Needs of Global Start-up companies (Deliverable 2) GlobalStart wp1 Studies Deliverable 2 Needs of Global Start-up Companies Table of contents p


(c) The internationalisation process



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1 (c) The internationalisation process
An international dimension is emerging early on in the development of the company through the employment of French and German personnel. It was a tactical decision by the Founder not to restrict the company to local workers especially when one of the posts was originally offered to a Welsh person who turned it down since he did not want to work for a start-up linked with a university. An important factor that helped with the recruitment of foreign personnel was the fact that the start-up was spinning out of a university 4 rated RAE school of computing which has an international standing. This was considered to be attractive by the prospective foreign employees.
The World-wide technology aspect of the business is an ambition of the Founder for the future. This could involve foreign businesses that can offer the same service that the Founder will be offering. For this service there is definitely a global market. It is the intention of the Founder to develop a profitable UK company first. The Founder has been approached by an Indian company already for the programmes element. For globalisation of the business there will also be product licensing and delivery to customers abroad. This will be considered in the middle of next year once the Spinout loan, Assembly Investment Grant (AIG) funding have been secured and five to six UK clients have been established. Since the company is making limited returns at present global aspirations will have to wait until this time. The global idea is in the background for the business. In nine or twelve month’s time if the business is not making a large profit in Great Britain the Founder will consider the German and French markets. The Indian firm is developing programming which will give the Founder an advantage, but the company will lose local leverage. At the moment the Founder is “playing the local card” with the CC and LPA. There are substantial returns to be made here. It would be helpful if Finance Wales provided globalisation training with regards to importing/exporting. There is a need to write globalisation into the business plan for travel, time and trust (“need people out there you can trust”). Globalisation is an interesting concept but there is a need to be sure that the markets entered are profitable.
With local markets the company has entry to these since there is knowledge of the participants. With foreign markets such as France there is a need to display products at exhibitions. Although the Founder does not speak French one of the employees does. In order to sell into the French market there is therefore the need to be able to communicate. In Wales businesses tend to sell to Welsh people and for German and Hungarian firms, for example, they may have difficulties selling into Wales. In terms of globalisation there is a need for a considered marketing plan. Wales Trade International (WTI) is a body that can provide support through Objective 1 programmes to develop overseas markets. The Founder will register interest for these programmes and will consult with the Spinout Manager about these. If a business has global potential this should be part of the package that Finance Wales provides including training.
According to the Founder the business plan is constantly expanding and the priority is to receive £25,000 funding from the Spinout programme. In order to establish the business the Founder has a house re-mortgage since this is important to do “above all else”. If the Founder does not receive the Spinout funding and the LPA contract there will be the need to re-evaluate the position. This could result in reverting back to research to complete the PhD and to develop another project. Since there is industrial sponsorship involved through the University it may be necessary to do this. The link with the University needs to be maintained and to make sure that they are comfortable with the Founder’s business (private company). The Founder is also worried about concentrating too much on the business at the expense of the research. Since the research is at the MPhil/PhD transfer stage there is a need to make sure this progresses. By taking on an employee this will give the Founder time to concentrate on research.
For globalisation the Founder feels foreign markets should be taken into consideration for the initial business plan. This will depend on the development of new technology and the involvement of bodies like WTI.
2. The University: Analysis of the Technology Transfer Office function in the internationalisation process
So far the Founder has received no starting capital therefore support bodies have been approached. There is a client base which will provide revenue. The Spinout programme £25,000 funding will cover the wages of personnel in the first year. Due to the work involved in developing the company the Founder has had little time to develop his PhD research. The Spinout programme funding is a driver to get personnel working for the company and a consultant through the University Commercial Services Company has been employed. Once this person has “settled in” the Founder will be able to concentrate on his PhD. There is also an MSc student at the University who wants to undertake a practical placement for no reimbursement.
