Technology Entrepreneurship Creating, Capturing, and Protecting Value

Transcription

1 Technology Entrepreneurship Creating, Capturing, and Protecting Value Thomas N. Duening, Ph.D El Pomar Chair of Business and Entrepreneurship Director, Center for Entrepreneurship University of Colorado at Colorado Springs Robert D. Hisrich, Ph.D Garvin Professor of Global Entrepreneurship Director, Walker Center for Global Entrepreneurship Thunderbird School of Global Management Michael A. Lechter Adjunct Professor, Ira A. Fulton School of Engineering Arizona State University President and CEO, Michael A. Lechter, PC President and CEO, TechPress, Inc. General Counsel, Pay Your Family First, LLC ELSEVIER AMSTERDAM BOSTON HEIDELBERG LONDON NEW YORK OXFORD PARIS SAN DIEGO SAN FRANCISCO SINGAPORE SYDNEY TOKYO Academic Press is an imprint of Elsevier

2 Contents Preface Acknowledgments About the Authors xvii xxiii xxv PART I FUNDAMENTALS OF BUSINESS AND ECONOMICS CHAPTER 1 Fundamentals of Business What is a Business? Business as an Organized Activity Business as a Purposeful Activity Business as a "Going Concern" Value Value and the Market Value Creation 9, Value Protection Value Capture Value Proposition Business and Society Business and Social Responsibility The Mechanics of a "Going Concern" Business Dynamics Change and Competition Change and Globalization : Engineering Creative Solutions The Future of Business 21 CHAPTER 2 Fundamentals of Economics in a Global Context Economic Resources Goods and Services Resource Allocation Product Distribution Supply, Demand, and Pricing Price and Market Equilibrium Price and Competition 36 VII

3 viii Contents Price and Gross Margin Inflation Price in a Compromised Market Interest and the Price of Money Economic Systems Socialism Communism Mixed Market Economies The U.S. Economic System International Trade Exporting and Importing, Balance of Trade Balance of Payments International Monetary System International Monetary Fund The World Bank Elements of Global Trade The WTO Trade Blocs and Free Trade Areas Currency Exchange Rates 52 CHAPTER 3 Technology Ventures in a Global Context Globalization and Technology Ventures Technology Venture Drivers Capital Intensity Knowledge Intensity Accelerated Pace of Change The Network Effect Value Creation in the Global Economy Creating Market Value Creating Enterprise Value Value Protection in Technology Ventures Value Capture in the Global Economy Capturing Market Value Capturing Enterprise Value Global Market Entry Strategies Exporting Licensing Joint Ventures Strategic Alliances Trading Companies Counter-trading Direct Ownership 84

4 Contents ix PART II LEGAL STRUCTURE AND CAPITAL CHAPTER 4 Legal Structure and Equity Distribution Ownership and Liability Issues Limited versus Unlimited Liability v2 The Extent of Limited Liability Choice of Legal Structure Sole Proprietorship General Partnership Limited Partnership Corporation Limited Liability Company Limited Liability Entities A Comparison Expense Shareholder Options Taxation Profits and Losses Partnerships Equity and Equity Types Equity and Stocks Common Stock Preferred Stock 122 ' Preferred Stock Distributions Convertibility Participating Preferred Stoch Voting Rights Founder's Stock Equity Distribution in/the Nascent Venture Employee Stock Options 127 CHAPTER 5 Capital and Deal Structuring Role of Capital in Technology Ventures Capital Sources Angel Investors Venture Capital Equity and Debt Financing Equity Financing Costs of Equity Financing Debt Financing Institutional Lender Requirements Loan Rates, Payment Methods, and Lender Types Small Business Administration Loans Fund-Raising Tools and Techniques 156

5 x Contents 5.51 Private Placement Memorandum Subscription Agreement "Elevator Pitch" Alternatives to Debt and Equity Financing SBIR Program Small Business Technology Transfer Program Bootstrap Financing 161 CHAPTER 6 Exit Strategies for Technology Ventures Acquisition Due Diligence The Acquisition Deal Mergers Venture Valuation Going Public Advantages of Going Public Disadvantages of Going Public Timing Underwriter Selection Registration Statement and Timetable The Prospectus The Red Herring Reporting Requirements 191 PART III INTELLECTUAL PROPERTY AND CONTRACTS CHAPTER 7 Intellectual Property Management and Protection Intellectual Property and Technology Ventures Intellectual Property Protection Recognizing Intellectual Property Record Keeping Record-Keeping Procedures Trade Secrets Trade Secret Protection Maintaining Trade Secrets Patents Patentability Requirements for Novelty and Nonobviousness Exclusive Right The Patent Application Process The Patent Examination Process Patent Pending Patent Ownership 222

