WESTGATE EDITION Our Mission: to Advance Purdue University’S Quest for Preeminence in Discovery, Learning and Engagement Through Effective Stewardship of Assets

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INNOVATIONS, COMMERCIALIZATION AND STARTUP GUIDE WESTGATE EDITION Our Mission: To advance Purdue University’s quest for preeminence in discovery, learning and engagement through effective stewardship of assets.

Our Mission at WestGate: To extend key assets and knowledge in Purdue’s Innovation and Entrepreneurial Ecosystem to the WestGate@Crane Technology Park region resulting in technology-inspired growth and activity. Table of Contents

2 Moving Innovations to the Public

3 A Letter From Our Chief Entrepreneurial Officer

4 Technology Transfer Law and Policy

5 Office of Technology Commercialization

6 Licensing to Existing Companies

7 Licensing Agreements

8 Setting Up a Company

10 Business Plans

12 Licensing to Startups

13 Startup Licensing Agreements

14 Support for Purdue Startups

15 Purdue Foundry

16 Entrepreneurial Considerations

17 Resources

18 Securing Federal, State, Local and Private Funding

19 Securing Tax Credits

20 Additional Resources

24 Appendix: Corporate Structures

25 Glossary Moving Innovations to the Public

We encourage you to become an active participant in Purdue’s entrepreneurial environment and invite you to contact us to answer additional questions and assist you through the commercialization and startup process.

Purdue Research Foundation (PRF), Office of Technology Commercialization (OTC), Purdue Foundry and other entrepreneurial programs strive to protect Purdue University’s intellectual property, move innovations to the public through startups and licensing agreements, and provide ongoing amenities to help innovators and entrepreneurs become successful in their endeavors. OTC oversees one of the most comprehensive technology transfer programs among leading research universities in the U.S. OTC protects, markets and licenses Purdue’s intellectual property. The professionals in the department work hand-in-hand with Purdue faculty-, staff- and student-entrepreneurs to provide the resources needed to better understand Purdue policies related to intellectual property and avail support for the processes whereby this intellectual property – patents, copyright, trademarks and tangible research property – can become an actual product or service. Purdue Foundry is an entrepreneurship and commercialization hub at the WestGate Academy located in the WestGate@Crane Technology Park whose professionals assist entrepreneurs with business models and plans, product ideation, customer discovery, market analysis, funding, grant writing and legal counsel.

2 A Letter from Our Chief Entrepreneurial Officer

As an internationally respected research institution, Purdue University strives to create value through the commercialization of new technologies into society to help people live longer, healthier, happier lives. An important avenue for achieving this goal is through the research, development and commercialization of Purdue innovations – something the university already has a long, successful history in accomplishing. In fact, Purdue discoveries across many disciplines including life sciences, engineering, veterinary medicine, crop science and computer technology are used in more than 100 countries and benefit millions of people around the world. Moving a discovery through the patent and commercialization process can be a daunting endeavor. It involves an understanding of patent laws, license negotiation, startup routes, fund resources and many other activities. This handbook, developed by Purdue Research Foundation, is designed to ease the commercialization and startup process by providing a high-level overview and guide for WestGate innovators and entrepreneurs. While not providing all the answers, this handbook will provide you with the basic knowledge about moving innovations to the market through licensing and startup creation. It also will connect you with the numerous resources Purdue makes available to innovators, entrepreneurs and investors including the Purdue Office of Technology Commercialization, Purdue Foundry and other support organizations and learning opportunities where professionals can assist you in protecting your intellectual property and commercializing your innovation. The Purdue Research Foundation is pleased to offer support for taking your idea to impact at the WestGate Academy.

Dan Hasler Chief Entrepreneurial Officer Purdue Research Foundation

3 Technology Transfer Law and Policy

Law and Policy Regarding Technology Transfer The transfer of new technology from university laboratories to the private sector has a long history. Most recently, the impetus resides in the 1980 enactment of P.L. 96-517, The Patent and Trademark Law Amendments Act, and amendments included in P.L. 98-620, enacted into law in 1984 (referred to as ‘Bayh-Dole’). In the 30 years since Bayh-Dole, universities have developed a wide range of technology transfer infrastructures to enable the expeditious and wide dissemination of university-generated technology for the public good. Guided by its altruistic mission, OTC carries out the protection and licensing of Purdue University (Purdue) intellectual property (IP). The purpose of licensing Purdue IP rights and materials is to encourage the practical application of the results of Purdue research for broad public benefit, meet Purdue obligations to sponsors of research, stimulate commercial uptake and investment, spur economic development and ensure an appropriate return of taxpayer investments in Purdue research. 4 Office of Technology Commercialization

Office of Technology Commercialization The Purdue Research Foundation’s Office of Technology Commercialization (OTC) helps the WestGate@Crane Technology Park community with a variety of intellectual property needs including the creation of technology summaries on our marketing websites and identifying technologies that may benefit from being bundled with Purdue Technology and marketed jointly. Workshops are provided to the community related to intellectual property and intellectual property licensing structures and negotiation. Collaborations between the WestGate@ Crane Technology Park community and Purdue Faculty are also facilitated. To learn more about OTC, visit our website. 5 Licensing to Existing Companies

