MIT Media Lab

Research Commercialization
Options for Venture Sponsorship
Ray Garcia
rgarcia@alterwork.com
 Goal
• How to best leverage the ML assets to help facilitate
having its research artifacts get adopted either
commercially or integrated into beneficial public
services.
• Commercialization is a strong signal to the
sponsoring companies that the research results in
benefits to those who seize the opportunities early.
• Engaging the VC community in Entrepreneurship at
MIT Media Lab
 Desired outcomes
• Enhanced learning experience for the students
• Exploit all the resources at MIT for student performance
• Realization of students/faculty passion to change the world
• Sponsors desire to create breakthrough products and services
• Faculty/Researchers/Students desire to form commercial
enterprises
• ML goal to retain, increase and acquire sponsorship
• ML diversifying its sponsors to include Venture Capitalist
• Increase PR for ML to maintain reputation
• Compliance with MIT Office of Technology transfer process
 Constraints
• Multi-constituency interest needed to be serviced
without compromising on a few essential core values
at the ML.
• The commercialization should add to the learning
and research environment.
• The research commercialization should increase
relevancy and provide insights for further
development
• VC has expectations of measurable results
 Constituencies
• Faculty
• Research Scientist
• Students
• Alumni
• Media Lab
• MIT
• Sponsors – corporate, government, ventures
• ML/MIT spin-off companies
• Public Good
 Challenges
• Gap between research and products needs experience from
people who understand both and know how to convert
• IP Ownership concerns need to be minimized to avoid
unnecessary complications until appropriate
• Need early active sponsor involvement in the research
through the commercialization phase to act as catalyst
• Funding and opportunities for large scale real-world context
for research opportunities to test commercial viability
• Cultural Gaps between academia and commerce
• Differing incentive models for academia and commercial
efforts need to be segmented not mixed
 Candidate Options
• Expand commercialization activities within the
existing Media Lab and MIT context
– Sponsors users group
– Sponsors research showcase to engage ML
– Expand/diversify sponsors with alliance categories
– Encourage ML participation in 100k, Desphande, E-Club
and other MIT entrepreneurial activities
– Tap alumni network of spin-offs
• Engage the Venture Community
– Funding entrepreneurship and commercialization
 Build Leverage
• Much of the ingredients for rich commercialization activity
already existing with the Media Lab and the Sponsors with all
the supporting programs at MIT
• Sponsors have innovations programs and research
collaborations but these remain largely disconnected from the
ML research and should be further integrated
• The gap exist in the high risk early stage nature of most
research used to launch a commercial entity, this gap remains
a void and obstacle for the ML and Sponsors to collaborate
thus having more innovation pipeline tracked into the
sponsoring companies
 ML & Sponsor Proposal
• Establish an ongoing forum between sponsors
innovation and Media Lab constituents that have
research they believe is candidate for
commercialization and jointly chart out activities to
test and develop the products within the Sponsors
company labs or market
• Activate the “Living Labs” as a marketing commercial
test bed with research data being generated as a by-
product not as the primary objective.
 Catalyst
• When ML Sponsors opt-out of commercialization
participation the local early stage Venture Capital
community should be engaged
• An InnoVenture Lab should be created for Venture
Capital Sponsorship of Post-Grad/Doc Fellowships in
technology entrepreneurship within the ML
• Sponsors provide the potential market channels for
the commercialized products once they are proven
using Venture high-risk funding
 InnoVenture Lab
• Joint Lab with Sloan School, leverage entrepreneurship support at MIT
• Entrepreneurship course requirements as pre-requisite (Sloan)
• Proposals for ML research commercialization (product and business model plan)
would be submitted on a competitive basis.
