If these conflict, academic goals take precedence
 See that ideas are practiced broadly
 Maximize benefits to general society
 Enhance the educational process
 Create companies and jobs
 Provide funds to patent future ideas
 Provide modest income to MIT
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2003 Massachusetts Institute of Technology
The Invention Funnel:
Disclosures to Licenses
~ 500 Inventions Disclosed to MIT
~ 300 Patents Filed
~ 180 Patents Issue
~ 120 Licenses/Options
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2003 Massachusetts Institute of Technology
Typical MIT TLO
Revenue/Expenses
~ $30 M Gross Revenue/year
~ $20 M Distributed (inventors, depts, and MIT)
~ $7 M Legal Fees
~ $3 M Operating expenses
$1 to 50 M$ Received from Equity Cash-outs
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2003 Massachusetts Institute of Technology
Institutional Structure for
Licensing Office
 Director of Licensing reports to VP-Research,
then Provost, and then Institute President
 Staff
Licensing Officers(TLO’s)
Associate Licensing Officers
Staff Attorney
Support
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8
6
1
15
• MIS, Govt Compliance, Accounting, Records, Admin, Assist
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2003 Massachusetts Institute of Technology
TLO Decision Making Process
 One person manages from disclosure to expiration
 No committee to review licenses
 Director signs each license
 Some variance TLO to TLO in deal terms
 TLO’s are on straight salary, no incentives
 Pursue any technology that can make it
 Maximize # of technologies licensed, not return
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2003 Massachusetts Institute of Technology
Licensing Tactics
 Emphasize enthusiastic and cooperative inventors
 Screen technology offered
 Provide clear, transparent, predictable policies
 Implement rapid, and straightforward procedures
 Offer flexible terms
 Be willing to adapt to changing circumstances
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2003 Massachusetts Institute of Technology
Leverage Regional Resources
 Financial – seed, angel, venture capital
 Contract services – design, prototype, manufacture
 Supportive culture – entrepreneur network, alumni
network, venture capital network, start-up clinics,
Entrepreneurship Lab student teams, others
 Legal and Accounting services – low cost, mentoring
 MIT Industrial Liaison Program (ILP)
 MIT Real Estate
 MIT Treasurer
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2003 Massachusetts Institute of Technology
University Factors
Strong support for Technology Licensing Office
• Financial support for office infrastructure
• Hire experienced, technically trained, business-
oriented staff with industrial experience
• Provide for early investment in patents
• Willingness to stand behind aggressive enforcement
of patent rights
• Entrepreneurial Real Estate team, Treasurer
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2003 Massachusetts Institute of Technology
Institutional Factors Supporting
Startups
 Easy to form/dissolve collaborations intra/inter
 Permeable intra/inter organizational boundaries
 Limited hierarchy, multiple paths
 Broad participation in entrepreneurship competition
(http://50k.mit.edu/)
 Entrepreneurship is holographic and respected
 Cost of failure is low
 Entrepreneurship Center has helped build strong
links to startups, VCs and Angels
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2003 Massachusetts Institute of Technology
The Entrepreneur: A Special Species?
 What does the successful high tech entrepreneur look like?
1. Integrity
2. Leadership
3. Impatient; bias toward action (with analysis).
4. Quick clock speed
5. Modest ego. Seeks and accepts coaching. Recognizes,
and hires to overcome weaknesses.
6. Willing to be different, but knows it (not oblivious).
7. Pragmatic; willing to compromise (in order to move forward).
8. Rejoices in others’ victories (no petty jealousy).
9. Driven to solve a valuable problem for customers
(not driven by money or technology).
10.Able to attract world class talent.
Net:
pH of Stomach = 1-2 σ > average
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2003 Massachusetts Institute of Technology
* With special thanks to
Duncan McCallum @
Flagship Ventures
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Our Message to Entrepreneurs:
Building Your Company
 Need an “A” Team – “3K” experience
 Serious Technology – sustainable advantage
 Solve an important, valuable problem…
 For clients who have money …
 Who want to pay well…
 With a short sales cycle…
 And will buy more, soon …
YOUR VALUE PROPOSITION MUST BE COMPELLING,
QUANTIFIABLE, PROVEABLE, REFERENCEABLE, AND
EASILY EXPLAINABLE…
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2003 Massachusetts Institute of Technology
Business Plan Suggestions (1/2)
 Executive Summary:
 Name your first ten customers
 Be brief
 Business Plan:
 Be optimistic, but realistic
 Know your competition’s numbers
 Be brief
 Advisors:
 Get good people with gray hair (or no hair) involved early
 Understand that investors will call them
 Focus on how and why prospective customers will
buy from you, and pay you money.
 Focus on milestones (more than calendar dates).
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2003 Massachusetts Institute of Technology
Business Plan Suggestions (2/2)
 Plan how to build your company without any outside
investment (bootstrap). Acquire a customer(s).Then,
maybe, you are ready to speak to VCs.
 Most entrepreneurship judges focus on
 Customer needs
 Value proposition
 Sustainability
 Team
 Your investors should bring you both customers and
management talent (Akamai case).
 Realize that business plan competitions are an
educational process. It does not particularly matter if
you win.*
*It does not matter “that you won or lost, but how you played the
game .” (Grantland Rice)
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2003 Massachusetts Institute of Technology
Financing Case Study: Akamai (1/3)
 Akamai – A leading provider of outsourced ebusiness infrastructure services and software.
 Founded by MIT students and faculty, in response
to businesses’ need to speed up access to their
web sites, for content and transactions.
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2003 Massachusetts Institute of Technology
Financing Case Study: Akamai (2/3)*
1.
2.
3.
$50K finalist, not winner (1998)
“Value-add, not valuation” philosophy of funding
Financing brings:

Credibility

Customer/partner introductions

Management expertise

Faster growth

Cash
4. First round: angel investors

First customers

Network deployment
* Special thanks to Jonathan Seelig, Co-founder, and frequent
guest lecturer at MIT Sloan School
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2003 Massachusetts Institute of Technology
Financing Case Study: Akamai (3/3)*
5.
Second round: VCs

Build operations & management

Battery Ventures & Polaris
6. Third round:

Broadband & International

Baker Communications
7. Fourth round:

Industry leadership, standards, & cachet

Apple, Cisco, Microsoft
8. IPO:

Serious company

“Currency” for growth + acquisitions
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Traditional vs.
Entrepreneurial Career Paths
High School
High School
University
University
Big Company
Practical Experience
Management Training
Well Managed, High Growth Firm
Startup Venture
Another Startup?
Retire
Venture Capital or Angel Investor
Never really retire
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2003 Massachusetts Institute of Technology
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Critical Success Factors in
Entrepreneurship
1.
Believe that Startup Ventures can Succeed:



Parent(s) who are entrepreneurs
Early contact with successful entrepreneurs
Exposure to success stories and case studies.
2.
Gain practical, real world experience before, during and after
university studies.
3.
Be willing to be Unusual/Unconventional.
4.
Agree to Embrace Risk, and possibly failure.
5.
Want to leave a large Company.
6.
Live in a society that sees the above as normal, not a strange
exception.
7.
Entrepreneurs ask themselves: “What do we want to do?”
• We want to make a world class product whatever it is.
• We want to have fun doing it.
• We want to get involved in a business area or business segment
that is at its ground floor and in its infancy.
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2003 Massachusetts Institute of Technology
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