Put simply, a license is a permission given by one party (the ‘licensor’) to another party (the ‘licensee’). In the case of intellectual property (IP), that permission often takes the form of allowing the licensee to use the IP owned by the licensor in an agreed upon manner, but does not involve the licensor selling the IP or otherwise transferring ownership permanently to the licensee. In all cases, Purdue Research Foundation (PRF) aims to ensure that Purdue technologies are licensed to companies able to develop those technologies into products and services. All potential licensees must demonstrate that they have sufficient resources, management talent and plans to see the technology launched as a product. Because of their differing structures, assets and inherent risks, different approaches must be taken when licensing to established companies versus new business startups in order to achieve that same goal; this section deals with the former, the latter is discussed later in this chapter. With either type of licensee, a PRF technology license follows a consistent format. The license begins with a Preamble, which sets forth facts in the agreement, such as the identity of the parties involved and details of the technology being licensed. A definitions section follows, outlining the precise meaning of the terms used throughout. The remainder of the license includes business and legal terms that constitute the details and specifics of the agreement between the parties. The majority of terms in PRF licenses are negotiable. However, certain terms are so important as to be non- negotiable, such as the right of Purdue to use licensed technology for education or non-profit purposes and indemnification of PRF and Purdue by the licensee. Yielding on these terms would negatively impact the principal activities of Purdue and PRF, namely education and scholarly research. Negotiable terms in PRF licenses generally include such things as the ability to sublicense the technology, the field of use and territory in which the license is granted, and financial terms such as considerations due in exchange for the license. PRF’s goal is to tailor the overall balance of these negotiable terms to fit the specifics of each individual 6 licensee and opportunity. Licensing Agreements

use a technology, under limited circumstance and for a limited time, to evaluate that technology. • Tangible Research Property License: IP takes many forms, and inventions that are not patentable or copyrighted can still be licensed. For example, published cell lines or antibodies can be licensed as a tangible property, where the licensee is granted the right to use and sell those materials that were created at Purdue. • License Agreement: This agreement can be tailored to suit many circumstances and generally represents a long-term partnership between PRF and a licensee. Licenses can grant exclusive or non-exclusive rights, such as the right to make, use and sell the technology, and they normally impose obligations on the licensee, such as the requirement to diligently develop the technology into a product or service and to pay an agreed- upon financial consideration. A license can usually be terminated at the discretion of the licensee, but Examples of Licensing Agreements Offered by PRF may only terminate that same license under Purdue Research Foundation predefined conditions, usually involving a material • Option: A simple, short-term agreement, usually breach of the agreement. Upon termination, rights for about 6 months, which gives the first right to the IP revert back to PRF. to enter negotiation for a license to a given • Express License: Under the “WestGate@Crane technology. For the duration of the Option, PRF Innovator Express Start-up License,” Purdue will not actively market the technology or seek innovator(s) who are the founders of their first other potential licensees. In exchange, the party new venture located in the WestGate@Crane receiving the Option often pays a modest fee and Technology Park and formed to develop and typically assumes the responsibility for ongoing commercialize a Purdue technology may apply for IP expenses during the period. This type of an exclusive express license under a standard form agreement is generally used when a prospective of license with pre-set terms. licensee wants the ability to conduct due diligence on the market or technology before entering into a The key to success in licensing Purdue technology full license. is to create a partnership between PRF and the licensee around the mutual interest of seeing Purdue • Commercial Evaluation License: Often, the technologies realized as commercial products and diligence a prospective licensee wishes to conduct services. on a technology cannot be completed without access to samples or data. In this case, commercial Click here to learn more about licensing. evaluation licenses are used to grant the right to 7 Setting Up a Company

There are several legally recognized business structures in the United States including sole proprietorships, general partnerships, C corporations (C corp), S corporations (S corp) and Limited Liability Companies (LLCs). The process of establishing a company’s existence is called “incorporation” and involves filing papers (“Articles of Incorporation” for C and S corporations and “Articles of Organization” for Limited Liability Companies) to set up a new legal entity. There are many decisions to be made at this point, and a company’s characteristics will depend on the choices made by the founders. Professionals working in the Purdue Foundry can advise and assist entrepreneurs in these early stages. While one person can form a company, it is typical for multiple entities or individuals to gain an ownership interest in the company, through a stock purchase for “Navigating through the example. Many third-party service providers can assist commercialization process is a with this process, including providing online services. daunting process for first-time Articles of Incorporation or Organization are filed at the entrepreneurs. Having access Secretary of State’s office for the state in which a person to resources such as the Purdue has chosen to set up a company, and therefore differ Foundry and its entrepreneurs- slightly in form and content. Check the appropriate state websites for further information. in-residence, the Innovation and Entrepreneurship website, Decisions to Make at the Start: and marketing and public At the outset of a new business venture, there are a relations assistance through the number of key decisions that must be made, including, Purdue Research Foundation is a but not limited to: tremendous asset.” • Company Name: This should be unique, memorable and clear of other existing businesses OLIVER WENDT, Ph.D. in similar market spaces; online search tools exist to Co-Founder & Chief Scientific Officer, find available names. SPEAK MODalities, LLC • State of Incorporation: A business can Assistant Professor of Speech, Language, incorporate in any state, but often it incorporates in and Hearing Sciences, and Educational Studies, Purdue University the headquarters state. • Corporate Structure: Many new startups often begin as LLCs, but most growth companies choose a C corp. • List of Founders/Members 8 Setting Up a Company

