A free online course "Beyond Silicon Valley: Growing Entrepreneurship in Transitioning Economies" taught by Professor Michael Goldberg of Case Western Reserve University launched through Coursera in April, using Cleveland as a funding case study. Come back to Entrepreneur.com as we feature additional interviews with experts and instructors connected to the six-week course. For more in the series, check out Think Like Cleveland.
In 2008, while he was getting his MBA at Stanford, Neundorfer got a call from Jim Petras, managing director of Early Stage Partners, a venture capital firm in northeast Ohio. Petras' firm had invested a million dollars that year in a technology that would improve the performance of automated and industrial processes from washing machines to equipment used in manufacturing.
The technology had been developed for more than a decade by Zhiqang Gao, a professor of electrical and computer engineering at Cleveland State University, but it needed a savvy business person to turn it into a profit-turning company. Neundorfer decided to work on the company, LineStream, as his MBA final project. When he graduated he became president and CEO.
Eventually, LineStream would partner with Texas Instruments and even raise $6 million in funding from the Silicon Valley-based firm U.S. Venture Partners. But getting there took a lot of work. Universities are filled with great business ideas and technologies waiting to be monetized. Still, getting there takes business know-how and funding. "The challenges are the same challenges all early-stage companies have," says Petras. "There's a scarcity of early stage capital. You really have to fight for funding."
Here are some key steps LineStream took to move out of the research lab and into the business world:
Make your story known. In 2005, before LineStream was even a business, Gao competed in a business plan competition through NASA's Glenn Research Center. That contest not only won Gao the competition and $50,000 in seed funding, it caught him the attention of Petras who served as one of the judges. Presenting at competitions isn’t a budding entrepreneur’s only option. White papers, newspaper articles and presentations can all help get an idea in front of investors. Reaching out to companies or potential customers who might benefit from it and getting their testimonials is also a powerful way to get your idea out into the world. "Get your name and story out there and start building credibility," says Neundorfer.
Move away from the abstract. The language used in academic research is often too abstract to hook customers, let alone investors. It's important to translate research findings and explain, very simply, how your innovation solves a problem. This can come in the form of simulations, prototypes or even by quantifying your results or findings in terms of concrete dollar-and-cents, rather than academic jargon. "You have to be able to demonstrate the value of your idea and make it connect with an audience that understands metrics like dollars saved, dollars made or value delivered," says Neundorfer.
In its early days before LineStream competed in the NASA competition, Gao reached out to manufacturers in northeast Ohio that used equipment lines. One of them showed interest in using his technology to improve its manufacturing processes, and while Gao wasn't yet ready to take the technology to market, that interest from a large manufacturer gave him a viable example to show investors. "Make it real for the potential customer and investor," says Neundorfer. For LineStream -- "the big breakthrough was when they got interest in doing an implementation for a major industrial company," he says.
Realize patents do more than protect you. Gao had applied for patents on his technology in 2003, even before approaching investors. According to Neundorfer, the patent applications became the bedrock of the company's tech transfer agreement – the process by which a technology is licensed from a university for commercial use. By showing that they had software and actual tangible assets that could be handed over, they made the investment more attractive.
While research within the university setting doesn't have to deal with all of the complications of commercialization, if there's a technology or idea in the university space that you're even remotely considering bringing to commercialization, having those patents to protect you is key. They also give investors piece-of-mind that you are thinking ahead about protecting and monetizing your idea.
Get a business brain involved. Once LineStream secured its first $50,000 in funding, Petras' firm, which is made up of Ohio- and Michigan-based institutional funders, showed interest in also investing in the technology. LineStream got a first round of $250,000, but to get the next $750,000 from Early Stage Partners, it would need to meet certain milestones it had set for itself. Gao, part of university faculty, was absorbed in research. To move forward, finding someone who could commercialize the technology -- and help run the business -- was critical, which is why Neundorfer was brought on board.Answer the question: Why now? Being able to convey why the product is relevant for investors is critical. Gao spent most of his professional career researching this topic, but just because his research had reached a finishing point, didn’t mean the market needed the technology. Fortunately, Gao could pinpoint that the technology was coming to market at a time when energy efficiency was critical in the marketplace. "We are replacing a technology that's over 70 years old," says Neundorfer. "You can tell a very good story about why the time is now. … Making it relevant is definitely critical."
More From Entrepreneur