Support has been provided by the Graduate into Enterprise programme and also CODA. There has also been £450 supplied for marketing materials and a marketing advisor. The Spinout Manager has been advising on a regular basis and is very amenable, enthusiastic and motivated, and has arranged for a business consultant to develop the business plan. The business plan has been completed by the 15th December and it is expected that the Spinout programme funding will be received by January or February 2005. With the receipt of the Spinout funding and the proposed project it will be possible for the company to expand. It will not be possible to make a decision about this until it is determined if the project has “landed”. Whether the company stays located at the University incubation centre will depend on how the company develops. The company has two rooms at the incubation centre and there are three people based in these. Due to this the incubation centre will be a little small for the company and there will be limited expansion opportunities. But with the benefits of free office space, a telephone and stationery it is beneficial to remain located at the centre for a year or two since this provides support for the start-up. Without this it would not be possible to have the recent employee and provide an office and a computer. Due to these associated costs being covered it makes it easier to have the employee. At the moment the University Commercial Services is subsidising the costs.
The other main forms of business support received so far from the University have been marketing advice from CODA, development of the business plan with advice from a consultant and the Spinout Manager, and accounting support (the Spinout Manager is arranging training on book keeping for the employee and the support of a book keeper). The training will involve the industry standard SAGE accounting package.
The Spinout Manager has helped the Founder to develop a clearer understanding of where the company is going through generating more revenue streams. This has involved day-to-day advice which has been provided on the telephone. An example of this has been advice regarding the LPA who are a potential client. They have been considering a similar product from a larger company. This has made the Founder aware of the competition. Since the company is a micro business with no trading history customers with good funding, like the LPA, are likely to take the safe option of a larger company. Without the LPA the company will lose a partner reference site which is a large risk to take. (It has been hard to reach the present stage for the company.) If the company loses the potential partner there will be the need to “rebuild” the business plan.
The Spinout Manager has helped the Founder to rationalise at what stage the company is positioned and to market locally in the first instance. Also, advice has been provided as to how to justify the company to business clients. There has been considerable help on a day-to-day basis. This has been especially relevant to the Founder since hard work has been involved driving forward the business and it has cost a considerable amount of money and time. The biggest problem for the Founder has been the final business plan. The Spinout Manager has provided a business consultant. There is the need to spend about a week to sit down with the business consultant to produce the final business plan. What is required is to write and develop a coherent plan. It would be beneficial for the Founder to have a week’s course on how to write a business plan and to consider other business plans. This would provide the right ideas to “spark off” the business. Also, this could include a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis. The Founder felt that the University could provide better support concerning marketing. In addition to the use of the University’s designer and Reprographics Unit it would be beneficial if other marketing support was offered. The marketing support involving CODA had been slow to deliver.
The Founder has sought advice from the Spinout Manager concerning an employment contract for staff. This will involve appointing a solicitor. The Spinout Manager has enabled the Founder to use distributive agreements. On the employment contract side, especially the legal aspects, the Founder feels that there could be more support. Also, with regard to the accounting side, there are income tax forms and VAT returns that need to be completed. The company is registered for VAT returns. Since the VAT return had been late the company has been fined £120. This has arisen due to disorganisation resulting in the return being made late. The money from the University research studentship is not taxable. When the Founder started the business it was not registered with the Inland Revenue. As a result the Founder was fined £100 for not registering. This could have been avoided with advice. The support the Founder receives could be tailored rather more than it is. This could include how to complete a tax return, how to file and make the return. The Founder has appointed an accountant but it costs money to use them. An accountant will charge around £100 an hour but this fee level can be “built in” and this will save more than the costs. There are also guides for self assessment. A good accountant will ask for receipts. Even though the Founder has a book keeper there is a need to deal with the accounts properly.
Table 3 shows the University support for Globalstart companies.