• Mailing Address: Company headquarters can agreements, and help avoid or resolve conflicts start in a residence, but soon moves to a separate between members by memorializing in writing the space when operations begin. Post office boxes are company’s daily operations and member roles. generally not sufficient. • Corporate Bylaws (C or S Corps): Typical bylaws • Website: This is a modern necessity – secure a include the company’s Name, Object, Members, domain name via one of the established hosting Officers, Meetings, Executive board, Committees, services, and expand the website to be your Parliamentary authority and Amendment process marketing nexus. (NOMOMECPA). • Accounting/Finance System: It is important to • Employment Agreements: Often overlooked comply with relevant federal, local and state tax at the start, these are helpful when dealing with requirements. Keep tax records for a minimum of disagreements or conflicts between founders and three years. early employees. These agreements should discuss • Employer Identification Number (EIN): An EIN roles and responsibilities, titles, compensation, any (also known as a Federal Tax Identification number) equity and vesting terms, duration of employment, is obtained from the IRS and is required for opening grounds for termination, any applicable non- bank accounts or processing payroll. compete clauses, confidentiality of company • Dun & Bradstreet D-U-N-S® Number: This information, work product ownership and dispute free unique identifier for each business location resolution. is necessary to receive government grants or • Non-Disclosure Agreements: Most licenses contracts such as Small Business Innovative require Purdue or PRF confidential information Research grants (SBIRs). (such as patent applications) to be protected • Sales Tax Permit: From the state of company if shared with investors or potential new headquarters. management team members. • Business License: From city/county; grants the Finally, it is important to select service providers in the right to conduct business in that jurisdiction. early days to assist with legal representation and the • Business Insurance: To protect the business. accounting and human resources functions. Licenses from OTC require proof of insurance. • Federal Drug Manufacture Permit: If applicable, Business Entity Guide from the Food and Drug Administration (FDA). Typically, sole proprietorships and general partnerships • Company Logo/Branding Materials: These can are used in single-person businesses or businesses with be developed after the company is established, but a small number of partners. These structures are usually should be in place prior to web or product launch. not suitable for a university-based startup company, This includes trademarks on the company name which is more often incorporated as a C corp, S corp or and logo. LLC. A corporate structure comparison table is provided Other Documents: in the Appendix on page 24. • Operating/Partnership Agreements (LLCs): These agreements, while technically optional in many states including Indiana (but mandatory in several like New York and Missouri) are important, as they protect the company from certain state laws that apply by default to LLCs without such 9 Business Plans

The Purdue Foundry abilities, greater profitability and increased assets. The plan shows how the business will get from here to there. Purdue Foundry is an entrepreneurship and commercialization hub at the WestGate Academy whose Purdue Research Foundation (PRF) requires all potential professionals assist entrepreneurs with business models licensees to submit their plans for the technology and plans, product ideation, customer discovery, market when desiring to enter license negotiations. When analysis, funding, grant writing and legal counsel. A the potential licensee is a startup, a business plan is startup becomes a Foundry Certified Startup once it has requested, and for a previously existing company, a completed an assistance program called the Firestarter. commercialization plan is requested. These plans are After completing this program, an entrepreneur can critical to the licensing process because they provide the begin licensing their technology through the Purdue starting points for the business and financial terms in the Office of Technology Commercialization (OTC). license agreements.

Business Plan Executive Summary A business plan is a written description of a business’ An executive summary should clearly tell the reader future, explaining what the business will do and how about the business, the problem it is solving, the it will do it. Business plans are inherently strategic and magnitude of the market and how it intends to generate should detail a business’ current resources and abilities. sales. The executive summary also clearly states what the This is followed by a clear description of the business business needs from the reader, and in general, should at a point in the future — usually three to five years be short, typically around two pages. out — at which time it will have different resources and

