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David Brophy
  David Brophy

Ross Students Devise Business Plans for U-M Inventors

12/6/2004 --

Students in Prof. David Brophy's Financing Technological Entrepreneurship course help scientists take ideas from the laboratory to the marketplace.

ANN ARBOR, Mich. – Promising scientific research and groundbreaking technologies often fail to achieve commercial success because they lack compelling market strategies needed to secure adequate financing.

Financing Technological Entrepreneurship, a practicum offered for the first time this semester at the Stephen M. Ross School of Business at the University of Michigan, provided MBA students and undergrads with skills to avoid common pitfalls and successfully navigate the perilous path from the laboratory to the marketplace.

The course combined readings, lectures, presentations by industry leaders and projects that teamed students with researchers and faculty from the U-M's Medical School, College of Engineering, Office of Technology Transfer and Kresge Hearing Institute, as well as the Michigan Research Institute and Michigan State University.

The participating scientists are in the early stages of commercializing research in the life sciences or information technology, and the students devised business plans to help them attract financing from angel, seed, venture capital or strategic investors.

Students worked directly with the principal investigators for each research project, said Professor David Brophy, instructor of the practicum and director of the Center for Venture Capital and Private Equity Finance at the Ross Business School.

They analyzed the potential product application for the researchers' intellectual property, assessed the competitive landscape for the product, and created a financial model. The market strategies for these initiatives typically involve a licensing agreement with an existing corporation or creation of a start-up company.

Rick Snyder, founder of Ardesta Corp., an Ann Arbor-based venture capital firm that invests in nanotechnology companies, recently advised Brophy's class to focus on the product and its application–not on the underlying science.

"We don't do technology investing (at Ardesta). We do product investing," Snyder said.

"You have to ask the right questions. How does this become a product and what's the timeframe? Are you building a component, a subsystem, a system or a solution? Where should you be in the distribution chain? Where's the value?"

Snyder identified other questions for the students to address as they developed their business plans. Is the product's success dependent on creation of a new market niche or will it replace an existing product or technology? What is the total value it will bring to customers? What are the potential obstacles? Will the benefits outweigh prospective customers' resistance to a new product or the infrastructure investment required to adopt a new technology?

"Is it a need-to-have or a nice-to-have? When you have something new, nice doesn't cut it. It's got to fulfill a need," Snyder said.

Then there are the fundamentals–good management–Snyder said.

"Perfect technologies don't make a company," he said. "The thing that will make or break a company is how quickly you respond when things go wrong."

Research commercialization is critically important, Brophy said, because technological innovation fuels competitiveness and the creation of economic value and jobs–and the work in Financing Technological Entrepreneurship positions the U-M at the forefront of this movement.

"There will be 50 U-M business school alums knowledgeable about research commercialization," said Brophy, who co-authored two chapters in the textbook used in the course, Financing University Spinouts: A Handbook for Entrepreneurs and Investors. "They will be prepared to evaluate and form these types of deals."

MBA student Tieh-Ling Koh said the course taught her how to merge entrepreneurship with her master's degree in biology.

"There is a need for people who can bridge science and business," she said. "Hopefully, I'll have an advantage."

Written by Dave Wilkins

For more information, contact:
Bernie DeGroat
Phone: (734) 936-1015 or 647-1847