Realising the value of emerging technology start-up companies

This risk means that a start-up’s equity funders should be managing their investment actively to achieve the best returns on exit. In our experience of working with emerging technology companies, this happens when investment drives the start-up to take its technology to market efficiently and without giving away the assets that create long-term value. This avoids excessive cash bleed and funding rounds during development, creates assets of well-defined value (IP and sellable products) and ultimately favours competition between potential buyers, leading to a fair valuation.

Technology start-ups have a complex challenge to juggle IP, development, cash management, customers, and investors whilst seeking a profitable exit. Even though the interplay between these requirements makes every case different, fundamentally every start-up needs to develop its technology in a time- and resource-efficient manner and deliver it to the market in a commercially sustainable way, while ideally maintaining some significant IP protection.

Here are some critical success factors for realising the value of emerging technology companies:

Retain control of IP without giving it away to one party

Strong and well-controlled IP can significantly boost a company’s valuation, as an IP-based company sale provides the buyer with an asset that can be exploited over the longer term and potentially through multiple platforms and business sectors. IP deals to raise cash should seek multiple potential buyers/licensees, demonstrating the value of the IP for the buyers/licensees’ own development, while retaining control of key IP in other sectors, markets and/or regions. The earlier a start-up begins to use its IP in such a strategic way, the more significant value-add can be realised from it. See our work in strengthening IP portfolios.

Extract value from strategic partners

A strategic commercial partner can offer additional equity, access to existing routes to market, enhanced reputation, potential for contributing development resource and often milestone-linked payments. The potential downside is that becoming locked-in to a single strategic partner effectively caps a company’s longer-term value to what that one buyer is willing to pay. Approaching such partners with a developed platform technology to begin with, and managing the start-up/partner interface to avoid requirement creep during development, will make the most of what the partner has to offer while keeping the platform independent and able to be exploited through multiple partners’ channels – ultimately resulting in a higher valuation through competitive bidding for the company. See PA's insight on collaborating with partners to harness the power of Open Innovation 

Get the technology right and do it efficiently

Technology development is necessarily iterative, and so getting the technology right in an efficient manner avoids many subsequent development rounds and the cash bleed that these entail. A credible development programme to deliver the core technology quickly combines technology and insight-rich programme management, flexible resourcing, risk managed delivery and strategic partnering and supplier engagement.
See our service offering on developing science and technology 
 

Focus on delivering the product

A commercialised product is the only way to obtain revenues from customers as well as a key determinant of a company’s valuation. Realising a new product rapidly, and in a risk-managed and commercially aware manner, requires engaging the right project leadership, creating a culture focused on delivering the essential rather than nice-to-haves, acting appropriately for each stage in the development process and balancing agility with compliance.  See our insights on the future of product development

Connect to customers

Close links to customers not only help a start-up transition faster out of the pre-revenue stage, they can also improve the effectiveness and efficiency of product development. Start-ups should consider their commercialisation strategy as they begin developing the technology, and work on building low-risk routes to market from the outset. At the same time, adapting to customer needs is also required – through collaborating with them in design, flexing to meet different sectors’ regulatory, accreditation and safety / failure management needs, and using early feedback from market testing to shape offerings.

PA’s expertise in commercialising technology can help emerging technology companies get to market faster and cheaper and ultimately be sold at higher valuations by:

• Managing and exploiting Intellectual Property successfully

• Driving innovative product development and manufacture

• Creating commercial advantage from technology.
  

To find out more about how PA can support strategies for emerging companies please contact us now.