Table 3: The University support for Globalstart companies

Description of support needed

Organisation/

Programme



Timing

Evaluation

of support



Importance of support

Research and Development













Production/

operations















Sales/market development

University Spinout programme

Start-up

Good

To help market the company

Organisation and governance













Other

University Spinout programme

Start-up

Good

To develop business plan


3. The Region: Regional infrastructure and internationalisation
The Founder is applying for a £50,000 Assembly Investment Grant (AIG) and once this has been undertaken the company will apply for an RSA. There is also an e-commerce grant that will be applied for from the local authority for up to £10,000. The Founder has also invested around £30,000 of his own money in the business.
Table 4 shows the regional infrastructure for globalstart companies.


Table 4: The Regional Infrastructure support for Globalstart companies

Description of support needed

Organisation/

Programme



Timing

Evaluation

of support



Importance of support

Research and Development













Production/

operations















Sales/market development

CODA

Start-up

Slow to deliver

To market company

Organisation and governance













Other

Graduate into Enterprise Programme
Finance Wales

Assembly Investment Grant (AIG)


Local authority e-commerce grant

Start-up

Start-up


At the moment

In the future



Good

Good


To be seen

To be seen



Graduate employment

To spin out company


To develop company

To develop e-commerce through Web site




4. Conclusions
4.1 Overview
This case study provides a description of the support received by the Geo Info company in order to develop international activities. Support is provided by both the University Technology Transfer Office (TTO) and the regional infrastructure.
4.2 Support received
A description of the support provided for the company to set up international activities is provided. This includes support from the University Spinout programme to develop the business plan and market the company at the start-up phase. Regional infrastructure support includes sales/market development from CODA, the Graduate into Enterprise programme for graduate employment and Finance Wales to spin out the company.
4.3 Organisation/programme
The four main organisations providing support are the University (through the Spinout programme), CODA (marketing), Graduate into Enterprise programme (graduate employment) and Finance Wales (to spin out the company).
4.4 Timing
Life stages at which support has been received are the start-up stage (from the University Spinout programme, CODA, Graduate into Enterprise programme and Finance Wales).
4.5 Evaluation of the support received
The Founder felt that generally the support works well and is effective. The main criticism is that the marketing support is slow to deliver.
4.6 Importance of support
Support is important for the company to start-up, develop and progress into international markets. On a scale of one to five it can be seen as five since it is crucial for the company to start-up and develop.
Ref: Geo Info company.doc

Pet Care company

Spin-off from Glamorgan


Name

Pet Care

Founding date

May 2004

Industry

Pet related products

Spin-off – origin

Glamorgan – School of Technology

Interview date

26/11/2004

Interviewee

Founder and Managing Director

Interviewer

BT

Sources:


Interview. Business plan, October 2004. Web site under development.
For confidentiality reasons, the spin-off company is called “Pet Care”. As well the interviewee is referred to as the “Founder”.


1 (a) Profile and background
The founder started-up as an incorporated company in May 2004 with a new product that needed development following considerable research into the “market”. Since the new company is at the early development stage there is a need for a manufacturer. It has been difficult to find early stage support since contacts have been reluctant to provide “backing” and are cautious. The original idea arose from outside the University from a company formed by the founder in 1986. This produced water beds for pets and a cage system as a holding bay for animals before and after hospital. Collaborative work originally took place with Bristol University. The bed, for use in animal hospitals, was new on the market and with this product it was the first time the founder had started a company. From the experience of doing this the founder decided to start a company again.
With the present company the first product is an outside cat cabin. This has been developed following the founder’s experience of “housing” cats while at work. There is a clear demand arising from owners not being able to have a cat flap in a wall or where the cost to replace a door is prohibitive (@ £800 in some cases). Also, many people do not want to have a hole through their wall or door. The founder has neighbour’s cats constantly at the door “crying” to come in and with the permission of a farmer acquired bins from a field as cabins for the cats which had been outside for two years. From this the idea for a cat cabin arose. Table 1 summarises the profile and background of the company.


Table 1: Profile and Background

Brief overview of the firm’s activities, it’s mission and focus

Industry

Pet products

Technology

Pet care technologies

Product/service

Specialised pet care products – “cat house”, “pet bed” and “animal warm mattress”.

Market and targeted customers

UK (in the first year) – pet super stores, multiple retailers, pet shops, privately owned high street outlets, veterinary surgeries.

Europe (second year).

North American market (third year).


Company’s current mission and focus

Through the development and sale of pet products the company will establish itself in the UK market and progress to the European and United States markets.

Founding process

Initial business idea

Development of a new product involving market research into its viability.

Founders

Managing Director who has experience from founding a pet care company in 1986.

Founding

The Founder established an incorporated company in May 2004 with a new product that needed development.

Evaluation of the current situation and developments for the near future




Alignment with original business plan

Since the business plan is currently under development it is yet to be seen whether the results will be above, on or below target.

Near future

The major challenges for the near future are to finish product development and testing of the original product, progress to manufacturing, secure retail distribution, establish a sales Web site, exploit mail order and meet the sales objectives.


1 (b) Mapping major milestones
Table 2 provides a two dimensional overview of the major milestones.


Table 2: Two dimensional overview of major milestones




Pre-venture phase

Foundation

Near future

(next 5 years)



Business concept

To set up a business for pet care products

To exploit the global market for pet accessories

The initial market is the UK with further markets in Europe and the USA

Technology platform

Initial technology research and design

Product development

First year – manufacture first product, second year – develop new products and launch second new product and third year launch third new product

Product

Design of “cat house”

Development of “cat house”

Production and sale of “cat house” followed by “pet bed” and “animal warm mattress”

