Trilateral alliance participants
The project will address the specific needs, cultural and economic
differences, and goals of the individual participants in trilateral alliances. This
is essential in order to develop generic mechanisms that overcome potential barriers and
allow new and enhanced opportunities for the development and exploitation of
technology.
Each of these potential trilateral alliance participant organisations has its own unique
culture and values that can adversely affect communications between them and with the
research and technology community. This can further inhibit the development of
potentially valuable partnerships and hence the successful exploitation of many new ideas.
Hence the role of the TRITEC partners, acting as catalysts in bringing together
these parties, identifying issues and addressing concerns directly, and through
introduction of other appropriate mechanisms.
Many of the ground-breaking new product, process and service ideas are
generated by innovative SMEs or by start-up
enterprises spun out from research and technology organisations. The cost incurred
and the resources required to take an 'invention' or 'idea' to a level at which it can be
marketed, are increasing as technology becomes more complex. Similarly, in a global
economy it is rarely an option to develop only one's domestic market, and the resource
demands of penetrating, developing and servicing international markets can be and often
are beyond the capability of most SMEs. Some of the potential SME partners are
established businesses, which have made the transition to devolved management, able to
cope with the challenges of anticipated growth resulting from a successful corporate
alliance. However, many of the most exciting product and service ideas are emerging
from new/early-start firms, often within incubation units. For these firms,
corporate partnerships, while possibly representing the only viable means of quickly
exploiting often-narrow windows of opportunity, may present additional challenges in terms
of the need to develop and the management structure to cope with the anticipated growth.
Within the existing venture capital
community as, for for example, represented by the BVCA, there is cash
available to finance the medium-term internal requirements of innovative SMEs. With
new fiscal measures across Europe and a growing realisation of the enormous growth
potential of many technology firms, the availability of suitable funds for both early
stage and development finance is growing. However, the due diligence process can be
costly and lengthy and very often a potential deal can falter because of the high risk
presented in cases where SMEs lack the essential resources or capability to develop such
resources needed to exploit international markets, quickly and effectively. All
venture capital firms will wish to see a medium term (say 5 year) exit route. In a
normal bilateral arrangement this is achieved through a trade sale, or public offer of
some kind. With the involvement of a corporate partner, processes will need to be
developed which protect the potentially longer term relationship between SME and large
company, while at the same time providing the venture capital partner with its required
exit. Issues such as potential differences in valuation of "the business"
by the alliance partners will need to be addressed.
With today's emphasis on core business, many large
companies are often poorly equipped to generate new products and
services in areas which, while not meeting existing 'core' criteria, may have the capacity
to threaten or enhance their existing business at some point in the future. A
partnership with an innovative SME could be a relatively low cost, low risk option, as
compared with in-house development, of exploring new ideas, applications and
markets. Large companies have many of the costly capital and human resources in
place to assist innovative SMEs with both product development and market entry and
support. Available resources might include complementary technology, product
development and testing laboratories, prototyping and manufacturing capabilities, software
development resources, existing European and global distribution and customer support
facilities. The decision to partner, using these resources, is frequently within the
remit of the appropriate division, plant, or product manager. However, in terms of
providing cash, either as a loan, or in the form of an equity (risk) investment, to fund
essential internal development costs within the SME partner, then few large companies have
a strategy in place that will allow such investments. Any decision to do so would be
required to be taken at the highest (board) level and the very complexity of this process
inhibits proposals being generated from within large companies. Thus, many
potentially rewarding partnerships with SMEs are not realised in practice. Also,
without a dedicated venture group within the large company, there is rarely a mechanism
for it to promote its interests in corporate partnerships, to manage subsequent
expressions of interest and perhaps most importantly, to shortlist promising cases and
secure funding for them. Independent brokers, such as the TRITEC catalyst partners,
could perform this task admirably, and provide the necessary levels of security.
Large company collaborations are especially important to the viability and success of
TRITEC as we aim to ensure that the project is firmly demand driven. We propose to
work closely with a select number of large companies in each region to learn about
specific interests that they have, for which alliances with technology-based SMEs (those
that fit particular profiles and offer particular 'assets'), could be a way forward.
We will treat any interests and needs in complete confidence, using it only in generic
form in order to identify matching SME partners. If the matches are appropriate and
appear attractive to both parties, we will then seek to plug any gaps in available funds
to support internal development of the SMEs, with cash from an appropriate VC
partner. And, importantly, we will seek to address the areas of potential conflict
between the partners, as may exist over such matters as the VC firms' exit route
mechanisms and future valuation of "the business".
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| Want to know more about corporate venturing and the prospects it may hold for your business? We're especially keen to hear from large companies interested in the benefits of partnering with smaller, technology firms. Contact John Duckett or Tony Fawcett at TVT now. |
