Alan Montgomery, Director alan.montgomery@infermed

1. Alan Montgomery, Director alan.montgomery@infermed.com

2. Objective of talk • Describe what R & D is like in a small IT company • … at least in my own experience • Demo of a product produced • Differences from academic research

3. Topics we will cover • Starting a company via an MBO (Management Buyout) • Search for a growth • Research grants for companies • IPR issues • Primacy of people • Cash flow • Marketing high-tech • Selling a business • Demo of Clementine

4. My experience • 66-73 M Sc. D Phil (Physics) from UoS • 72-74 CAP Process Control - House • 74-84 ICL Compilers - Redundancy • 84-86 Software Engineering Research • Poplog Product Manager, SDL • “AI Winter” • 89-99 Founded Integral Solutions Ltd. • 94-99 Clementine • Sold Company   …? • 00- Director, InferMed

5. The Management Buyout • “AI Winter” - Close AI Products Divn. • Main Product was Poplog! • Maybe 60 industry/government clients • Negotiation with Sussex and SD-Scicon • Ignorance of business – enterprise agency • Business Plan • Bank loan – collateral • Ownership • Thank you SDL and UoS/COGS

6. Where to go next? • Poplog is a tool, used by R&D defence, manufacturing, academics, …. • Does not solve any high-value business problem • Have to sell to technicians – endless technical wrangling • Low prices • Can we turn it into an application, or find some new market?

7. ISL Research, Phase 1Lucky break as we hit recession! • Government IT R&D favours SMEs • Get 50% funding for R&D • Invited into three projects: • UIDE - turn Poplog into UI prototyping tool  • Gateway – KBS Methodology  • ISS – semiconductor wafers  • SMART proposal FORTRAN. Failed. 

8. Funding research and development • Self funding from profits! • Co-operative project with customer • Loans – where’s the collateral? • Equity finance • Corporate venturing e.g. Roche • R&D Grants

9. Funding - Equity Finance • Equity finance from • Business angel £20K-100K • First stage investor £100K-500K • Major investor e.g. 3i, Apax etc £1M-10M • Requires realistic market plan • Have to give up part of the company • Expensive: advisors take 10-20% of cash! • Need to have an exit strategy • The best way if you have the right idea.

10. Funding – R & D Grants • Governments/EU encourage growth and innovation; get university brains working with business R&D. • Common themes: • There is a project (sometimes within broad areas defined by government / EU) • Business only gets part-funding (e.g. 50%) • Often has to be a collaboration (e.g. EU) • Business gets the IPR; pays royalties • Monitoring by the grant provider • Works if right project and right partners

11. UIDE Project • User Interface Design Environment • British Maritime Technology • Integral Solutions Ltd • University of Sussex, COGS. • Extend Poplog to allow rapid prototyping / simulation of UIs • Problems • No end user • COGS design too sophisticated

12. Clementine: a graphical language!

13. Control 1 Data 1 Data 2 Widget 2 Widget 1 But data flows have type and arguments. If several data flows, what order? So we need control ports, with type, order Keep it simple

14. UIDE Project • Technically interesting - could prototype a grand piano! • Research papers on strongly typed visual programming • Some ideas that turned up later • No product as such • Result? 

15. ISS Project • GEC-Plessey Semiconductors, ISL, Reading University • Better scheduling of wafers through wafer fabrication plant. • Big problem, huge pay-off 5% increase in output. • Strong user; strong product champion

16. ISS Project • After 3 years just starting to work, no customers • RAs all looking for new job • Follow-on proposal possible in Europe • … Mortgage another £90K of our house and hire the team • Chivvy MPs and ministers to get Euro project!

17. ISS and JESSI Faw project • Got next customer SGS-Thomson • Won competitive tender for Intel • Successful trials at Intel, Texas • $1M order negotiated! • Intel decided ISL too small for them to become strategically dependent. • Intel introduced ASL • Later ISS business sold to ASL • Negotiations, due diligence, IPR • $3.5M in total, partly staged.

18. HiP – Teaching Company Scheme • TCAs work for 2 years at industry to transfer university skills. • Academic teaching “bought out” • DTI funds 60% of costs • IPR in industry, royalty to university • TCAs groomed to be high-fliers in company. • Excellent scheme, light proposal; high success rate; 1 to 1 collaboration.

19. HiP – Teaching Company Scheme • ISL + UoS COGS (Mike Sharples) • Follow-on to UIDE • Hypermedia in Poplog. World’s first intelligent multimedia system. • One software guy, one designer. • Success ….ready to launch ….. Then Tim Berners-Lee introduced a new multi-media standard. Too late in project, too expensive to change – so we canned HiP. 