Markets

Market research

Market testing

Start marketing “cat house” in February 2005

Finance

Own finance

Spinout loan

Seeking a Welsh Assembly Development Grant and SFLG loan

People

Founder

Founder

Founder and Personal Assistant

Networking

Founder’s contacts

Founders and University’s contacts

Firm’s and international contacts



1 (c) The internationalisation process
In the first year the company will concentrate on the UK and Irish markets. Since this will be a challenge it has been decided to concentrate on one product. In the second year the company will sell into the European, United States and Chinese markets. The Chinese market is a large “window of opportunity” since the majority of homes have a cat and therefore there is an immense market. Since the “cat house” is a unique shape representing the head of cat at the entrance it “looks good”. It is therefore functional since the cat “head” fits into the garden as a piece of furniture.
For the first year outlets have been established including selling through the company Web site, pet stores, local shops and large chain stores like Argos. The founder has also approached other outlets such as mail order catalogues. When a retailer sees a picture of the product they usually want to sell it. This has been the case with a large Irish retailer. There has therefore been a really good response and there appears to be a good global market. Once the initial market has been established the company will consider other products in order to diversity and sell internationally.

2. The University: Analysis of the Technology Transfer Office function in the internationalisation process
The first support organisation approached was Venture Wales but the founder was disappointed with the support provided and consequently found out about the University spinout programme. After the initial contact with the University this was followed with a meeting between the founder, spinout manager and the business advisor from Venture Wales. The founder was surprised that although the advisor knew the spinout manager they had not referred the founder to the manager before especially for financial and technological help. This meeting led to the completion of a business plan, which had already been started, with the help of the spinout manager.
Following this the founder decided to cease contact with Venture Wales and to work with the University instead. One of the disadvantages with the Venture Wales advisor was that they had little understanding of the founder’s needs since they had never run a business. Whereas, the spinout manager had a manufacturing background and introduced the founder to a marketing expert for specialist support and arranged attendance at seminars for the founder to make contact with other business people for advice.
Since the spinout manager is full-time and available on the phone this results in the founder receiving good support and advice. The spinout manager also guided the founder through the whole process of developing the business and provided contact with a Business Eye advisor at Bridgend. By doing this the initial finance to develop the business was organised. Also, the founder was guided to receive a loan through a private finance manager located “next door” to the advisor’s office. The advisor also persuaded the founder to contact a different advisor at Venture Wales who was more helpful than the original. This resulted in the company having a sound financial base to develop from.
Regarding the technological side the University provides the assistance of technical staff from the School of Technology to help develop products. An example of this is a satellite tracking system for the cat cabin enabling a cat to open the door and also the use of a “pin head” device. It has been agreed for this technical support to be provided by the University over the next few years. This has been very helpful since the founder has not had to find another organisation to provide this and a contract has been drawn up.
The founder has attended two seminars arranged through the University, paid for by the Spinout programme, and organised by Finance Wales. There has been a whole and a half day seminar. Topics at the whole day seminar included consideration of the situation of the company and responsibility as a director. The half day conference concerned sales and was very useful. The Spinout programme through the University also pays for other seminars such as financial support. There have been arrangements through the Spinout Manager for the programme at the University to pay for a marketing expert. Also, three models have been made and paid for which usually cost £500 and are expensive.
Since the Spinout Manager is also a lecturer in Cardiff student projects have been undertaken with the company. This has involved two students undertaking research into European markets and it is anticipated that these will be the next markets the company will move into, once the UK market has been established.
The support received from the University has been fairly comprehensive to the needs of the company. There is a good relationship between the founder and the spinout manager. In fact, the spinout manager has been really helpful and without this support it will not be possible to develop the company.
Table 3 shows the University support for Globalstart companies.