6 Contents xi 7.6 International Patent Protection Copyrights Considerations with Respect to Software Notice The Term Copyright Registration Copyright Ownership Mask Works Trademarks Acquiring Trademark Rights Registering a Trademark Principal Register Supplemental Register Application Based on "Intent to Use" The Strength of a Mark 232, Choosing a Mark Term of the Registration Maintaining Trademark Rights 235 CHAPTER 8 Contracts Sources of Contract Law Contract Formation 250 * The Offer The Counteroffer Acceptance Revocation of Offer or Acceptance f Consideration.. ; Defenses against Contract Enforcement Performance and Breach Damages Rescission and Restitution Specific Performance Quasi-contract Reformation Anatomy of a Contract Preamble Recitals Definitions Performance Ownership and Use of Intellectual Property Consideration Representations and Warranties Indemnity Term and Termination 264

7 xii Contents Miscellaneous Provisions Operating Agreements Employment Agreements Noncompete Agreements Confidentiality Agreements Consulting and Development Agreements Maintenance and Support Agreements Manufacturing Agreements Assignment Agreements License Agreements Patent Licenses Know-How Licenses Trademark Licenses Franchise Agreements Technical Services Agreements Distribution Agreements., VAR and OEM Agreements Purchase Agreements 273 CHAPTER 9 Negotiating Fundamentals Negotiation Fundamentals Process, Behavior, Substance Preparation Mindset Emotions Position versus Interest Establishing Your BATNA Negotiation Approaches Integrative versus Distributive Bargaining Integrative Bargaining Distributive Bargaining Negotiation Outcome Types Lose-Win Negotiating Lose-Lose Negotiating Win-Win Negotiating Negotiating Gambits Opening Gambits Bargaining Gambits Closing Gambits Vendor Tactics Negotiations after the Fact Negotiating Contracts Sales Contracts Complex Project Contracts in Technology 305

8 Contents xiii PART IV TECHNOLOGY VENTURE STRATEGY AND OPERATIONS CHAPTER 10 Launching the Technology Venture The Business Plan Writing a Business Plan Company Information Product/Service Description Competitive Analysis Market Analysis Industry Analysis The Management Team The Marketing Plan Financial Projections Networking Serendipity Using the Internet to Network The Primary Objective of Networking Resource Aggregation Capital Resources Human Resources Organizational Resources Technology Resources New-Venture Operations Performance Standards Information and Measurement Quality Standards Managing for'quality 341 CHAPTER 11 Going to Market and the Marketing Plan Marketing The Marketing Concept Market Segmentation Product Product Planning and Development Product Life Cycle Price Economic Dimension of Pricing Pricing Objectives Distribution Functions of Physical Distribution Modes of Transportation Types of Transport Services 366

9 xiv Contents Managerial Practices in Physical Distribution Promotion The Marketing Mix The Marketing Plan The Marketing Budget Determining a Marketing Budget The Marketing Message 376 CHAPTER 12 Financial Management and Control Accounting Definition and Practices The Accounting Cycle The Accounting Equation Working with Accountants Finance Definition and Practices The Financial Manager The Financial Plan Financial Statements Sales Forecast Income Statement Cash Flow Statement Balance Sheet Financial Statement Analysis Breakeven Analysis Ratio Analysis Types of Ratio Analyses Financial Management Start-up Costs Working Capital Accounts Receivable Credit and Collections Inventory Management Purchase of Capital Assets Payment of Debt : Payment of Dividends Capital Budgeting 415 CHAPTER 13 Venture Management and Leadership Entrepreneur Managers Basic Management Skills., Analytical Skills Decision-Making Skills Communication Skills 431

10 Contents xv Conceptual Skills Team BuUding Skills Entrepreneurial Leadership Influence Leadership versus Management Effectuation and Entrepreneurial Expertise Entrepreneurial Ethics Entrepreneurial Strategy Real Options Approach Resource-Based Theory Competitive Strategy Model Differentiation Cost Leadership Niche Strategy 446 PART V MANAGING RISK AND CAREER DEVELOPMENT CHAPTER 14 Venture Risk Management Venture Risk Management Hazard Risks 462 * Product Liability Liability Insurance Operational Risks Venture Governance Investor Relations Human Resources Management Legal Risk Management Laws Affecting Start-up Ventures Law of Torts Law of Sales Law of Bankruptcy Law of Negotiable Instruments Obtaining and Working with Legal Counsel Managing Failure Risk Developing Resilience Overcoming Cognitive Biases 479 CHAPTER 15 Your Entrepreneurial Career Your Entrepreneurial Career The Individual Entrepreneur Conceptual Model of Entrepreneurial Careers Finding a Mentor 496

11 xvi Contents 15.2 The Entrepreneurial Personality Characteristics of Growth-Oriented Entrepreneurs Emotional Intelligence Intrapreneurship Five Entrepreneurial Careers Paul Baran Marc Andreessen Pierre Omidyar Craig Newmark Robert Metcalfe The Franchising Option Franchising: A Brief History Uniform Franchise Offering Circular Ten-Day Rule Franchising Agreement Advantages of Owning a Franchise Disadvantages of Owning a Franchise Franchisor Disclosure Launching Your Entrepreneurial Career..512 Appendix 521 Index 545