INCUBATORS AND THE CONSULTANT DR JOEL T SHERTOK

INCUBATORS AND THE CONSULTANT DR. JOEL T. SHERTOK, Ph. D. PRESIDENT – PROCESS INDUSTRIES CONSULTANTS A PRESENTATION TO THE ROCHESTER PROFESSIONAL CONSULTANTS NETWORK

WHAT IS A CONSULTANT? ? ? • A CONSULTANT IS SOMEONE WHO BORROWS YOUR WATCH TO TELL YOU THE TIME. • HE WHO CONSULTS AND RUNS AWAY/WILL LIVE TO CONSULT ANOTHER DAY THOSE WHO CAN, DO THOSE WHO CAN’T, TEACH THOSE WHO AREN’T SURE, CONSULT

• A FIRST HISTORYCONSULTING OF CONSULTING FIRM: ARTHUR D. LITTLE – 1886 • Mc. KINSEY/A. T. KEARNEY – 1920’S • BOSTON CONSULTING GROUP – 1963 • BUT - FROM EXODUS 18 (3500 BCE): “…Moses sat to judge the people: and the people stood by Moses from the morning unto the evening” Jethro (Yitro) “. . what you are doing is not good. You will surely wear away, both you and this people with you: for this thing is too heavy for you and you are not able to do it alone”. “ teach them ordinances and laws, and show them what to do and how to do it” “find the best men, such as fear God, men of truth, hating covetousness; and place these people in charge, to be rulers of thousands, and rulers of hundreds, rulers of fifties, and rulers of tens” But: Jethro collected no fee, did not wear tassels on his sandals, and stuck around to evaluate his advice. We no longer practice these primitive procedures.

THE EVOLUTION OF AMERICAN BUSINESS PRACTICES OR: HOW TO GET RICH FAST • • CAPITALISM OF THE INDIVIDUAL PROPRIETOR CAPITALISM OF THE CORPORATION START-UP OR ENTREPRENURIAL CAPITALISM INCUBATOR CAPITALISM • ALL REFLECT THE ECONOMIC CIRCUMSTANCES OF THEIR TIME • REFERENCES: • MAX WEBER: THE PROTESTANT ETHIC AND THE SPIRIT OF CAPITALISM (1905) • V. I. LENIN: IMPERIALISM – THE HIGHEST FORM OF CAPITALISM (1916) • MICHAEL LEWIS: PANIC - THE STORY OF MODERN FINANCIAL INSANITY (2008)

THE ERA OFCLASSICAL THE INDIVIDUAL (SEMI-SANE)CAPITALISM: INDUSTRIAL 1800 ENTREPRENEUR AMERICAN/BRITISH - 1914 ROLE OF WEBER’S “PROTESTANT ETHIC”: RICHES = GRACE/SALVATION • BUSINESS FOUNDER HAS A CONCEPT • DEVELOPS CONCEPT ON HIS OWN • SELF-FINANCED/FAMILY THEN THROUGH BANKS OR CREATIVE FRAUD NO BUSINESS LAWS OR REGULATION WORTHY OF THE NAME • EXPANSION/CONSOLIDATION/COLLAPSE DURING “PANICS” • NO NEED FOR CONSULTANTS – ALL MANUAL OPERATION MAKE IT UP AS YOU GO ALONG • ASTOR, EDISON, FORD, CARNEIGE, KRUPP (GERMANY): SMASH AND GRAB

CORPORATE CAPITALISM: 1920 - 1990 THE END OF COWBOY CAPITALISM AND THE SINGLE ENTREPRENEUR • CONSOLIDATION AND CONGLOMERATION: OIL COMPANIES, UNION CARBIDE, DUPONT, GM • SOME ENTREPRENEURS STILL EXIST: HEWLETT PACKARD • THE RISE OF THE “CORPORATE MANAGER” AND CORPORATE R/D • THE OVERIDING CONCEPT: RISK MANAGEMENT • DEPRESSION ENHANCES CAUTION, BOTH MANAGEMENT AND EMPLOYEE • THE PRESIDENT, CEO, AND BOARD ARE NOT “EXPERTS” – THEY ARE MANAGERS

THE CONCEPT: HIRE THE EXPERTISE YOU NEED • THE RISE OF “BIG CONSULTING”: NICHE EXPERTS – TECHNICAL/MANAGERIAL • HIRED TO EVALUATE/EXECUTE/TAKE BLAME/LEAVE • RISE OF THE “ACADEMIC CONSULTANT”: IN SEARCH OF QUALITY, IN SEARCH OF EXCELLENCE, RE-ENGINEERING THE CORPORATION (FROM 1980 ON) • HBR ARTICLE – SMALL SCALE SUCCESS - PUBLISH BOOK – FAILURE – REPEAT CYCLE • LITTLE ROOM FOR “SMALL CONSULTANT”. SCALE AND CREDIBILITY NEEDED