20. Clementine – DTI Smart Award • DTI Competition: small companies • 1. 75% of costs up to £80K? • 2. 50% of costs up to £150K? • No need to collaborate • Easy proposal form • Very competitive

21. Clementine – DTI Smart Award • Based on our experience of machine learning NN and induction, • And on Poplog, UIDE, HiP • Make data mining accessible to business people. (Colin Shearer)

22. Clementine Productization • EU Project with DB to run on Intel PCs and in theory on parallel machines • EU Project on DM Methodology • EU Project on mining web data

23. Early Clementine Users Manufacturing • Daimler Benz • Ford • British Steel • Caterpillar Retail • Boots • Tandy • ICL Retail • Halfords Finance • Reuters • Nationwide • National Westminster • Citibank Pharmaceutical • Glaxo-Wellcome • Pfizer • Du Pont • Unilever Government • HM Customs & Excise • IRS • The Home Office • DERA Telcos • AT & T • Vodafone Australia • Cellnet • Airtouch Cellular • Singapore Telecoms

24. Introducing Clementine

25. ISL Sales Growth

26. Focus on the winner • Disposal of ISS gave money to develop Clementine • Opened office in Philadelphia • … and in Singapore • Distributors worldwide • Sales doubled each year • Hard to justify other businesses • But there was one other line of business…

27. The Happy Ending • Clementine recognized as best of breed worldwide. • NCR adopted it, and paid for Japanese version. • Main competitors SAS and IBM. • Offer from SPSS to buy the business • My wife said “Yes!” • Long negotiations, due diligence, contracts, guarantees, ………. • 04.00am 1st January 1999 we signed! 

28. The KBS bit • Throughout ISL’s ten years I’d been trying to build a KBS business. • LPE, Gateway, KADS, KACTUS. • PC-PACK Knowledge Elicitation Tools • RED • MACRO, PROMPT

29. RED Project • UK Safety Critical Systems Project • ICRF – Prof John Fox • ISL, Lloyds Register, Masons, QMW • Use of logic to express knowledge • Discovery of generic safety rules • Proforma language to describe formally and enact logic-based guidelines • Demonstrators in Asthma Management and Ship Safety Assessment • Led ultimately to a new IT company

30. 1990 UK SCS Prog. MACRO Padcom, EORTC, ISL RED ICRF, ISL, LR, QMW .. Prompt ICRF, ICSF, IB, .. Language for protocols Proforma 1994 EU H/C Tele Proforma =>> ArezzoTM MACRO 1999. InferMed InferMed Roots of InferMed

31. Basic concepts of the language Protocols (processes) Data entry Clinical actions Decisions Scheduling

34. RetroGramtm HIV drug advice Genetic analysis Pain control Clinical trials Remote data entry Electronic best practice guidelines Generic Internet delivery Rapid development InferMed Software High value product Licence fee (up to £2M) Customisation Training Maintenance Direct sales model • Bespoke development for Roche • Fully validated system delivered in 3 months • Repeat business Opportunities: • license to B2C site • pharmaceutical sponsorship • flexible revenue models Vertical applications Core technology

35. Market must be ready • Long time from innovation to profitable market (5-15 years) • Sometimes a standard must be present e.g. electricity supply, IBM PC, WWW. • Market slow to start - goes critical rapidly • Can only introduce radical ideas if: • need is great and • current ideas don’t work • Missionary selling is very expensive

36. Early Majority Late Majority Laggards Technology adoption cycle after Geoffrey Moore Uptake of a new product (that requires behaviour change) Early adopters Innovators

37. Early Majority Late Majority Early adopters Innovators Laggards Adoption cycle with chasmwhere ISL came from! Beware the chasm! (Geoffrey Moore) 85-90 KBS business dropped into the chasm: specialist suppliers failed, majors pulled out.

38. Differences from academic research • Rarely intellectual curiosity -> a paper. Seek marketable product or process • Industry is secretive, patents, etc • Academic research often alone – industry research nearly always a team • Usually short term, exploit in 3 years • At mercy of managers and the economy • Competition is other companies, not quite same as academic rivalry • New research usually in parallel with the development/support of current products.

39. Lessons to remember • Keep it simple • Work with users • It can take 10 years • Every project needs a champion • Market solutions not technology • The technology adoption curve and the Chasm • Real wealth from selling the company • It is also a matter of luck!

40. Thank you for listening ? Any Questions? alan.montgomery@infermed.com