The Value of Venture Readiness
H. Lee Herron, DVM
Vice President of Venture Development
Georgia Research Alliance
To put the concept of venture readiness in context, many university-based venture development efforts do not achieve the desired results of sustainable start-up companies. Creating companies is the easy part and obtaining seed capital though SBIR, STTR or other grants or state/university funding require skills that are consistent with the training and experience of academic founders. It’s the sustainability part that trips up well intentioned programs. Many university start-ups never emerge from what is often referred to as the valley of death. While the “valley of death” does not have a defined entry point, it is primarily associated with and defined by an inability to raise sufficient funds to sustain operations. This failure in fundraising often transcends the fundamental requirements of a fundable enterprise: management, market need and a technology solution; and further, such failure applies to most, if not all forms of investment capital whether conventional venture capital, angel investment or other forms of investment. Although the great majority of companies emerging from university labs are not suitable for institutional venture capital, the business discipline and process gained through company-specific preparation and planning for a venture capital investment offers the opportunity for companies to identify critical factors required to traverse the valley and thereby position the company for post-seed funding. Applied in a structured, systemic way rather than on an ad hoc basis, this process is referred to as Venture Readiness. It can be embodied in a program tailored to any venture development organization.
The Georgia Research Alliance (GRA) has a long history of sustained investment in leading-edge academic research and commercialization. GRA has developed a continuum of programs (from basic research to commercialization) that creates a robust pipeline of technologies and discoveries with market potential. The GRA Ventures program identifies and advances the most promising opportunities emerging from research universities within the state with a goal of creating sustainable start-up companies.
Not unlike other venture develop programs, some of the GRA Ventures portfolio companies lack the capability to attract sufficient investment capital to progress beyond the seed stage. Many make the mistake of trying to raise funds too early or with inadequate planning and preparation. To better prepare companies for investment capital, a Venture Readiness program is being implemented. This program is intended to assess GRA Ventures companies’ preparedness for investment capital from any source – including angels, institutional VC and strategic partners. The program goes beyond simply assessing preparedness for investment capital, it suggests specific steps for the company to take and provides connections to individuals with the requisite skills to remedy any potential barriers to funding. After issues have been resolved, the program provides tailored outreach to potential funding sources based on industry, market, stage of development and investor preferences.
While often not specifically focused on preparing investor pitches, many accelerator and incubator programs contain elements of venture readiness. The described Venture Readiness program is not an alternative to accelerators or incubators but rather, it complements such programs and can be included in their curriculum or as a stand-alone program.
The GRA Venture Readiness program includes the following fundamental elements:
- Venture readiness assessment. This activity involves the engagement of domain-specific advisors from the business and investment community and includes a review of a company’s business plan, executive summary, pitch deck and actual presentation. The assessment also includes an evaluation of company stage and suitability for investment. The ideal participants in the review process are local entrepreneurs who have received venture/angel/strategic partner funding and experienced investors who can provide objective feedback without the presenting company feeling the pressure of pitching to a potential funding source. These individuals are also well-networked in the local and national investment community.
- Connections to commercialization talent. GRA Ventures facilitates connections to subject-matter experts who can help address issues identified by the assessment team. A database has been developed to help identify appropriate matches between companies and commercialization talent. Expertise provided includes, for example, business development, intellectual property strategy, regulatory strategy, and executive leadership.
- Preparation of a company overview. This follows a consistent format and is used as a preliminary introductory document. The purpose of this one- to two-page document is to generate interest and lead to a request for additional information or a meeting.
- Pitch craft. GRA Ventures organizes one-on-one training sessions as well as group events to help entrepreneurs develop effective investor presentations.
- Prospect list development. GRA Ventures works with the company to develop a prospect list of potential funding sources.
- Identification of contacts or referrals to prospects. This is to avoid cold calls or unsolicited submission of company introductions. GRA Ventures draws on its network of contacts as well as the networks of its advisors.
- Continued mentoring and follow up.
The Venture Readiness program is just underway. A future commentary will report on resources required for implementation and results obtained.