By Ron Peterson, President of Three Arrows Capital in Bethesda, MD (Published 6/23/03)

The richest man in the world bought a technology from a company that had no further application for it, adapted it to a new market, and made economic history. Bill Gates paid $50,000 for DOS and contracted with IBM for its use as the operating system for their new PC. Larry Ellison, CEO of Oracle and contender for the number one wealth spot, took much the same approach. He adapted a data-base management system that he read about in a white paper, invested $6,000 plus any funds he could spare from his consulting practice while developing his company, and became a multi-billionaire. Both Ellison and Gates were on the cusp of new and giant markets, they both leveraged their networks and accelerated sharply on the back of key contracts. Were these two just lucky?

What were the ingredients that made Microsoft and Oracle phenomenally successful firms? They both had intriguing technologies that were hardly products ready for the market, they both added some money (although not much), they both saw new markets and an avenue to use that technology to tap into those markets, and they both were led by excellent managers while gathering talent around them. Does this sound so difficult and is it something you could do yourself?

At the U.S. Army’s Aberdeen Proving Ground north of Baltimore, MD, in March 2003, along with hundreds of others, I was briefed on technologies that were developed for military applications but were seeking homes in the commercial world, under the sponsorship of Maryland TEDCO. At Aberdeen, among dozens of intriguing innovations, the Army Research Laboratory showed a patented and low-cost new acoustic sensor that can be worn around the wrist and continually emits wireless data on heart rate, breath rate, blood pressure, voice, food intake, trauma, falls and other data. With an aging population, couldn’t that device be adapted to monitor the elderly and ease the anxiety of millions of adult children who worry about their frail parents? Couldn’t that same device monitor sleep apnea in newborns, asthma in children, etc.? Could a person contract with the Army to commercialize the sensor, place a couple of ads in magazines, and see if it would sell? Could a person test whether they have the elements for a company and a good market for the price of a couple of ads? (Richard Thalheimer did just that to start the Sharper Image and Lillian Vernon did it earlier for a company she sold later for tens of millions of dollars.)

The Army, along with many other federal agencies and hundreds of universities, is involved in technology transfer, the process of taking developed or partially developed technologies and making them commercially viable. In Maryland where Aberdeen is located, dozens of new companies have taken such technologies, been partially funded by state grants, investments or loans, developed a market, added personnel and produced successful companies.

The ingredients are technologies that become products, money, markets and personnel. The entrepreneur is the one who selects the ingredients, in their right proportions and at the right time assembles them to create and nurture a company. The acoustic sensor joins tens of thousands of well-developed technologies that are begging for the far-sighted visionary that can develop a business model and find true commercial applications for the work. Basic ingredients for new businesses surround us.

Corporations are a source for these technologies as well. Proctor & Gamble maintains a website that lists over one-hundred technologies for products that can be licensed (www.yet2.com). These products typically don’t fit P&G’s mega-market strategies, but in the right hands may be just the thing to make you a few million. Technology transfer offices at universities and federal laboratories are the places to start talking and perhaps looking, and occasionally can even facilitate what you want to do. Websites such as those at the Robert C. Byrd National Technology Transfer Center (www.ntte.edu) are just one of many places to start. www.TechPharma.biz magazine out of London is devoted to the life-sciences and you’ll find many sources when you do a web-search. Federal labs, universities, and corporations alike are under pressure to find commercial applications and new sources of revenue from the work of their creative scientists and engineers. You should find a welcome when you illustrate your intent to make something out of their assets, and return a benefit in the form of royalties, licensing, etc.

You’re also not alone when you seek to form a new company. Some state agency and county economic development groups will open doors for you when you show a business model that can become a significant employer within their jurisdictions. Very innovative commercial groups such as www.t-broker.com in London and Australia’s incredibly creative Jigsaw Group (Jigsaw@mypostbox.com) are resources to be tapped as organizations bring their ingredients together and make them ready for global markets. These are organizations that have helped build many technology-based firms, and there are similar companies here such as Battelle (www.Battelle.org, the people who originally funded what became Xerox, in the 1940s). Sign up for Tom Lambert’s free newsletter, Consultants’ Consultant, at www.tom-lambert.org if you want to have your mind stretched in new business directions. www.ecademy.com is the place to learn new marketing avenues, also a free newsletter. We’ve listed sources of innovation, help, funding, technology, etc., in When Venture Capitalists Say ‘No’—Creative Financing Strategies & Resources at www.ThreeArrowsCapital.com. One story of how Henry Ford started the Ford Motor Company one-hundred years ago is at the website and illustrates how he gathered the resources to become one of history’s most successful entrepreneurs, starting with nothing.

The key to forming new companies, such as Microsoft and Oracle, is not to find a partially developed technology that has a long lead time and require a huge expense to bring to market. Instead, the job is to identify something and bring it to a different market. This is the creative task of the entrepreneur, not that of coming up with the idea and developing the technology—that’s the job of the scientist or engineer. Sure, you can do both, but it’s far less risky to focus on one element that gives you quick feedback than to invest years and money in something that may or may not be accepted by the market.

A prominent Hollywood actor with an environmental bent used a technology developed at the Federal Nuclear Reactor Laboratory in Idaho as the basis for a new company and a generation of innovative centrifuges. He introduced the devices to separate out spilled oil from sea water, and found added markets in the chemical and pharmaceutical industries. Thousands of other entrepreneurs have examined what is sitting on the shelf and had eureka moments to see the markets that would give these technologies value. The essential step in doing this yourself is to start looking at these technologies. Chances are your closest university has a technical transfer department that would be a good place to start. The University of Minnesota had a perfectly good browser called “Gopher” that predated Mark Andreesen’s billion-dollar success, Netscape, but never made a dime from it. The University of Pennsylvania created the world’s first computer but had to settle for the honor, not the cash. The history of technology is filled with similar stories from Oxford University’s work on penicillin on up to the present day.

While looking and thinking of various technologies can help get your creative juices flowing, a good deal of will and determination marks the successful entrepreneur. Doug Humphrey, one of the early Internet Service Providers, knocked on the doors of 200 venture capitalists before finding the money he needed to develop his company (Digex was sold later for $170 million). There are few of us who could handle so much rejection, especially if we weren’t absolutely driven by the conviction that we’re right. While the press regularly reports the decline in spending by venture capitalists, and trumpets this facet as strangling economic growth, nothing could be further from the truth. There are many sources of funds for deserving and well-developed business models, but not anymore for selling fifty pound bags of pet food on the web. Investors need places to put money, and declining stock markets and low bond yields severely limit their arenas—your company may be just the thing that they should invest in.

This is the time for your creative juices to flow. Add the ingredients of energy, purpose and finding or seeing congruence with existing and new markets. Identify the right time and right place, test out what will work, and find yourself in a new career path.

Abstract from a new book “When Venture Capitalists Say ‘No”—Creative Financing Strategies & Resources” by Ron Peterson, http://www.threearrowscapital.com/. 

Ron Peterson, President of Three Arrows Capital in Bethesda, MD has worked with hundreds of companies to secure capital over a 30 year Wall Street career. http://www.threearrowscapital.com/.
tarrows@comcast.net