START-UP/ENTREPRENURIAL CAPITALISM: - TODAY POPULARIZED IN SILICON VALLEY, RT 128, THE 1990 NEW JERSEY BIOTECH CORRIDOR • THE “GARAGE START-UP” CONCEPT: BOTH FOR ROCK BANDS AND HIGH-TECH CORPS • THE “ANTI-CORPORATE” CORPORATION – TECH DEVELOPMENT BEGINNING IN 1982, FOREIGN COMPETITION BECOMES INTENSE • JAPAN IN AUTOS/ELECTRONICS: DEMINGS, JURAN, KAIZAN, 6 -SIGMA • US CORPORATIONS NOT READY – PROFITS TAKE A HIT; FIRST MASS LAY-OFFS • R/D INTERNAL FUNDING SEVERELY CUT; FRINGE BENEFITS – HIGH COST

THE RISE OF “PARASITIC TECHNOLOGY DEVELOPMENT” • INSECURITY/LAYOFFS DRIVE INNOVATORS OUT • CORPORATIONS PLAY IT SAFE • BEGINNINGS OF VENTURE CAPITALISM TO FUND EXTERNAL DEVELOPMENT THE NEW MODEL: • • CORPORATE TECHNOLOGISTS LEAVE – SELF-DEVELOP TECHNOLOGY VENTURE/ANGEL CAPITALISTS INVEST TO FUND DEVELOPMENT ESTABLISHED CORPORATIONS BUY TECHNOLOGIES, COMPANIES TECHNOLOGISTS LEAVE, CYCLE STARTS AGAIN

NEW OPPORTUNITIES FOR THE SMALL CONSULTANT • • LARGE CONSULTING ORGANIZATIONS – NO NICHE DEPTH FEES TOO HIGH FOR SMALL START-UPS PERPETUALLY STARVED FOR FUNDING NICHE CONSULTANCIES – HIRE/EXPLOIT/FIRE/FORGET • STRAIGHT FEE STRUCTURE, NO FRINGES • SHACK-UP RATHER THAN A MARRIAGE BUT. . . INSECURITY FOR CONSULTANT, JUST LIKE START-UP • • ENGAGEMENTS ARE SHORT-TERM, NOT LIKE LARGE ORGANIZATIONS MUST BE VERY ENTREPRENEURIAL – SEEK OUT LIKELY TARGETS HAVE TO SELL YOUR SKILLS THE BEGINNING OF THE “MODERN WORLD” THAT WE NOW KNOW

CAPITALISM: 2014 - PRESENT A VARIATION ON INCUBATOR THE “GARAGE START-UP/VENTURE CAPITAL” MODEL DRIVEN BY: 2008 – 2014 RECESSION • LACK OF OPPORTUNITIES FOR NEW Ph. D GRADS IN SCIENCE/TEACHING FIELDS • DRYING UP OF FUNDING FOR ADVANCED RESEARCH IN SCIENCES AT UNIVERSITIES • DECREASED TAX RECEIPTS AT THE STATE LEVEL • NEED ADDITIONAL FUNDING RESOURCES – EMPLOYMENT OPPORTUNITIES • BUILD “SKILL CENTERS” FOR FUTURE HIGH-TECH COMPANIES • SILICON VALLEY MODEL: HOPE FOR NEW APPLE OR MICROSOFT ALL-PURPOSE CURE: MONETIZE UNIVERSITY RESEARCH • • • BUILD OFF-CAMPUS ‘’INCUBATOR” BUILDINGS/LAB FACILITIES HOUSE Ph. D/MBA CANDIDATE/GRADS IN FACILITIES STAFF INCUBATORS WITH “ADULT SUPERVISION” FORM SKELETON COMPANIES LINE UP ANGEL INVESTORS, GOV’T GRANTS, ETC. • PRAY FOR LIGHTENING TO STRIKE

INCUBATOR CAPITALISM: ISSUES HOWEVER – IT’S NOT THAT SIMPLE THE START-UP MODEL ASSUMES: • • EXPERIENCED TECHNICAL PERSONNEL VENTURE CAPITALISTS WHO UNDERSTAND THE TECHNOLOGY BUSINESS PLANS BASED ON THE ABOVE DIFFERENTIATION BETWEEN ACADEMIA AND COMMERCE • NOT THE CASE WITH THE INCUBATOR MODEL THE “UNDERWEAR GNOMES” MODEL • SOUTH PARK EPISODE, FROM EARLY SEASONS • https: //www. youtube. com/watch? v=3 zc 4 b. Gk. U 05 o • https: //www. youtube. com/watch? v=k. QD 1 zwd. Ov_0 • UNDERWEAR GNOMES STEAL UNDERWEAR FROM PEOPLES’ HOUSES • THEIR BUSINESS MODEL: 1. STEAL UNDERWEAR 2. ? ? ? 3. $$$$$ - BIG PROFITS! • BUT – THE GNOMES CANNOT DEFINE STEP (2)