10 Business Plans

Business Description Operations and Management Plan The business description focuses on the current and The operations and management plan describes how future state of the industry, especially the opportunities the business will function on a continuing basis. The for the business. All addressable markets should be plan highlights the logistics of the organization such as described. the various responsibilities of the management team. Each team member’s résumé should be included in the Market Strategies appendix. Market strategies are derived from a meticulous market Financial Plan analysis. A market analysis forces a business to become familiar with all aspects of the market so the target The financial plan is the last section of the business plan. market can be defined, a clear profile of the customer It demonstrates projected company growth, financial is depicted and the company can be positioned to management and resource allocation, which is critical enter the industry and capture a significant share of the to a successful plan. This section brings together the business in that commercial space. information in the prior sections to illustrate how the business will expend capital, generate revenue and Competitive Analysis realize profits over the timeframe of the business plan. The purpose of the competitive analysis is to determine The Business Model the strengths and weaknesses of the competitors within a market. Strategies that provide a company with a In recent years, many leaders in the startup community distinct advantage, barriers that can be developed to have switched their focus from a business plan to a prevent competition from entering the market and any business model. The latter de-emphasizes detailed weaknesses that can be exploited within the product pro forma financials and lengthy market assessments. development cycle should be considered during Instead, it concentrates on the key issues of customer competitive analysis. discovery (Who will buy?), customer validation (Is the product what they want?) and generating revenue. Design and Development Plan Either a business plan or a business model can be The design and development plan provides the reader submitted to OTC to demonstrate the company’s with a description of the product’s design and charts resources and ability to fulfill its commitments under a its development within the context of production, proposed license agreement. marketing and sales. All regulatory steps and strategies to achieve key milestones should be clearly defined. 11 Licensing to Startups

Purdue Research Foundation Policies and understands that this plan is a living document that Agreements will change based on the contemporary fact pattern. PRF and Purdue have dedicated a number of resources Not all technologies or market opportunities can that are made freely available to Purdue faculty, staff support a startup company, but when they can, and students to educate and assist them in the process startups can be a more rapid, powerful and rewarding of developing a business plan or model. For more way for a technology to impact the public when information, contact OTC and the Purdue Foundry. compared to trying to license to existing companies. There are many key differences between a new, As with licensing to existing companies, there are some untested business venture and an established business, terms in PRF licenses to startup companies that are such as structure, culture and financial capability. In still non-negotiable, but agreements can be crafted recognition of these differences, the Purdue Research to fit the particular needs of the startup company and Foundation (PRF) uses a success-based model to circumstances of the license. Startup company licenses license Purdue University technologies to new startup are generally exclusive, meaning the technology companies with minimal fees taken from the startup cannot be licensed to another party and often have company during development. Every effort is made broad scope in terms of the technical field of use and to ensure that a startup company is given the greatest geographic territory to give the startup company chance to thrive, and that PRF and the innovators the greatest flexibility in identifying and pursuing the can share in the company’s later success. To that end, appropriate market opportunity. The business plan of a PRF has created a variety of policies and agreements startup company should describe how opportunities in designed to get startup companies access to the all the identified market segments will be pursued. technology they need to develop without hindering There are several specific agreements that PRF has their ability to succeed. made available, under defined conditions, to WestGate All startup companies require a well-developed and Crane innovators in an effort to give entrepreneurs business plan or business model to demonstrate the greatest chance of success in commercialization of that the founders have thought of the critical issues Purdue technologies. surrounding the market opportunity of interest. PRF 12 Startup Licensing Agreements

Examples of Startup Licensing Agreements Offered by PRF • SBIR/STTR Option: PRF offers a zero-initial fee option for startups with direct involvement from Purdue innovators that are awarded Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) funding, and use at least 30 percent of the granted budget to support further R&D at Purdue. • Express License: WestGate@Crane innovators who are founders of their first new venture formed and located in the WestGate@Crane Technology Park to develop and commercialize a Purdue technology may be eligible for an exclusive express license with preset terms. This license has no upfront fees, defers reimbursement of patent costs and provides a quick and easy option for licensing innovations that are not encumbered by third-party obligations. Startups are important to PRF, both as a key indicator of PRF’s success in developing the entrepreneurial ecosystem at Purdue and in their economic impact on the region and State of Indiana. It is PRF’s clear intention to make the process of starting a new venture based on a Purdue technology as simple and transparent as possible, while providing the support necessary through OTC and the Foundry for entrepreneurs to develop their ideas into prosperous companies.

13 Support for Purdue Startups

Funding Sources for Purdue Innovations PRF’s Purdue Ventures provides support through four initiatives for startups, speeding the process from innovation to commercialization.

