Project Management Process - As Is Version

1
s
Launching a High Technology Venture
Patterns of Entrepreneurship Chapter 13
2
Framework for Launching a Technology

•       
• Screen Technologies for New Ideas
• Prepare the Strategy, Product Positioning and
  Alliance Plan
• Determine Capital and Resources
• Talent and Management team
• Implementation

3
Framework for Launching a Technology

• Screen Technologies
• Identify systems and technology
• Investigate environment for technological and
  market conditions
• Plan the technology project
• Perform feasibility analysis
• Execute market forecasts and benchmarking

4
Technology Trends

• Internet is changing the model of computing
• Software architecture of the internet will become
  the software architecture for the enterprise
• Computing infrastructure (datacenter) will be the
  next surprise fueled by ASP Services,
  outsourced compute tone, and internet
  geoscale
• The real-time enterprise will drive carrier
  demand at increasing rates of growth create
  Oracle/SAP scale companies
• Operations systems to reduce operating cost
  total cost of ownership will be a major
  issue/opportunity
• Evernet everyplace, every time, every device
  thru mobile IP (but not a lot of money for new
  ventures)

5
Network Issues Trends

• Everything over IP
• Two layer network
• Value added services
• Internet based SW architecture
• Skills shortage
• Mission critical technology
• Rapid, unpredictable growth
• Legacy encapsulation

6
Prepare Strategy and Positioning

• Prepare Pilot testing of new technology product
• Beta site testing in a few selected locations
• Develop a marketing plan to roll out the product
• Consider how the product will be positioned and
  determine pricing plan
• Use alliances for cost sharing and efficiency
• Be proactive in locating companies to network
• Leverage resources.

7
Determine Capital and Resource Requirements

• Determine Sources of Financial Needs
• Leverage Intellectual Properties
• Develop Exit strategy

8
Players In Private Equity
9
Funding Milestones The Right Way
TechnologyWorks
A Customer Buys
Idea isFeasible
P(success) 80 Reqd IRR 30
Valuation
P(success) 50 Reqd IRR 50
P(success) 40 Reqd IRR 70
P(success) 30 Reqd IRR 100
Risk (ß)
Capital
Seed Funding
RDCapital
Go-to-MarketCaptial
ExpansionCaptial
10
The VC LANDSCAPE in 2000
2000 693 8368 164 497 105.05 211.4
1980 87 1035 24 57 2.08 36.5
1990 375 3794 14 82 3.20 39.0
of VC Firms in Existence of Professionals
of First Time VC Funds Raised of VC Funds
Raised This Year VC Capital Raised This Year
(B) Avg VC Fund Size Raised This Year (M)
Source NVCA Yearbook 2001 Venture Economics
11
The Committed Capital Bubble
Years
Accumulated Capital Over-commitments (B)
Source VentureOne
12
The Illiquid Bulge

• From 1995-2000

14,463 978 1,529 1,180 10,776
Companies funded Went public Were acquired Went
out of business Remaining
-
-
-
Source Venture Economics Venture Source
13
A Generic Late 90s Model
Million
14
A Generic Early 90s Model
Million
15
Why Its Great To Be An Entrepreneur - TODAY
US Venture Capital Partnership ReturnsVersus
Public Market ReturnsFunds Formed 1969-1999
(quarterly returns)
Source Venture Economics/NVCA
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The HALF-EMPTY view

• Technology led slowdown
• Consumer Reaction pile-on
• Sept 11
• The WAR
• 2002 is history!
• Financings Unavailable
• Stay afloat, tread water, hunker down

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The HALF-FULL view

• Less competition
• Time to develop technology
• Focus sustainable advantage, value-add
• Better critique, Better ventures, Higher Bar
• Longer Term View/Horizon
• Lower Funding gt Lower Risk

18
Venture Investment Criteria

• Market Exists today, high growth, addressable
• Management Industry experience, operating track
  record, vision and guts, trust/ethics
• Business Case Convincing value proposition,
  product vs. service, strategy (chasm!),
  profitability in sight
• Technology Defensible, scalable, open, breeder
  vs. broker
• Liquidity Cash management fund raising
• Clear Exit Based on market share not raw
  technology value
• Self Discipline Dont get creative expectation
  pact and process

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Investment Process
FirstMeeting
InitialInformationPack Sent
ConfidentialityAgreement
2nd Info Pack/More Meetings
IndicationOf Interest
InitialDue Diligence
EarlyRead
ProposedTermsheet
Full DueDiligence
Closing
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Attract Talent and Build the Management team

• Carry out Recruitment and Selection
• Build the Best Team
• Consider Outsourcing

21
The New World of Partnerships - Building
Strategic Alliances

• Technology - Transfer Partnerships
• A computer hardware company and software company
  can combine to benefit each other
• Setting up joint licensing arrangements
• Equity Investment Partnerships
• Global Partnerships
• A technology company received needed cash, and a
  European company received stock and access to
  cutting-edge software

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Acquisition
Joint Venture
Minority Equity

• Control
• Synergy
• Goodwill
• Capital

• Starting Point
• Complex
• Short-Term

• Simple
• Committed
• Insider
• Pre-Acquisition

A
A
B
B
A
B
A
C
Consider Minority Equity As Strategic Alternative
23
The New World of Partnerships - Building
Strategic Alliances

• Marketing Partnerships
• Combining value added services between two
  companies.
• Supplier Partnerships
• Customer-vendor relationships where one can
  perform a specialized service more effectively
  than its partner.

24
Partnership Criteria Evaluation

• Evaluate potential partners carefully
• Most partnerships fail
• Perform due diligence
• Select number 2 or 3 in the market as a partner
• Assess possible mutual benefits critically
• Strengthen the partnership through skin in the
  game
• Strive for open communication