Table 3: The University support for Globalstart companies

Description of support needed

Organisation/

Programme



Timing

Evaluation

of support



Importance of support

Research and Development

University Spinout programme and Finance Wales

Pre-start

Good

To develop business plan

Production/

operations



University Spinout programme and School of Technology

At the moment and in the future

Good

To provide technical assistance

Sales/market development

University Spinout programme and Finance Wales

Recently

Good

Useful seminars on running a company and sales and the construction of models

Organisation and governance

University Spinout programme and Business Eye

Pre-start

Good

Development of Business

Other















3. The Region: Regional infrastructure and internationalisation
The founder had a meeting with Finance Wales and agreed to the arrangement of a Wales Spinout loan. This will help the development of the company since the processes and toolings involved in manufacturing are very expensive. The founder has also made an application to the National Assembly for Wales for a loan with the help of the University. The papers for the Welsh Assembly have been paid for through the Spinout scheme and this financial support does not have to be paid back.
According to the founder there is a considerable difference between what the Spinout programme provides and the limited business advice from the support agencies. “These advisers do not really know what companies need. It appears that they want to increase the statistics and that they did not want to provide money.” The founder is also preparing an application for a DTI loan. Other sources of finance include their own funding from a house re-mortgage. The Spinout loan will help to develop the product and through its receipt has given the “go ahead” for the company. The founder will also not be able to receive a grant from the National Assembly without the Spinout loan. “It all hangs together.” As a consequence of liaising with Finance Wales most of the advisers there know the founder. Further to the “cat house” product there will be two more products developed for the international market. These are a pet bed and a veterinary heat pad. The “cat house” will not be an expensive product since it will be under £40. An application has been lodged for a British patent and the product will be registered as a trade name. This will be important when selling products at home and abroad.
Table 4 shows the regional infrastructure support for Globalstart companies


Table 4: The Regional Infrastructure support for Globalstart companies

Description of support needed

Organisation/

Programme



Timing

Evaluation

of support



Importance of support

Research and Development

Finance Wales, Wales Spinout loan

Start-up

Good

To develop company

Production/

operations















Sales/market development













Organisation and governance

Venture Wales

Pre-start

Disappointed with initial support, later support better

Initial support of no significance, later support more useful

Other

Wales Assembly loan

DTI loan


Current moment

Near future



Application made

Preparing an application



To develop product for initial markets
To develop further products



4. Conclusions
4.1 Overview
The case study gives a brief description of the support received by the Pet Care company in order to set up international activities. This support is provided by both the University and the regional infrastructure.
4.2 Support received
Organisations which provide support to the Pet Care company are reported and are distinguished according to the three major providers of support which are the University (through the Technology Transfer Office (TTO)), the regional organisations and other sources. These include support through the University Spinout programme, the School of Technology at pre-start, at the moment and in the future. This support has helped to develop the business, provide technical assistance and training. Regional infrastructure support has been arranged through the Wales Spinout programme at the start-up stage.
4.3 Organisation/programme
The organisations providing support are the University (through the Spinout programme), Business Eye, Finance Wales (to develop the business and provide training) and the School of Technology (to provide technical assistance). Regional infrastructure support includes the provision of a Wales Spinout loan through Finance Wales (to develop the company). Other support applied for includes a Wales Assembly loan and a DTI loan.
4.4 Timing
Support has been provided at a number of life stages of the company including the pre-start and start-up stages through the University Spinout programme involving Finance Wales and through the School of Technology at the moment and in the future.
4.5 Evaluation of the support received
The founder reported that the support worked well and was effective generally. The only criticism concerns the initial support provided by Venture Wales.
4.6 Importance of support
Support has been important for the company to start-up and develop. On a scale of one to five it can be seen as five since it is crucial for the company. As the founder elaborated the Spinout loan will help to develop the product and has given the “go ahead” for the company. Through receipt of this the founder is able to apply for other funding and support. “It all hangs together.”

Under Grad company

Spin-off from Glamorgan


Name

Under Grad

Founding date

January 2003

Industry

Employment

Spin-off – origin

Glamorgan – School of Technology

Interview date

15/12/2004

Interviewee

Co-founder

Interviewer

BT

Sources:


Interview. Brochure. Web site.
For confidentiality reasons, the spin-off company is called “Under Grad”. As well the interviewee is referred to as the “Co-founder”.