• Foundry Investment Fund - Established through • Purdue Ag-Celerator - A $2M fund supported a partnership between Purdue Research Foundation through the Purdue Moves initiative. The program and Cook Medical, the $12 million not-for-profit works specifically with companies commercializing fund seeks to join with other investors to fund Purdue intellectual property or Purdue know-how companies that are based on Purdue technology or technologies in plant sciences. The process includes expertise in the areas of human and animal health the completion of the Foundry’s Firestarter program and plant sciences. and working closely with Foundry Entrepreneurs in Residence. The culmination of the Ag-Celerator • Elevate Purdue Foundry Fund - A $2 million is a Demo Day where participants compete for fund created through a collaboration among $100,000 of investment in their company. Purdue Foundry, Elevate Ventures and the Indiana Economic Development Corporation. Qualified • Purdue Alumni Fund - A fund dedicated to Purdue-affiliated startups may apply for two tiers investing in early-stage companies that are based of funding: the “Black Award,” a $20,000 convertible on Purdue Intectual Property. nonrecourse note, and the “Gold Award,” for up to an For further assistance in identifying funding sources, additional $80,000 debt or equity. contact the Purdue Foundry. 14 Purdue Foundry

Purdue Foundry professionals offer an entrepreneurial assistance program called Firestarter. The program provides entrepreneurs with resources and services aimed at accelerating the progress of a startup and helping to improve chances for success including key elements of articulating a value proposition, creating a business model, developing an investor slide deck and validating the idea in the market.

Purdue Foundry The Foundry team includes Entrepreneurs-in-Residence and a Director of Collaborations. The The Purdue Foundry (Foundry) at WestGate Academy Entrepreneurs-in-Residence draw on their own exists to help inventors, entrepreneurs and researchers entrepreneurial experiences in order to advise and assist turn their ideas into startups. The Foundry mobilizes companies as they seek to create and implement their Purdue’s entrepreneurial resources that are aimed at unique business model. The Director of Collaborations launching new ventures. Located in the WestGate seeks to identify experienced Purdue and NSWC Crane Academy, the Foundry builds on the strong alumni who are willing to provide advice to new entrepreneurial activities already taking place in the companies and entrepreneurs based on their specific center and has created an entrepreneurship and technical, business and entrepreneurial experiences. commercialization hub ‘where learning becomes doing.’ With both the Entrepreneurs-in-Residence and the Assistance for Entrepreneurs Director of Collaborations, the Foundry is leveraging vast networks in order to provide insight and direction The process at the Foundry begins with ideation to new ventures. activities aimed at refining and determining value propositions for the idea and potential pathways to the If Purdue innovators have a new idea, the Foundry team marketplace. can help them think through the pathways to create a new company or commercialization strategy. 15 Entrepreneurial Considerations

The life of an entrepreneur can be challenging and be real, and the ability to gain market share must be rewarding, but it is often fraught with paradox. There based on solid, early customer feedback rather than a are many considerations that ultimately lead to the simple percentage of the market. Entrepreneurs with success of an entrepreneur and startup. A few key deep market understanding are best positioned to success factors are highlighted below. articulate their value proposition. Demonstrating the value proposition through a working prototype is a Commitment is an absolute requirement. An critical step to introducing an idea into the marketplace. entrepreneur who truly believes in an idea and wants Startups should be prepared to partner as market others to do the same must be “all in.” Seeing an idea strategy often extends beyond the existing company to fruition requires an honest assessment, which will or team, requiring partnerships with companies with drive and shape the company and team. That level existing market share or imbedded sales forces. of commitment and passion will build relationships, secure partnerships and drive an equal commitment Execution of an idea requires a dedication to success. from the team. That dedication ultimately will require a full-time CEO with experience. Entrepreneurs are often faced with Building the Team may be more important than the the realization that their skills are better utilized in idea itself. Successful companies are built on great non-CEO roles in the company. An entrepreneur will teams with diverse skills and experience that can mold, likely have more good ideas than resources and will be shape and adapt ideas to make a company successful. forced to focus and choose. It is unlikely that there is When building a team, entrepreneurs should be only one right way to proceed, making it important to aware of the weaknesses within themselves and their find opportunities and move forward. Listening to the team, and carefully consider how to balance them team and customer is of critical importance. Customer with people who want to make a difference and solve interaction should not be delegated, as early feedback problems. Establishing trust will help navigate the will help the team improve execution. Milestones are a inevitable challenges ahead. The sequence of adding critical part of execution, but also may require flexibility team members should be informed by the sequence of as knowledge and experience increase. Be prepared established goals and milestones. for course corrections and some initial failures that will Go-to-Market Plans require a deep understanding inform how the company navigates through obstacles of the market and market segments. The market must in the future. 16 Resources

WestGate@Crane Technology Park Lock & Key Coworking Space Over thirty Fortune 500 companies and small WestGate@Crane Technology Park created this businesses call the WestGate@Crane Technology Park coworking space to further enable the park as the home. WestGate is the state’s only tri-county tech Gateway to the Future. Just outside NSWC Crane park, encompassing parts of Daviess, Greene, and and inside a technology park with more than 30 Martin counties. This unique partnership provides a companies in the high-tech defense industry, The Lock strong base of local support for the WestGate@Crane & Key coworking space is an ideal location for the next Authority, a nine-member board created to develop big idea to become a reality. Consider The Lock & Key and manage the tech park. WestGate’s proximity to when you begin collaborating on your next project, NSA Crane provides the perfect location for start-up network with other professionals to discover new businesses and large corporations seeking technology opportunities, or individually build your next business transfer from NSWC Crane. venture.