• Only graduating MS and Ph.D. can apply as post graduate fellowship
• Must have proof demonstration to enter and valid market test possible within 12
months
• Seed investment provided for market realization of the research
• Small teams of 2 – 3 people to ready the product for full investment
• Team of mentoring advisors with corp/start-up/academia experience who have
formed technology companies, (MIT Venture Mentoring Service)
• C-Corp structure to address ownership via stock vesting period
• VC reserve for 1st round full investment for successful spin-out
• Tech Licensing Office involvement and supporting activity throughout ML
• Sponsors have option to participate in funding round or early exit licensing at
commercial terms if product proves to be market viable and VC opts-out of next
round investment
 InnoVenture “NOT”
• It is not research, nor is it complete product development
• It is to take working research prototypes and address the scaling and
commoditization problems, technical and business problems will need to be solved
during this stage transition
• It is to create and demonstrate a viable business model, cost and distribution and
research/test market need
• These are not innovation labs for sponsors and will remain autonomous to prove
business viability
• The main achievement of the year is to remove uncertainty and build confidence
in market viability and achieve a feasible business model
• It is not to launch or bootstrap an actual business, that will be done in the 1st
round investment after the post grad/doc period
• This is a technology transfer option that is easier than the alternatives of people
attempting this without support outside of the ML
• It is not the typical Angel or F&F investment and comes with the same high risk
profile for investors as any early stage start-up, investors are only securing early
right to invest once the business is ready to launch, investment is not guaranteed
 InnoVenture Feasibility
VC Event to explore feasibility jointly with ML
– Closing the gap between research and commerce
– Active Research presentations
– Innovation processes
– Past Commercialization case stories
– Idea Storms and Streams
– Research Commercialization Outlook
 InnoVenture Structure
• Venture Syndicate
– Angel and Venture Capitalist (potential 1st round funding)
– Corporate Strategic investors (potential acquirers)
– Mentor network (commercialization process)
– Legal Firm (entity governance)
• Funding allocation structure
– ML Sponsorship (what is done today with corp. sponsors)
– Fund Entrepreneurship programs
– Fund Contest [MIT 100k example]
– Fund PostDoc Fellowships in Entrepreneurship
– Funding grants to small teams with 5, 10, 20K amounts
– Fund IP process, tech licensing and patent filings
 Venture Commitment
• Assuming a threshold of quality submittals VC discretion on
number, size and composition of funding
• 3 – 5 million over three years
– 1 Million of fellowship awards per year
– 2 Million of 1st round funding within 3 years
• Lead investor in the 1st round
• Generous stock pool with incentives for all constituents
• VC option to fund IP filing or license if appropriate
• VC network to help fill out the business launch team
• Target of 5 VC’s in a consortium for total of $15 - $25 Million
 Governance
• Corporate entity
• Board with By-Laws
• Affiliation or Alliance with MIT but not part of the Media Lab
entity. This is set-up as a consortium for profit entity
• Advisory board of vested participants
• Shareholder voting
• Spin-out from ML InnoVenture Entity after first year
• Innoventure maintains small stake in spin-out
 Results
• The InnoVenture lab would remove the risk gap for Sponsors
and facilitate a clear path of commercialization for ML
research that has reached product feasibility
• For each VC sponsor 2 companies would have been
bootstrapped through the process within 3 years with many
more attempting to discover viable business models for ML
research
• As successful cases emerge ML Sponsorship from VC and
Corporate Sponsor should grow each year
• InnoVenture Lab appreciates in value quickly with its shares in
spin-offs returning value until it becomes its own endowment
at which point it is self funded
 Resolution
• New source of Funding for ML consistent with its mission and
history
• All constituents may participate in the InnoVenture Lab and
share in the rewards through the stock plan, including
Sponsors if they contribute funding or resources
• Venture expertise is made readily available to the ML and
Sponsors that remove risk of early stage businesses
• ML is able to clearly demonstrate one of its benefits to
Sponsors and continue to attract the best students and faculty
 Next Steps
• Explore ML interest and feasibility
• Stakeholders feedback and model revisions
• Sloan School engagement
• Survey of ML research suitable for commercialization with
timing and interest
• Team and committee formation
• ML agreements and entity structure
• Local VC community feedback
• Marketing and Business Dev
 Candidate Investors
• Venture Angels
– commonangels.com
– keiretsuforum.com (350 members)
– ecoastangels.com
– launchpadventuregroup.com
– newyorkangels.com
• 1st Round VC’s in Boston
– Highland Capital hcp.com
– sigmapartners.com
– Polarisventures.com
Center for Venture Research
at University of New Hampshire
“Small Business Association
estimates 260,000 Angels active
in US funding +55,000 small
companies a year for a total of
+20 Billion as compared to +28
Billion a year from formal VC’s”
VC Discovery Tools:
angelsoft.net
thefunded.com
ncet2.org National Council of
Entrepreneurial Tech Transfer
 References
• MIT Entreprenuership Center http://entrepreneurship.mit.edu
• MIT Enterprise Forum http://enterpriseforum.mit.edu
• MIT 100k Contest http://www.mit100k.org
• MIT Tech Licensing Office http://web.mit.edu/tlo/www
• MIT Lemelson
http://engineering.mit.edu/education/special_programs/lemelson.php
• Kauffman Foundation Feb ‘09 Report Entrepreneurial Impact : The Role of MIT
http://web.mit.edu/newsoffice/kauffman-report2009.pdf
• Kauffman Foundation http://kauffman.org
• Tech Stars http://www.techstars.org
• Ycombinator.org http://ycombinator.org/about.html
• Idealab http://www.idealab.com/about_idealab
• National Venture Capital Association Yearly Report
http://www.nvca.org/index.php?option=com_docman&task=doc_download&gid=
446&ItemId