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Preface

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From Innovation to Cash Flows is written by a global team of experts from law, science, engineering, and business. We all have years of experience working closely with high-tech entrepreneurs and scientists from around the world. We collaborated and pooled our know-how and especially our cross-cultural expertise to write this book for you. Inside the book and on the free downloads portion of this web site you, will find real-life cases, sample legal contracts, useful valuation tools, and practical strategy frameworks to help you start up your high technology business and improve your venture's chances for success in these turbulent times.

Divided into six parts, the book explores the process of entrepreneurship from the creative inception of an idea, to turning that idea into a protectable invention, and then into an innovation - which is the commercialization of an invention into a new process, product or service that benefits a customer who buys it. In different chapters, we examine how to develop a venture's business strategy and create a viable business model. We discuss in depth the design, structure, negotiation and management of strategic alliances. We show our readers how to value a high-tech start-up in order to obtain investor financing. You will learn how to model the financial terms of a licensing agreement and employ exit strategies that make it possible for investors in the business to harvest their holdings, if they so desire.

Investors expect today's high-tech entrepreneurs to possess both breadth and depth of knowledge. Readers will see, step by step, how to protect their scientific inventions and license a variety of intellectual property (IP) rights. They will learn about state of the art tools to draw patent maps of the competitive landscape and find out what rivals are doing to advance their research. They will learn about effective and ineffective intellectual property strategies. The book explains in clear and simple language the latest on trade secrets, know-how, patent, trademark, copyright, and design registration laws. We discuss the legal terms and contract clauses that frequently are included in technology transfer, strategic alliances, joint ventures, and shareholder investment agreements.

Our aim is to create a practical how-to-get started manual that appeals to the first-time entrepreneur as well as to write a readable reference book that benefits an experienced entrepreneur who desires to do better the next time around. Our readers need not be experts in business, law, high technology, or intellectual property rights. However, if you do have expertise in any of these areas, we hope you will be interested in reading our interpretation of the issues specific to high-tech venture start-ups.

In short, what is the rationale for the book? Here's our answer. High-tech entrepreneurs need to:

  • Understand intellectual property rights but often are baffled by the legal terminology that surrounds it.
  • Value their start-up businesses but might not know how to do so.
  • Select good advisory teams and know what questions to ask of these specialists in commercial contracts, intellectual property, or finance.
  • Understand best practices in carrying out due diligence.
  • Structure and negotiate strategic alliances that create economic value.
  • Understand how to turn innovation into sustainable cash flows that will attract investor financing.

 

We hope that a single comprehensive volume like ours - which is integrative and interdisciplinary and that weaves the challenges of starting up a high-tech venture with the management of IP rights, valuation of emerging technologies, and structuring of collaborative alliances for long-term value creation - provides you with useful insights and long-lasting value for your money.

Depending on the background and knowledge of the reader, the variety of strategic alliances we discuss might be surprising. We explain how different high-tech industries tend to use particular combinations of strategic alliances to achieve their aims. We explore outsourcing and offshoring alliances, technology transfer and pharmaceutical licensing arrangements, codevelopment and comarketing agreements, early-stage research consortia, equity and nonequity joint ventures.

When it comes to describing how to structure strategic alliances, we are very pragmatic and include sample contracts and useful checklists to guide you through the process. We have tried to cover concepts, methods, principles, and attitudes (both managerial and investor) toward sharing risks and rewards. We emphasize the governance issues of strategic alliances and of shareholder arrangements from various perspectives: that of the entrepreneur, the outside member of the board of directors, and the lead investor.

We have striven to keep perspective - to balance the needs of the novice with the expectations of the expert. For instance, we wanted you to see how patent searching is actually done in real life, not just refer you to incomprehensible databases and let you fend for yourselves. We wanted you to see a real investor term sheet or memorandum of understanding so you could read it ahead of time and prepare your own questions to bring up with your legal counsel before you negotiate for the first time with an angel investor or venture capitalist. The same chapters will help you when you negotiate with the personnel in your university's technology transfer office about protecting your invention. We also hope our book provides you with lasting insights that make the time you spend with your IP lawyers and financial advisors more strategic, more productive, and more rewarding - long after your venture is up and running.

Where we saw a special need for a book like ours was where entrepreneurs needed to manage IP rights in turbulent and fast-moving market conditions. Strategic alliances are often the best way to leverage two companies' complementary resources and capabilities where conditions are especially risky and ambiguous. Here we discuss real options and how to construct contracts that provide you with more flexibility and protection against downside losses while enabling you to share in upside rewards.

Part and parcel of designing, structuring, and negotiating either financing or strategic alliances for your new venture is being able to value the cash flows related to the agreements. We have written about venture valuation issues with an eye to lawyers and scientists; we also have written about entrepreneurial finance keeping in mind the needs of MBAs, executive MBAs, and graduate students enrolled in advanced degree programs.

From Innovation to Cash Flows will be an invaluable guide for executives taking courses on mergers and acquisitions, strategic alliances, intellectual property rights or managing high technology entrepreneurial firms. To satisfy the learning needs of these various audiences, we introduce and explain basic concepts and vocabulary, and then apply the theory, valuation tools or strategy frameworks to practical cases, illustrated with short stories, and numerical examples. To use the financial models, readers need to have only a very basic understanding of electronic spreadsheets. For the numerical examples, a simple financial calculator is all that is required.

We and our contributing author team have examined issues related to high-technology strategic alliances from many diverse perspectives and through many different cross-cultural lenses. But we all had one comprehensive aim in mind: to help equip you as an entrepreneur for your journey in launching, scaling up, managing, and, when the time is ripe, harvesting your venture successfully.

We welcome your feedback for further improvements. Contact us at this email: constance.lutolfcarroll@esade.edu