17 Securing Federal, State, Local and Private Funding

Support for entrepreneurs from various federal, state, • Elevate Purdue Foundry Fund: A $2 million local and private funding can come from a number of fund created through a collaboration among resources including: Purdue Foundry, Elevate Ventures and the Indiana Economic Development Corporation. Qualified • SBIR/STTR: Provides funding opportunities in the Purdue-affiliated startups may apply for two tiers federal innovation research and development arena of funding: the “Black Award,” a $20,000 convertible in the form of grants and/or matching grants. nonrecourse note, and the “Gold Award,” for up to an additional $80,000 debt or equity. • Indiana Economic Development Corporation (IEDC): Oversees programs enacted by the General • Regional Economic Development: Daviess, Assembly including tax credits, workforce training Greene and Martin Counties stand ready to provide grants and public infrastructure assistance. assistance aimed at helping you settle and grow in our region. All three counties are partners in the • Venture Club of Indiana: Helps entrepreneurs and WestGate@Crane Technology Park. investors succeed by creating an entrepreneurial, business-friendly environment attractive to • Purdue Ag-Celerator: The Ag-Celerator is a investors. $2M fund supported through the Purdue Moves initiative. The program works specifically with • Elevate Ventures Inc.: Nurtures and develops companies commercializing Purdue intellectual emerging and existing high-potential businesses property or Purdue know-how technologies in plant into high-performing, Indiana-based companies. sciences. The process includes the completion • Foundry Investment Fund: Established through a of the Foundry’s Firestarter program and working partnership between Purdue Research Foundation closely with Foundry Entrepreneurs in Residence. and Cook Medical. The $12 million not-for-profit The culmination of the Ag-Celerator is a Demo fund supports startups originating from Purdue Day where participants compete for $100,000 of innovations. investment in their company. • Purdue Alumni Fund: The Purdue Alumni Fund is dedicated to investing in early-stage companies that are based on Purdue Intectual Property.

18 Securing Tax Credits

State Tax Credits registered securities. The JOBS Act was passed by Congress in 2012 and the SEC continues to make rule The Indiana Economic Development Corporation announcements that have helped to define what is or is website states: "The Venture Capital Investment Tax not permitted under the Act. Crowdfunding, accredited Credit program improves access to capital for fast investor status, general solicitation, advertisement and growing Indiana companies by providing individual and other topics have been impacted. For the most recent corporate investors an additional incentive to invest in and accurate information, visit the SEC. early stage firms. Investors who provide qualified debt or equity capital to Indiana companies receive a credit Angel Investing against their Indiana tax liability." Purdue has been active in the angel investment arena The state of Indiana also offers an R&D tax credit. More through its P3 Alliance, the Purdue angel investment information is available online. network; the Venture Club of Indiana; and the Angel Capital Association. For more information on these Jumpstart Our Business Startups (JOBS) Act resources, contact the Purdue Foundry. A great deal of information has been published regarding investment in startups through non-

19 Additional Resources

Learn About Entrepreneurship Purdue Research Foundation Office of Technology Commercialization Workshops are provided to the WestGate community related to intellectual property and intellectual property licensing structures and negotiation. Interns for Indiana Enhances student learning through hands-on experiences with Indiana startups. Interns gain firsthand understanding of entrepreneurship along with enhanced technical, professional and communication skills. The Young Entrepreneur Program Assists young entrepreneurs on how to make their business plans become a reality in Indiana. Starting a Company Purdue Foundry @ WestGate Academy Provides support for business plans, prototype development, funding sources, finance opportunities, regulatory requirements and mentoring, and can offer advice on other entrepreneurial activities. Indiana Secretary of Commerce: Business Opportunities Offers resources to start a business, relocate a business and obtain business licenses and permits, as well as information on job resources and labor law. 20 Additional Resources

Indiana Economic Development Corporation (IEDC) Venture Club of Indiana

Oversees programs enacted by the General Assembly Helps entrepreneurs and investors succeed by creating including tax credits, workforce training grants and an entrepreneurial, business-friendly environment public infrastructure assistance. attractive to investors. Elevate Ventures Inc. Small Business Development Centers (SBDC) Nurtures and develops emerging and existing high- Provides assistance to small businesses and aspiring potential businesses into high-performing, Indiana- entrepreneurs. based companies. Fund Your Innovation Purdue Ag-Celerator Foundry Investment Fund The Ag-Celerator is a $2M fund supported through the A $12 million not-for-profit fund to support startups Purdue Moves initiative. The program works specifically originating from Purdue innovations. with companies commercializing Purdue intellectual Elevate Purdue Foundry Fund property or Purdue know-how technologies in plant sciences. The process includes the completion of the A $2 million fund created through a collaboration Foundry’s Firestarter program and working closely with among Purdue Foundry, Elevate Ventures and the Foundry Entrepreneurs in Residence. The culmination Indiana Economic Development Corporation. Qualified of the Ag-Celerator is a Demo Day where participants Purdue-affiliated startups may apply for two tiers compete for $100,000 of investment in their company. of funding: the “Black Award,” a $20,000 convertible Purdue Alumni Fund nonrecourse note, and the “Gold Award,” for up to an additional $80,000 debt or equity. The Purdue Alumni Fund is dedicated to investing Trask Innovation Fund (TIF) in early-stage companies that are based on Purdue Intellectual Property. Assists faculty with funding to further the commercial potential of technologies disclosed to the Office of Technology Commercialization (OTC). 21 Additional Resources

