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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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
Technology MaturityEmerging Mature
Emerging
MarketMaturity
Mature
CustomerFunding
FlexibleFunding
Via partnership
Many funding options
here
(VC)
Fixed-fundedproject