An embryo seems to miraculously mature through layers of development. Cellular differentiation, a forming spinal column, organ development, and more, are all necessary for a healthy, vital birth. Just as the developing fetus goes through a myriad of maturation steps, your innovation and your company must proceed methodically through multiple tasks. But this business procession is no miracle—it’s plain old work. I would say the adage, “plan your work, and work your plan” is invaluable advice—provided that your plan is well constructed.
Development tasks, and their associated timelines and costs make up the technology’s vital development or commercialization plan; without a commercialization plan, the maturing of your technology will likely stall. Do you have a grasp of the numerous tasks that must be undertaken to get your product to market launch? Truthfully, it can be time consuming and non-trivial process.
Start with a small team
The plan is best developed, I believe, through a small team effort. Depending on the kind of innovation, the group could include the inventors, engineers (perhaps mechanical, electrical, and software), other individuals with prior development experience.
But, because a commercialization plan should encompass, for example, technical development, human resources, financial, regulatory, and marketing tasks, your small team may require a range of competencies. For certain topics, like technical development, for example, you would be well-served to have your engineers present, rather than someone with human resources knowledge. However, if you are planning the build out of the executive management team, having the input of a human relations person would be good.
Create your task and timeline
I think the commercialization plan is most useful in the form of a task and timeline, which includes estimated costs. In other words, each task that must be accomplished is listed, along with its estimated starting and completion time. The task and timeline below focuses on the technical development activities for an example medical device.
Notice how certain tasks must be completed before others are started. In this example, certain development activities occur prior to animal testing, and animal testing occurs prior to submitting for regulatory clearance. In this case, we at least want engineers, those individuals that will be conducting the animal tests, and someone with regulatory experience involved in constructing this task and timeline. While costs do not appear in this example, it is convenient to include them while the team is thinking through the plan specifics. The cost amounts can be transferred to pro-forma (projected) financial spreadsheets for financial planning purposes.
Because the commercialization plan is the “working plan” for the business, this example technical task and timeline is one portion of the whole plan, albeit, a critical portion. Planning could also include elements related to transitioning to manufacturing, market development, strategic contacts, patent filings, fund raising, and hiring of key staff.
Identify your milestones
The commercialization plan is not only a working plan for the business, it is also a source of key, useful information. A well-constructed task and timeline should provide you with a grasp on what tasks lie ahead and how much money you will need to accomplish them. This is key information for an important reason.
As you progress down your timeline, accomplishing the tasks that you and your team have set out to do, a small number of the tasks can be considered major accomplishments—milestones—if you will. For example, testing a bench-top prototype that offers proof of principle is significant, compared to the tasks of securing lab space, completing the prototypes design plans, and purchasing materials. Think about other tasks that might be considered milestones: completing the first animal study, human studies, receiving FDA clearance, having patent claims allowed, market launch, etc.
Notice what is happening with your business as you accomplish such milestones: Progressing from “idea” to increasing levels of “proof,” you are building a case for the validity of your technology. In other words, as you advance, the chance that you are wasting your resources and efforts continues to diminish. Makes sense, does it not? But, not only are your chances for wasted resources and efforts being reduced with each milestone accomplishment—risk is similarly reduced for outside investors. Therein lies the key to raising the capital necessary to drive your innovation toward commercialization.
Investors know that putting their money into a startup is a risky venture. That is, of course, why they expect, on average getting 10 times their money back at some time in your startup’s future. But, in general, as you reduce risk, you increase the value of your startup—or, in other words, you decrease how much of your company you have to give away for each dollar invested. Therefore a key to raising the money you need is to do so after you have achieved any given milestone. In the example milestones above, that would mean the optimal time to begin a funding round is upon the successful accomplishment of the first animal study, human trial, receiving FDA clearance, having patent claims allowed, or market launch.
This advice implies, of course, that you must get some of the early, basic groundwork done (e.g., proof of principle) with your own resources, first. This strategy works to reduce investor risk ahead of seeking investment funds. Without proof of principle your startup is very risky, and your company value is low. Moreover, this advice implies that you should only be raising the amount of money you need to reach the next milestone (and enough to hold you over until the next funds come in). Why? Because going beyond the money you need to reach the given milestone means you are giving away more of the company than you may need to.
Your milestones should be limited to roughly three to five major events. And you should know how much it should take to reach each one, and how much in total you need to reach commercialization. You also must be able to calculate and justify your company valuation—more about that in the next column.