Build a Prototype Find Entrepreneurial Programs Invention City: How to Make Invention Prototypes Indiana Clinical Translational Sciences Institute (CTSI)

Provides various resources to build prototypes. Works to increase translational biomedical research and improve the health of people of Indiana and beyond Startup Nation: Getting an Invention Prototype Built through a statewide collaboration of Indiana University, Purdue University and the University of Notre Dame. Offers advice about moving your invention prototype TechPoint from your mind’s eye to a reality that will help you commercialize your product. Represents Indiana’s entire technology community. Look for Space There are no restrictions on involvement in TechPoint other than being a company or professional that is WestGate@Crane Technology Park interested in the success and growth of Indiana’s tech Provides space for incubating companies, startups and sector. expanding companies just outside NSWC Crane. Foundry Grounds WestGate Academy A weekly gathering of the entrepreneurial and inovation WestGate Academy Conferencing & Training Center community for learning and networking. is the crown jewel of WestGate@Crane Technology Spirited Entrepreneur Park. This spacious, state-of-the-art facility opened A monthly gathering to network and connect the its doors in October 2012, and since then it has been innovation and entrepreneurial communities with serving the needs of NSWC Crane and the surrounding talent, funding and other resources. communities. The Academy offers space for events, training and office space for lease. The Academy is Indiana University Law School Clinics home to the Lock & Key Coworking Space. Indiana University offers legal clinics that can assist technology companies with a variety of legal matters. 22 Additional Resources

Collaborate with Purdue Investment Opportunities Purdue Office of Engagement Purdue Office of the Executive Vice President for Research and Partnerships Helps the University use its human, intellectual and fiscal resources to address issues that affect the prosperity Oversees research development, funding, research and quality of life for people in Indiana and around the partnerships, policies and integrity and regulatory for world. Purdue faculty, staff and student researchers. Purdue Enterprise Company P3 Alliance Combines the knowledge of expert faculty from across Provides investors with an interest in furthering the the many departments at the University with the needs mission of Purdue University and Purdue Research of cutting-edge businesses. Foundation to obtain the First Look advantage for investing in the companies that are commercializing Find Interesting Technologies technologies. Purdue Office of Technology Commercialization (OTC) Operates one of the most comprehensive technology transfer programs among leading research universities in the United States. 23 Appendix: Corporate Structures

The following table provides basic information on certain corporate structures that may be of interest for new ventures. This information is for informational purposes only and is neither a recommendation or endorsement of any type of corporate structure nor a replacement of advice from tax and corporate professionals.

C-Corp S-Corp LLC Business losses, profits, Business losses, profits, Federal Corporate tax and expenses flow and expenses flow Double brackets depending on net Pass-through through the company Pass-through through the company Taxation income, state and some to the individual to the individual local corporate tax. Tax shareholders. members. The profit is taxed to the corporation Ordinary income tax on wages (including Ordinary income tax on net income when earned and then is taxed to SS and Medicare), but no FICA tax for (including SS and Medicare the shareholders when distributed as SS or Medicare for distributions; wages on all). dividends (qualified lower dividend rate). must be reasonable. File with a state, pay fee, and provide File with a state, pay fee, and provide articles of incorporation. Requires articles of incorporation. Requires holding an initial meeting of directors election of subchapter S with the IRS; File with a state, pay fee, and provide and shareholders, adoption of bylaws, drafting of bylaws; holding an initial articles of organization and entity Formation and and recording of minutes; issuance meeting, adopting bylaws, electing classification elections with the IRS other formalities of shares of stock to shareholders; directors, and recording of minutes; (minimal formalities), operation creation of a stock ledger; creation of a creation of a stock ledger; creation of a agreement not necessary, but corporate book; filing of annual reports; corporate book; filing of annual reports; recommended. and holding annual and special and holding annual and special meetings of shareholders. meetings of shareholders. Membership interest of the decedent ends and only economic interests Survives individual shareholder’s Survives individual shareholder’s survive (unless otherwise stated in the Duration death or bankruptcy. death or bankruptcy. operation agreement). Single member LLC dissolves with the death of the sole-member. Limited liability (subject to piercing Yes Yes Yes the corporate veil and other limitations) Two classes: Common stocks and One class, but can be voting and Units of membership, but LLC Types of Stock preferred stocks non-voting stocks. cannot issue stocks. It is a U.S. corp, no more than 100 Anyone (nonresident aliens, shareholders, U.S. Who Shareholders: Anyone Shareholders corporations, trusts, partnerships, citizens and resident other LLCs, etc.) aliens, and certain trusts and estates. Ability to file for initial Not practicable (limitation on number Yes No public offering of shareholders) Growth companies that may go public Mostly small companies that do not Growing profitable companies seeking Best suited for in the future, but not there yet, seek to desire the complexity of formalities of outside investors. take advantage of tax benefits. C-corps and S-corps. Profit sharing based on percent Profit sharing Flexible profit sharing Flexible profit sharing ownership. 24 Glossary