INCUBATOR CAPITALISM: ISSUES THEM: THE CHALLENGES AND HOW YOU CAN EXPLOIT • • • INCUBATOR PERSONNEL ARE INEXPERIENCED TYPICALLY IN MID-LATE 20’S (LATE MILLENNIALS/GEN Y) COMMERCIALIZING THEIR PHD THESIS TYPICIALLY LITTLE/NO INDUSTRIAL EXPERIENCE “PLAYING HOUSE” SCENARIO: MICKEY ROONEY/JUDY GARLAND MOVIES • NEED EXPERTISE – • TECHNICAL/SCALE-UP • MARKETING (MOST HAVE SKELETAL WEB SITES) • BUSINESS PLANNING (FRESHLY MINTED MBA’S) • COMMUNICATIONS • LEGAL • UNDERCAPITALIZED-DEPEND ON GRANTS/UNDERSTAFFE • TYPICAL STAFFING: • CTO: TECH PHD; COO – MBA GRAD; CEO: INCUBATOR ADVISOR, ETC.

OTHER ISSUES: INCUBATOR CAPITALISM: ISSUES • INCUBATORS ARE “THE NEXT BIG THING”! • ALL MAJOR UNIVERSITES HAVE INCUBATORS • EVERYONE IS DOING THIS, SO IT MUST BE RIGHT • EVERYONE IS DOING THIS, SO WE HAVE TO AS WELL • BORDERLINE BETWEEN GOOD BUSINESS AND THE NEXT FAD • BUT– NOT ALL PH. D. THESES YIELD GOOD BUSINESS PROPOSITIONS • STATES DESPERATE FOR JOB REPLACEMENT OPPORTUNITIES BESIDES MCDONALDS • MUTUALLY ASSURED DESTRUCTION VIA INCENTIVES • UNIVERSITIES DESPERATE TO MONETIZE THEIR RESEARCH • INFRASTRUCTURES AND BUREAUCRACIES SET UP TO EXPLOIT RESEARCH • PATENT OFFICES, LEGAL OFFICES, INCUBATOR STAFFING • PERSONNEL FROM KODAK, B&L, XEROX – OLD BOY NETWORKS • MAKES BREAKING IN A CHALLENGE NEW MATERIALS CEO: “THEY TOLD ME THEY HAD 100 CUSTOMERS; THEY HAD 100 SAMPLE ORDERS”

INCUBATOR COMPANIES A TARGET ENVIRONMENT TAKINGOFFER ADVANTAGE AS RICH A CONSULTANT • TYPICALLY UNDERSTAFFED, UNDERFUNDED, UNDER PRESSURE • TYPICALLY TECHNICAL EXPERTS, BUT NOT BUSINESS-SAVVY • A CONSULTANT OFFERS A “CHEAP” WAY TO ADD EXPERTISE • PLUS – EXTRA SATISFACTION IN GETTING A BUSINESS OFF THE GROUND • INCUBATORS EXIST AS “PARALLEL UNIVERSE” TO THE MORE TYPICAL COMMERCIAL ARENA • HOWEVER, LIKE MOST PARALLEL UNIVERSES, ACCESS CAN BE DIFFICULT ACCESSING THE UNIVERSE • GO INTO THE PROCESS UNDERSTANDING THAT: • INCUBATORS ARE FUND LIMITED – THEIR CONTRACTS TYPICALLY LIMIT CONSULTANT FEES • NYSERDA - $600/DAY LIMIT AS AN EXAMPLE • UNDERSTAFFED – DECISIONS/FUNDING TAKE LONGER TIMES THAN COMMERCIAL ENTITIES • COUNT ON WEEKS, MONTHS, NOT DAYS: ACADEMIC SCHEDULE • MAY NEED TO BREAK THROUGH INCUBATOR ORGANIZATION STRUCTURE FIRST • CONSULTANT ACTS AS EDUCATOR AND ADVISOR AS WELL AS EXPERTISE RESOURCE • NEED PATIENCE WHEN DEALING WITH 25 YEAR OLD • BUT – THEY ARE TRAINABLE AT THAT AGE