1 (a) Profile and background
Under Grad is a company, which provides a scheme that encourages companies to employ the best engineering and technology students. The co-founders started the company about two years ago in January 2003. The interviewee is one of the original founders and the idea for the company arose due to the national decline of the numbers of students gaining employment in the areas of engineering and technology. Following this being recognised as an opportunity in 2002 a limited company was formed in January 2003. Office space was provided at the University spin-off premises with the help of the Head of the University Commercial Services. The ambition of the founders is to help the University and other universities (like minded organisations and departments) to find industrial employment for their engineering and technology students. The two founders are both employed by the University in the School of Technology and when they formed the company they were the two directors. Office space, support staff and facilities are provided in the School as well as the office space at the University spin-off premises.
The company was developed within the University's School of Technology. The firm places undergraduate students at a host company while studying part-time for a degree. Two days are spent by trainees at the University and the rest of the week at work. Complex systems have been developed to support the scheme, by a franchise centre, through innovative support systems with the award of the ISO 9000:2000 accreditation of the work. Originally work was aimed at higher education institutions in Britain but following modification overseas colleges and a private European training organisation have become involved. Franchise centres deliver key skills modules at level 1 through to five-year supported programmes. The company provides valuable work experience to students during their university course, with no fees and a bursary up to £9,000. Businesses benefit from motivated undergraduates studying at university and working with the businesses and they become competent and experienced company members. Franchise centres are cost effective. These have been very successful and have helped to reverse trends in declining numbers and entry qualifications for engineering and technology students. There have also been follow on efforts such as the retention of students. Through students being more aware of potential debt and the incentive of a bursary and work experience they are attracted to the scheme.
Flexibility is a key factor and franchises are available for fees and maintenance fees with three levels of participation. Level 1, which is the placement class, is the entry level developed for overseas partners. The company provides the means to develop industrial contacts and many businesses are willing to have students on short placements. A "matching" section of the company Web site provides a means to do this. Level 2 involves an innovative student attendance monitoring system. An essential element of the programme is to develop a mature student attitude towards their work and studies. Level 3 is full membership and includes the two previous classes plus a full package providing the franchise centre with training and support to develop a network of companies and students. Documentation is provided to support the running of the programme with the required resources.
Table 1 summarises the profile and background of the company.


Table 1: Profile and Background

Brief overview of the firm’s activities, it’s mission and focus

Industry

Employment

Technology

Student employment systems

Product/service

Employment service for companies to employ engineering and technology students.

Market and targeted customers

  • Engineering and technology students

  • Companies

  • Universities

Company’s current mission and focus

To maintain and consolidate company activities in the employment of engineering and technology students over the next five years.

Founding process

Initial business idea

Scheme to encourage companies to employ the best engineering and technology students.

Founders

Co-founders were head of division and lecturer in the School of Technology.

Founding

Founding date January 2003

The company spun out of the School of Technology. Initial support has been received from the University in the founding process including help with the business plan and the provision of office facilities at the University and in the University’s incubator centre.



Evaluation of the current situation and developments for the near future




Alignment with original business plan

The results of the company are on target when compared with the original business plan.

Near future

The major challenges and opportunities for the near future are to consolidate the activities of the company and to develop a further spin-off.


1 (b) Mapping major milestones
Table 2 provides a two dimensional overview of the major milestones.


Table 2: Two dimensional overview of major milestones




Pre-venture phase

Foundation

Near future

(next 5 years)



Business concept

To encourage companies to employ engineering and technology students.

Scheme that encourages companies to employ students.

Development of an online system for student attendance.

Technology platform

Web site and computer database technology.

Web site, computer database and related technology.

Online systems for student attendance.

Products/

services


Proposed service to help students find employment with companies.

Provision of service to help students find employment.

Marketing of online system for student attendance.

Markets

Wales

Wales and England

Wales, England, France and Spain

Finance

University support

Spinout programme

Spinout programme

People

Co-founders

Co-founders and supporting staff

Co-founders and supporting staff

Networking

Co-founder’s contacts

Founders and University's contacts

National and international contacts



1 (c) The internationalisation process
So far 90% of business has been with French institutions although originally business was only carried out with English universities. In fact, only four or five English universities signed agreements. As a result there has been more funding in France and there is a certain amount of business in Spain. In the first year of trading most business was undertaken in England and in the second year this progressed to France and Spain. At the moment the company is staying with the customers it has established. Although, further development is taking place which will be the founding of a separate spin-off for UK based business. The company does not work through any formal networks since it deals direct with universities.
Regarding staff the company has employed technical personnel in the past and is likely to do so in the future. Also, on the technical side, the company has developed its own Web site. This is found to be a necessity when recruiting French students since this is undertaken online. The Web site is therefore seen as an important international tool.
With regard to performance indicators it is expected that performance will be profitable with moderate growth for the next few years rather than being rapid. Future developments involve a second spin-off being formed in January 2005 which will have global aspirations since it will involve selling a hardware/software product which will be an online system for student attendance.

2. The University: Analysis of the Technology Transfer Office function in the internationalisation process
Initially the main support was through the University Spinout Manager. In addition to this the company had Knowledge Exploitation Fund (KEF) funding and support provided by the University Spinout Manager to develop the business plan to form the company. The background of the University assistance provided the company with a supportive presence especially since the firm provides a scheme to help undergraduates.
The University Spinout Manager provides good support even though the University does not "walk the talk" on spinouts. The co-founder thought that this might be due to in reality the University being "scared" of such developments. It was felt that if the University is going to "lead" in the knowledge based economy spin-offs need to be "driven" from the top (directorate level). It is possible to do this and an example is Manchester University where they have more than 100 spin-off companies. The strong case behind spin-offs is that they produce resources. The company had mainly carried out its own marketing although the University Marketing Department provided contact with a firm of graphic designers to produce a "flier".
Table 3 shows the University support for Globalstart companies.


