Quarterly Newsletter: March 2006
Valuation and Equity Investment considerations
According to American Venture Magazine, “Most early stage company investments fall within a narrow valuation band. Most early stage deals are priced at a pre-money valuation of between $2 and $5 million. Early stage investors typically look to acquire a 15 to 30 percent ownership interest for their money.” An investor will adjust the inputs to his model to come up with a valuation that fits within market norms. The article goes on to say, “Almost any valuation can be reached by an investor by adjusting a combination of the hypothetical liquidity date, earnings projections, earnings multiple and target investment return.” The article continues, “An early stage company that can talk the valuation talk is immeasurably more likely to be able to make a convincing argument for a higher valuation, which translates into more upside for the founders.” Helping to determine value is a core service of our company.
Fast growth continues
According to Barometer Survey, published by PricewaterhouseCoopers, “The nations fastest growing private companies continue to shun new bank financing.” Instead, most appear content to self-finance their expansion thanks to healthy and growing margins. The few that did visit their banker apparently are growing so fast that they cannot satisfy all their capital needs internally.
What does this all mean?
Angel investors are now highly organized and have adopted the due diligence structures common to VC’s making them very selective. In addition, Private Equity has always targeted fast growing companies that need more money. Now that fast growing companies are funding their own growth a wealth of investment capital is being amassed and they need to find a place to invest it. This may signal the return of the “emotional investor.”
U.S. powerhouses enter Tech Transfer
Microsoft has started selling technology to start-ups through its Microsoft IP Ventures division: software, biometrics and image analysis for starters. IBM continues to expand its Engineering and Services group to provide R&D consulting. Irving Wladawsky-Berger, IBM’s Vice President for Technology Strategy and Innovation says, “if you’re doing R & D and if you are not world-class, then you’d better let it go.” IBM sees a $1 billion market for its know-how and expertise. IBM is the top patent holder in the U.S.
Document secrecy – what is metadata anyway?
All documents have hidden data files on who authored the paper, when it was saved and what someone has done with the document including changes made. This information is called metadata; it is data about data. It is intended to help preserve original documents and is designed to “stick” around because it can help people organize files and bolster collaboration. Just because it doesn’t show up when a document is printed or doesn’t appear on the screen, does not mean that it is not there so it’s easy to forget. There is a lot of hidden information in electronic files. It must be stripped from the file to make it go away. Metadata is how Merck & Co. was found to have deleted a study about Vioxx and heart attacks because there were electronic traces to the deleted file!
Keeping confidential information confidential
The name Kevin Mitnick may not be easily recognized but he is one of the world’s most famous computer hackers. He led the FBI on a three-year manhunt while he hacked his way into the world’s largest firms and stealing their carefully guarded information. He now travels the world teaching companies how to guard against someone like him! His secret to success was being able to persuade staff to hand over top-secret information such as passwords and codes by posing as a colleague. How do you guard your secrets?
Keeping trade secrets secret
Lone Star Steakhouse has recently filed a lawsuit against a former employee alleging his new restaurant has illegally used proprietary information and trade secrets of the national chain. The company is diligent in requiring confidentiality before hiring and sending reminder letters after employees leave however, Lone Star has sued on the charge that this employee used trade secrets described in procedure and operating manuals as well as guides and recipes.
True Genius
Jack St. Clair Kilby won the Nobel Prize for Physics in 2000 for his 1958 invention of the integrated circuit which made computers, cell phones, satellite navigation systems and many other devices possible. He also invented the hand-held calculator, which commercialized the microchip, and he held more that 60 Patents. According to a statement by Tom Engibous, chairman of Texas Instruments, “If there was ever a seminal invention that transformed not only our industry but our world, it was Jack’s invention of the integrated circuit. According to an article in the Washington Post, Kilby failed the college entrance exam for MIT and had not worked long enough for TI to merit vacation during the company’s annual summer shutdown. So he was alone in the labs, working on borrowed equipment when he struck upon the idea that revolutionized electronics.
True Genius sparks patent fight
Kilby’s invention came just six months before Robert Noyce, who later co-founded Intel Corp., came up with the same idea. Noyce was generally credited with making the idea practical while Kilby was acknowledged as the first to conceive of putting components on a single piece of material. After a ten-year patent battle, the men called themselves co-inventors of the microchip.
Technology Resource of the Southeast, Inc. is an objective, third party analyst of new discoveries and emerging technologies. We specialize in
- Disclosure Evaluation Analysis,
- Market and Licensing Potential,
- Analysis of Factors Affecting Valuation,
- Commercialization Assistance and
- Technology Valuation Analysis
Return to Newsletter page.
|