Business Description: The Business Description Design and Development Plan: The purpose of focuses on the current and future state of the industry, the Design and Development Plan is to provide the especially in regards to the opportunities for a business. reader with a description of the product’s design, chart its development within the context of production, Business Model: A startup company’s Business Model marketing and sales. All regulatory steps should be concentrates on the key issues of customer discovery clearly defined, as well as the strategies to achieve key (who will buy?), customer validation (is your product milestones. what they want?) and generating revenue. Diligence: Efforts toward development of a product or Business Plan: A Business Plan is a written description service. of a business’s future, a strategic document that describes what the business plans to do and how it Executive Summary: An Executive Summary sets plans to do it. forth high-level information about the business, the problem(s) to be solved, the magnitude of the market Competitive Analysis: The purpose of the Competitive and how the business intends on generating sales. Analysis is to determine the strengths and weaknesses of the competitors within the market space of a startup. Field of Use: Field of Use could be unrestricted, or could be limited to human or veterinary applications. Consideration: Exchange of value in a legal contract. In the context of a technology license, this value Financial Plan: A Financial Plan is a critical component often takes the form of the grant of license transferred of a Business Plan, illustrating projected company from the Licensor, and money, e.g., fees and royalties growth, financial management and resource allocation. transferred from the Licensee. Co-working Space: Shared office space that provides independent work space that typically includes desks, conference rooms, 24-hour secure access, Internet access and a business center. 25 Glossary

Financing: The seeking of funds to support a startup Provisional Application: A confidential, time limited company. Financing generally takes different forms patent application that is unexamined, first must meet depending on the stage of the company, from personal sufficient written description requirements under patent capital or loans, to government grants, angel investor law. and venture capital funding, and public share offerings. Public Disclosure: Any non-confidential Indemnification:To protect someone by promising to communication which an innovator(s) makes available pay for the cost of future damage, loss or injury. to the public the existence of an invention and enables an individual to reproduce the invention. Intellectual Property (IP): A work or invention that is the result of creativity, such as a manuscript or a design, SBIR: The Small Business Innovation Research (SBIR) to which one has rights and may apply for a patent, program is a United States government program, copyright, trademark, etc. coordinated by the Small Business Administration, in which 2.5 percent of the total extramural research License: A permission to use, generally used to refer to budgets of all federal agencies with such budgets in an agreement between a Licensor and Licensee to grant excess of $100 million are reserved for contracts or permission to use a technology. grants to small businesses. Licensee: The recipient of a License. STTR: The Small Business Technology Transfer (STTR) Licensor: The individual or entity granting a License. program uses a similar approach to the SBIR program to expand public/private sector partnerships between License Scope: The extent of the rights granted in a small businesses and nonprofit U.S. research institutions. License. For example, License Scope could include the It currently is funded at 0.3 percent of the relevant geographic region in which a license is granted and agencies’ extramural research budgets. whether the license is to use a product or also to make that product. Sublicense: A license between a Licensee and a third party, granting that third party the use of some or all of Market Analysis: A Market Analysis defines a target the Licensee’s rights under the initial license. market, a clear profile of potential customers and how the company can be positioned to enter the market. Technology Assessment: A multipart assessment process of a new Purdue technology including Operations and Management Plan: An Operations marketability and patentability analyses. and Management Plan describes how a business will function on a continuing basis. It highlights the logistics Technology Disclosure Form: A form via which of the organization such as the various responsibilities of innovators can disclose potentially patentable the management team. technologies to the Purdue Office of Technology Commercialization (OTC). PCT Application: An international patent application filed under the Patent Cooperation Treaty that can be U.S. Non-Provisional Application: A U.S. patent used to file nationalized applications after 30 to 31 application that is examined by the U.S. Patent and months in various countries and territories. Trademark Office. Warranty: A written statement promising the good condition of a product and its suitability for a particular purpose. 26 Send correspondence to: Visit these Web sites for more information about the Purdue Research Foundation, the Office of Technology Commercialization and the Chief Entrepreneurial Officer Purdue Foundry: Purdue Research Foundation Herman and Heddy Kurz Purdue www.prf.org Technology Center www.prf.org/otc 1281 Win Hentschel Blvd. www.purduefoundry.com West Lafayette, IN 47906 www.prf.org/researchpark www.prf.org/innovation-and-entrepreneurship Email: [email protected]