Table 3: The University support for Globalstart companies

Description of support needed

Organisation/

Programme



Timing

Evaluation

of support



Importance of support

Research and Development













Production/

operations















Sales/market development

University Spinout programme

Recently

Good

To help market service

Organisation and governance

University Spinout programme

Start-up

Good

Advice for IPR

Other

Knowledge Exploitation Fund (KEF)

Pre-Start

Good

To develop business plan



3. The Region: Regional infrastructure and internationalisation
The technology used by the company includes computer systems to recruit and monitor students online. There is also the development of key skills online. The company has two registered trademarks and raised IPR for funding. Finance Wales provided an interest free loan when the company spun out. The company became profitable within its first year of trading and a franchise has been sold to the other universities involved in the scheme.
The company has received limited regional support since Spinout programme support has been provided within the university, which satisfies the founders' requirements. Although it is felt that the spinout culture within the University could be better. It is acknowledged that global aspects might be important in the future and is an important factor in prioritising activities at the moment.
The company has a modest year-on-year growth of 10% and therefore support is not required for the core elements of the business at the moment. When looking back the co-founder felt that the support they had received was about right. There had been KEF Objective 1 regional support and they had been fairly happy with this.
Table 4 shows the regional infrastructure support for Globalstart companies.


Table 4: The Regional Infrastructure support for Globalstart companies

Description of support needed

Organisation/

Programme



Timing

Evaluation

of support



Importance of support

Research and Development













Production/

operations















Sales/market development













Organisation and governance













Other

KEF Objective 1 regional support
Finance Wales

Pre-Start

Start-up


Good

Good


To develop business

To spin out company




4. Conclusions
4.1 Overview

The case study has provided information about the specific needs for support during the internationalisation process of the Under Grad company. The support has been provided by both the University Technology Transfer Office (TTO) and through regional infrastructure support.


4.2 Support provided

A brief description of the support provided for the company to set up international activities has been provided. This includes support from the University Spinout programme for such areas as the development of the business plan at the pre-start stage, advice for IPR at start-up and marketing services recently. Regional infrastructure support includes an interest free loan from Finance Wales to spin out the company and Objective 1 support to develop the company.


4.3 Organisation/programme

The three main organisations providing support are the University (through the Spinout programme), Finance Wales (finance to start-up the company) and the European Union (through KEF Objective 1 support). The support has been customised to the company though the TTO.


4.4 Timing

The life stages at which the support has been provided are the pre-start (from the Knowledge Exploitation Fund) start-up (through the University Spinout programme and Finance Wales) and recently (again through the University Spinout programme).


4.5 Evaluation of the support received

According to the co-founder the support received is effective and works well. What is missing is perhaps a better understanding from the University generally and empowering senior management to have a more proactive approach could improve this in the future.


4.6 Importance of support

The support was important for the company to start-up and develop. On a scale of one to five it could be seen as four since it was fairly crucial. It should be noted that several organisations will have provided support for a specific need such as support being provided at the start-up stage by the University Spinout programme and Finance Wales.





Name

Laboratorio Farmacéutico USAL-A S.L.

