A fast-changing business and technology landscape provides technology start-ups with unprecedented opportunity. Yet for more complex technologies the extended timescales required for development means start-ups risk running out of cash reserves before they succeed in bringing a fully commercialised product to market.
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As a result, many organisations source working capital indiscriminately – giving away control of key intellectual property (IP) or undermining the independence of their technology platform in unbalanced deals that damage the company’s value on eventual sale.
To create maximum long-term value, technology start-ups must build a technology development and commercialisation strategy which is fit for the future. This should focus on five critical success factors: retaining control of core IP, extracting value from strategic partners, developing technology in an efficient and risk managed way, focusing on fast track commercialisation for early revenue generation and looking to consumers to validate product design and innovation decisions.
Similarly, investors in emerging technology start-ups need to manage their investment actively to achieve maximum returns on exit. Investment should drive the start-up to take the technology to market efficiently, without giving away assets that create long-term value.
Creating value from IP and defining how best to use it strategically
Strong and well-controlled IP can significantly boost a company’s valuation. This is because an IP-based company provides its 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 strategically, the greater the value it can expect to realise from it. See our work in strengthening IP portfolios.
Extracting maximum 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 can effectively cap the start-up’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. At the same time, it will keep the platform independent and capable of exploitation by multiple partners – 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
Proving the core technologies through a credible development programme
Technology development is necessarily iterative, but it must be managed in an efficient manner to avoid numerous 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
Delivering a new product with a focus on rapid commercialisation
A commercialised product is the only way to obtain revenues from customers and therefore a key determinant of a company’s valuation. Managing product development to realise 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
Looking to customers to verify product innovation decisions
Close links to customers not only help a start-up move out of the pre-revenue stage more quickly, they can also make product development more effective and efficient. Start-ups should consider their commercialisation strategy even as they begin developing the technology, and work on building low-risk routes to market from the outset. At the same time, they must work with customers to help inform/verify product innovation decisions, ensuring they meet customer needs by collaborating with them in design and scale-up planning. PA’s expertise in technology commercialisation can help emerging technology companies get to market faster and cheaper and ultimately be sold at higher valuations by:
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To find out how PA can help you protect value by developing expertise in technology development and an effective commercialisation strategy, click here or contact us now.