imagen

Funding via PartnershipPamela Lipson

Case study: ImagenPartnership parameters

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MIT Enterprise Forum, September 18, 2003

No Money Down: Raising Capital from Unconventional Sources

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Funding options as a function of Markets and Technologies

Technology Maturity Emerging Mature

Emerging

MarketMaturity

Mature

CustomerFunding

FlexibleFunding

Many funding options

here

(VC)

Fixed-fundedproject

Let’s consider a concrete example…

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Imagen technologyTHE PROBLEM: Visual pattern recognition over

a wide range of acceptable variations.

UnacceptableVariations

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Imagen technology at work: Potential Markets

Image web search

Face Recognition

Trademark Search

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Looking for a Partner

• Secure funds to develop technology for a particular market

• Find a partner who is already in the general business to shoulder most of the market risk

• Develop a relationship that would allow both parties to work together to match the technology to the market needs

• Gain experience creating a commercial product

• Develop intellectual property base

• Develop name recognition

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Imagen and Teradyne find an opportunity to explore together

Chip Shooter Fine PitchPlacement

ReflowScreen Printer

Printed circuit board manufacturing:

Opportunity to visuallytest boards while theyare being manufactured

INSPECTIONSYSTEMS

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Imagen’s technology extends to printed circuit boards

Parts and boards have a wide range of acceptable appearances.This variation must be distinguished from true defects.

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Partnership through thick…

• 1998, Imagen & Teradyne start in earnest

• Initial targets: Large US electronic manufacturers (EMS)

• 1999, Successful Beta test with large-cell-phone-manufacturer

• 2000, Begin to ramp production for first customer ship

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Partnership through thick and thin

• 2000 high tech crash, reduction in demand for electronics

• Manufacturing sites & buying decision ‘center of gravity’ changes to Asian areas

• New indigenous competitors pressure western Average Selling Prices

• End-product & technology evolution result in a change in product requirements

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Teradyne and Imagen react together• Imagen enhances technology to address new product requirements

• Teradyne works on machine infrastructure & cost down

• Teradyne and Imagen form a heavy-weight (multi-disciplinary) team to focus on Asia wireless accounts (early adopter for in-process test)

The results…

•Break-in accounts in China, Taiwan, and USA

•Evaluations starting in Korea, Japan, and Europe

•First long term studies of machine’s performance

–End of line defects reduced by an order of magnitude

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End of case study

Now for some general remarks about partnerships.

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Partnerships:Advantages• Funding sufficient to weather the storm

• Can approach markets & products that do not follow traditional VC return curves.

• Partner brings significant assets to the table– Experience– Access to the market– Brand recognition.

Disadvantages• Dependence for possibly critical functions

• Inherited inertia from bigger partner

• Difficult to transition to other markets and other products.

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1. Funding for technology development– Fixed/ Variable based on Milestones

2. Monetary Rewards – technology milestones

– sales milestones

3. Intellectual Property ownership– Original IP/New IP

– Field of Use, geography, period of time, customer segment

4. Equity

5. Marketing control of product and technology

6. Sales control

7. Separation Criteria

Pre-nuptials for a Successful

Partnership?

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Conclusion:For an emerging technology in an emerging market –

partnership is a good funding choice

lipson@imagen-inc.com

Technology MaturityEmerging Mature

Emerging

MarketMaturity

Mature

CustomerFunding

FlexibleFunding

Via partnership

Many funding options

here

(VC)

Fixed-fundedproject