NEED TO FISH WHERE THEACCESSING FISH ARE…. INCUBATORS ACTIVE NETWORKING ESSENTIAL TO FIND OUT WHERE THE INCUBATORS ARE EVENTS TO ATTEND: • UVANY – UPSTATE VENTURE ASSOCIATION OF NEW YORK • • TYPICALLY HOLD MONTHLY EVENTS AT ALBANY, ROCHESTER, BUFFALO, ITHACA EVENTS TYPICALLY SPECIALIZE ON ONE TOPIC (GUEST SPEAKERS) + NETWORKING TIME • • DIGITAL ROCHESTER • • • $20 - $40 / EVENT DEPENDING ON LOCATION AND FOOD SERVED – NON MEMBER FEE BRINGS TOGETHER INCUBATORS, ANGEL/VENTURE CAPITALISTS, LAWYERS, BANKERS SEVERAL MEETINGS IN OCTOBER VARIETY OF MONTHLY EVENTS AT DIFFERENT ROCHESTER LOCATIONS THE FAILURE SESSIONS, NETWORKING AT VINYARDS, NOMINAL FEES TMA – UPSTATE NEW YORK TURNAROUND MANAGEMENT ASSOCIATION • • GOOD WAY TO MEET VENTURE INVESTERS/BANKERS: BUFFALO, ROCHESTER PROGRAMS ON SEPTEMBER 24, OCTOBER 22 (LONDON ON SEPT 17)

• NYSERDA – NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY • • ENTREPRENEUR IN RESIDENCE (EIR) PROGRAM PROVIDE ADULT SUPERVISION TO NYSERDA START-UP COMPANIES • ADMINISTERED BY HIGH TECH ROCHESTER – CONTACT DOREEN KULA • HIGH TECH ROCHESTER • LOCAL UMBRELLA ORGANIZATION FOR START-UPS IN THE ROCHESTER AREA • SEEMS VERY UNFOCUSED TO ME (MY OPINION) • INCUBATOR ORGANIZATIONS AT RIT AND UNIVERSITY OF ROCHESTER • FOR THE MOST PART STAFFED BY FORMER KODAKERS… • EASTMAN BUSINESS PARK • LOCAL HQ FOR ROCHESTER START-UPS • GET A HOLD OF THEIR DIRECTORY AND SEE WHAT LOOKS INTERESTING • BUT – HARD TO GET A HOLD OF BUT: REQUIRES PATIENCE (LOTS OF CONTACT ATTEMPTS) AND SALESPERSONSHIP (DEFAULT RESPONSE IS “GO AWAY”. ) • ALSO – LOTS OF TRAVEL. MAKE SURE YOUR CAR IS IN GOOD REPAIR

PEOPLE TO BUG JAMES SENALL – PRESIDENT, HIGH TECH ROCHESTER ANNETTE BRENNER – CLIENT DEVELOPMENT MANAGER - HTR RICHARD C. NOTARGIACOMO – RIT – NEW VENTURE COMMERCIALIZATION WILLIAM E BOND – RIT – INTELLECTUAL PROPERTY MANAGEMENT ODED SPINDEL/RAMI KATZ – EXCELL PARTNERS (VENTURE CAPTIAL) DAVID GOTTFRIED – MANAGER – SMART SYSTEM TECHNOLOGY – SUNY NANOSCALE DAVID ENGLERT – MARKETING MANAGER – U OF R COMMERCIAL VENTURES JEFFREY PETERSON – PROGRAM MANAGER/NYSERDA ALAN J. ROSENHOCH – BUFFALO/NIAGARA ENTERPRISE LISA DOERNER – EXECUTIVE DIRECTOR, DIGITAL ROCHESTER ROBERT LETESTE – COMMERCIALIZATION CO-ORDINATOR – NYSTAR – NYS CENTER OF EXCELLENCE

IN SUMMARY…. THE CREATION OF ACADEMIC – BASED INCUBATORS REFLECTS: • • LACK OF OPPORTUNITIES FOR ADVANCED TECH GRADS DESIRE FOR MORE FUNDS FOR UNIVERSITIES AND GOVERNMENT MUTUALLY ASSURED DESTRUCTION SINCE ALL LOCATIONS ARE DOING THIS BUSINESS IS MORE WORRIED ABOUT QUARTERLY EARNINGS THAN ABOUT INVESTMENT INCUBATORS SHOULD BE RUN BY BUSINESS, NOT BY ACADEMIA • DIFFERENT ORIENTATIONS OPPORTUNITIES EXIST FOR CONSULTANTS • FILL IN THE EXPERTISE GAPS FOR INCUBATORS • TAKE ADVANTAGE OF LIMITED FUNDING • PROVIDE ADULT SUPERVISION BUT: • • REQUIRES PATIENCE, PERSISTANCE, TRAVEL, AND NETWORKING ARE YOU WILLING TO WORK WITH 25 YEAR OLDS WITH FANCY TITLES AND NOT MUCH ELSE?

Process Industries Consultants Maximizing Profitability with Innovative Products & Optimized Processes Dr. Joel T. Shertok, Ph. D President Office: 111 East Avenue, #533 Rochester NY 14604 Cell: 302. 562. 9759 ▪ Landline: 585. 563. 6096 Email: jshertok@processindconsultants. com www. linkedin. com/in/joelshertok/