Website




Contact Person

Camino Hernández

Tel

+34 923 282 154

Fax

+34 923 282 260

Email

acite_salamanca@acite.org







Founding Date

February 2004

Industry

Biomedicine, pharmaceuticals

SO-Origin

Department of Pharmacy and Pharmaceutical Technology







Interview Date

25/11/2004

Interviewee

Camino Hernández

Interviewers

Mark Anderson


Overview.
USAL-A is a biomedical firm specialising in the formulation and evaluation of new generic drugs for their subsequent commercialisation by different pharmaceutical companies.
The commercial viability of generic drugs is well established: In Spain, spending on drugs represents over 30% of the health budget, while generic versions of established drugs are between 10% and 25% cheaper than their originally formulated counterparts. Consequently the state is very keen to promote the development of generics. On the other hand, levels of quality, safety and efficacy of these new drugs are extremely stringent, governed by the regulations of the European Medicines Agency, and their development requires great expertise. In 2001, when the company was being established, generics was beginning to emerge as a market of enormous potential with the expiry of patents worth $10,000m.and a further $72,000m of expiries between 2002 and 2007. By 2010, 79.7% of blockbuster sales will be exposed to generics, equating to 103.7 billion worth of products. What’s more, in 2007 registration of generics will be centralised which will greatly simplify the prcess, At a global level, the distribution of generic drugs within the pharmaceutical market varies greatly. Within Europe itself there are two clearly distinct groups – Germany, UK and Netherlands, with a market penetration of between 35 and 55% and growth of 30-80%, and countries like Spain, France and Italy on the other, with a market penetration of only 5-15% and growth of below 30%. In 2002, generics only accounted for 4% of the Spanish pharmaceutical market.
Given the especially acute shortfall within the Spanish market, although the company may have global aspirations, its first instinct has been to focus on a national, and even regional market. One of its priorities is to become a recognised laboratory of reference for the region, meeting the Laboratory Best Practices criteria, which will be essential for it to become competitive. The process for development will consist of 10 stages:

i. identification of the molecule to be studied, based on the patents whose expiry is imminent, availability of raw materials and market assessment; ii) identification of potential producer; iii) evaluation of R+D costs; iv) definition of total costs; v) price established for sale of licences; vi) identification of potential customers; vii) development of the molecule; viii) registration; ix) production; x) commercialisation.


The University transfer office was first approached by the Director of the Department of Pharmacy and Pharmaceutical Technology who was seeking partners with investment and business knowhow who might be interested in his ideas. Soon after, a company of consultants, ACITE, who have also collaborated with the University on various other projects, showed an interest. ACITE, which was founded in 1993 specialises in project management, training and research into new technologies.
Once the two bodies were brought together, they quickly began the pre-start up process. starting up the company: potential industrial and commercial partners working in the pharmaceutical market were identified, in particular those who showed special interest in the development of new generic drugs; objectives were defined in the form of production protocols and bioequivalence trials for the commercial interest of generic drugs to be developed; a series of draft agreements were drawn up until the definitive version was agreed upon; they sought government and regional support, specifically, incorporating the company onto the NEOTEC (national funding for the consolidation of NBTFs in Spain; meetings were held with risk capital companies as well as evaluating possible support from the Ministry of Science and Technology, the Regional Castilla y León government through its Development Agency and Institute of Official Credit. The company was formally constituted and registered in February 2004 under the name Laboratorio Farmacéutico USAL-A S.L., and laboratory equipment was acquired and installed within the University. In a second stage, 10 professors from the Department of Pharmacy and Pharmaceutical Technology have taken up shares within the company. As well as overseeing the foundation of the company, the University has a 5% share and has also made laboratory space and equipment available. Once the forthcoming University Science Park has been completed, the company will have a permanent space within it.
The foundation of the company deviated from the original business plan, due to extraneous circumstances such as the change in the University’s governing body. With these unavoidable delays, the drugs targeted by the company for development have been modified.
The first challenges for the company have been to consolidate their position and gain a foothold within the market through official recognition according to government best practice standards. They are also opening complementary avenues for development within the cosmetics and veterinary industries as well as secondary activities in consultancy etc.





Pre-Venture

early 2001-2004

Foundation

2004-5

Near Future

Business Concept

Founder 1 approaches Technology Transfer Office with idea of setting up generic drug company.

Founder 2 contacted. Concept defined as the and start up process begins.

A preliminary business plan is written, in which the Market and technology is defined.


Foundation and preparation for 2nd round financing. Improved and updated business plan. Agreement signed with University of Salamanca. Location with University labs. (120 m2)

Location in the Newly built University Science Park.

Technology platform

Product Market

Definition of shortfalls in Spanish market, analysis of existing companies (Ratiopharm, Alter, Laboratorios Cantabria, Normon, Bayvit) offering generics. 2003 study of potential generics for development (Azitromicin and Pravastatine)

Consolidation of technology.

First product development completed.

Expansion into cosmetics, and veterinary products as a second product line; consultancy work.




Finance

Just under share capital of 140 keur. (5% from the University, 95% to be used for personnel, external collaboration costs materials and supplies, supplementary costs,

Regional development agency funding of 100keur.

Increased share capital of over 300keur.

Staff

Founder 1 – Director Dept. of Pharmacy and Pharmaceutical Technology and Founder 2 Director of ACITE

2 lab technicians and 1 administrative staff member, further 10 university professors as shareholders




Networking

Academic partnerships of Founder 1 and business contacts of Founder 2

Increased scientific networks with University through increased participation by university staff.





Müomeetria Ltd

Spin-off from the University of Tartu


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