Why and how a corporate can spin out ventures.

1. Value Creation through
Technological Spin-outs
A corporate perspective
Alain Meller - NovaXone
NovAxone Sarl, 5, rue Davioud 75016 Paris

2. What are the Business Cases for Spin-outs?
 Innovation-based Opportunities
 Establishing a beachhead in an emerging product market.
 Commercializing an innovation outside core markets.
 Creating an alternative path on an established technology
roadmap.
 Disvest non-core, non-strategic innovations
 Business-based Opportunities
 Turning a captive cost center into a commercial supplier.
 Building a supplier to meet a corporate need.
 Disvest non-core, non-strategic businesses
NovAxone Sarl, 5, rue Davioud, 75016 Paris

3. The Spin-Out Rationale
 Strategic
 Creates new channels to market for technology
 Transforms captive cost centers into value-added suppliers to business units
 Provides opportunities to test a developing market or create a market for the
corporation’s products
 Creates the possibility to re-acquire or re-invest later when risk is diminished
 Technological
 Increases clock speed of innovation
 Brings entrepreneurial culture to corporate labs, and attracts young
researchers
 Provides market feedback that can shape future project direction
 Generate new collaboration opportunities with new partners and spin-outs
 Financial
 Generates financial gains through equity ownership
 Complements, does not compete with, intellectual property licensing
 Provides a source of risk capital
 Social Responsibility
 Irrigate local economy
 Helps recycle workforce to new opportunities
NovAxone Sarl, 5, rue Davioud, 75016 Paris

4. Examples of Spin-outs
Spin-out Business Case From
Azure Turning a captive cost center into a British Telecom
commercial supplier.
InPhase Technologies Commercializing an innovation Bell Labs
outside core markets.
Liquavista Commercializing an innovation Phillips
outside core markets.
Gainspan Establishing a beachhead in an Intel Corp.
emerging product market.
Elanti Systems Inc. Turning a captive cost center into a Telstra
commercial supplier.
NovAxone Sarl, 5, rue Davioud, 75016 Paris

5. Syncing with the Open Innovation vision
Emergence of spin-
outs Future acquisition ?
Future Partner ?
Innovation Funnel client
5

6. Why setting up spin-outs is difficult?
 Cultural Gaps
 Crossing Corporate Boundaries
 Lack of internal resources
 Need for diverse not in-house expertises
 Limited funding
 Not on the agenda of operational managers
 Manage employee expectations and fears
 Governance issues
NovAxone Sarl, 5, rue Davioud, 75016 Paris

7. Funding Ventures by Investors is difficult.
Corporation Domain External Investor
• Tech Team only; lacks business acumen • Require investable business plan
• Target market not indentified • Wants Management Team
• Revenues under internal consideration Assets • Needs customer references
• Do not like technical risks
•Need NDA •Don’t sign NDA
•Have people and time •Limited time and resources, will not move
•Long approval processes Process forward in due diligence if unsure deal is feasible
•No manpower to help transition •No incubation facilites
•Narrow non-exclusive IP-license •Believe the venture should own all IP
•Can’t sign non competes •Want a non-compete
•Sometime reluctant to let good people go •Must take the people that have the know-how
•Driven by annual P/L (royalty model) Terms •Fear agendas that may limit exists
•Won’t fully fund to venture viability •Driven by 5/7 years ROI model
•Royalties drain cash and limit exits
 Need for a process + people to bridge the gap
 Independant, external team is key to manage the exit process
 Intermediate Corporate Venture Fund might be a facilitator
 Prepare for futher funding
 Lack of available funding sources in current market conditions
NovAxone Sarl, 5, rue Davioud, 75016 Paris

8. Our value
 The difficulties identified require an external
person that:
 Ensures the spin-out process is set in the best interest
of every stakeholder
 Provides an external viewpoint that will avoid conflicts
and political issues to hamper the potential of the spin-
out process
 Possesses the set of expertise and experience that is
difficult to find internally
 R&D, Marketing and General Management of Large
Companies and Startups
 Investing in Early Stage Opportunities thru Venture Fund
NovAxone Sarl, 5, rue Davioud, 75016 Paris

9. What we do?
 Every Corporate is different:
 we go through an “analyze – design – execute” approach to
define and implement the framework for spin-outs creation
 Analyze:
 Analyze portfolio of opportunities
 Examine current practices
 Report on current situation
 Suggest target processes, organization and resources
 Design:
 Elaborate possible scenarios
 Evaluate and choose the best path
 Execute:
 Conduct the process to implementation
 Facilitate the process thru a continuous monitoring
NovAxone Sarl, 5, rue Davioud, 75016 Paris

10.  For further details: references, processes etc.
 Contact: Alain Meller @ info@novaxone.com
 Thank you.
NovAxone Sarl, 5, rue Davioud, 75016 Paris