Technology Entrepreneurship

Creating, Capturing, and Protecting Value

Thomas N. Duening, Robert A. Hisrich, Michael A. Lechter

• Publisher: Academic Press
• Year: 2009
• ISBN:
  9780080922881
• Topic: Business
• Subtopic: Industrial Management
• Index: Business

Recognizing the unique needs of the technology startup, Duening focuses on intellectual property development, funding, and marketing/selling more than other texts in this market. Extensive use of technology examples, case studies, and assignments keeps the book relevant and motivating for engineering students.

• Rich in case studies, examples, and in-chapter elements that focus on the challenges of launching and operating a technology venture
• In-depth examination of intellectual property development, valuation, deal structuring, and equity preservation, issues of most relevance to technology start-ups
• Extensive discussion of technology management and continuous innovation as a competitive advantage
• Addresses the issue of leading, managing, motivating, and compensating technical workers
• More time on the fundamentals of marketing and selling, as these are elements of entrepreneurship commonly most neglected by engineers and scientists

Chapter 1. Fundamentals of Business

After studying this chapter, students should be able to:

▪ Understand the logic and mechanics of a business enterprise

▪ Appreciate the role of value in business and economics

▪ Identify roles and responsibilities of business in society

▪ Explain business as a human activity

▪ Evaluate elements of a going concern versus a failed venture

▪ Identify factors essential to a dynamic venture

Tech Venture Insight

It's Hard to Be a CEO

Mark Zuckerberg is the 23-year-old chief executive of Facebook, the popular social-networking web site used by millions of people around the world. Zuckerberg founded Facebook as a 19-year-old college student in 2004. The company enjoyed almost instant success as millions of users flocked to the site, and Silicon Valley venture capital firms competed with each other to provide funding. In 2007, Microsoft invested $240 million in the venture at a valuation of $15 billion.

Zuckerberg moved Facebook's headquarters to Palo Alto, California, shortly after he launched the company. At first, Zuckerberg was able to maintain a “college student” lifestyle, living and working out of a rented house with the other Facebook engineers. When he finally moved into a Silicon Valley office, Zuckerberg would arrive mid-morning in his flip-flops and work late into the night. It was a laid-back style that was not suited to the growing business.

To adjust to the challenges of running a fast-growing technology company, Zuckerberg turned to other industry giants for consultation. He became friends with Marc Andreessen who founded the Internet browser company Netscape when he was just 22 years old. The two of them met often to discuss business and strategy issues. Zuckerberg also had frequent conversations with Silicon Valley investor Roger McNamee. McNamee had become a mentor to his young protégé. Zuckerberg lamented that being CEO of his own company “is hard—I do sometimes whine to Roger about it.”

In March 2008, Zuckerberg finally reached into the Internet company talent pool and hired 38-year-old Sheryl Sandberg from Google to become Facebook's CEO. Sandberg was one of the first 300 employees at Google, and helped turn the company into a global advertising power. Together, the two confronted the business challenges that the youthful Zuckerberg may not have had the knowledge or experience to tackle on his own.

Introduction

Mark Zuckerberg is the youthful CEO of the popular social-networking web site, Facebook. As his company grew rapidly, Zuckerberg discovered that his background and skills were increasingly inadequate to the business challenges he faced. Confounded not only by the technical issues that inevitably arise in a rapidly growing venture, he also encountered increasingly complex business and strategic issues. As the opening Technology Venture Insight highlights, after four years of operation, Zuckerberg finally hired a more seasoned and business-savvy executive to help him achieve his business goals.

This is a common path for many technology entrepreneurs. While they are experts in a narrow technology field, they often find their business skills less than adequate to cope with a growing number of employees and the pressures of global competition. This textbook starts with the premise that many technology-oriented students simply are not exposed to the fundamental principles of business operations. To address this problem, we have devoted the first three chapters of this textbook to business and economics topics to familiarize technology students with basic business concepts, as well as the challenges faced by technology ventures in the modern global economy.

Business activity pervades societies and cultures around the globe. The nomadic reindeer herder on the steppes of Mongolia delivers hides to a market in the capital city of Ulan Bator to supplement a family income. The fashion designer in Hong Kong sends out the latest designs to an eager audience in New York. And the dairy farmer in Wisconsin has lunch while listening to up-to-the-minute broadcasts on the price of feed grains and other commodities. Business is all-encompassing and globally connected, yet usually only modestly understood by most people.

In modern times, the pervasive influence of business plays out in entire television networks, such as CNBC, which broadcasts every tick of the major stock markets as they make their daily up and down movements. Newspapers, such as The Wall Street Journal, Financial Times, and Investor's Business Daily, are dedicated entirely to business and economic news. Blogs, such as TechCrunch and Killer Startups, report continuously about new technology ventures being launched, acquired, going public, or closing their doors for the last time.

Despite this increased awareness of business activity, most technology-focused education and training programs do not include lessons on fundamental business principles and practice. Technology students, however, are exposed to compulsory instruction in literature, history, composition, and other of liberal arts subjects, but few are required to enroll in basic business courses. This is a pity since most technology-oriented students will typically end up working in a business. In fact, a recent review of the Standard & Poor's 500 largest companies in the United States revealed that fully 23% are led by individuals with an undergraduate engineering degree. The next closest undergraduate major is business, with a 15% representation. ¹

Of course, it is possible to learn some basic principles of business and management by working within a company and observing how it operates and is managed by others. ² Unfortunately, this approach has two critical drawbacks. First, it takes a long time to both perform in your technical job and at the same time observe enough business situations, decisions, and consequences so that you may extract meaningful lessons. Second, those who manage and lead the business may not be doing a very good job—and the lessons learned may not be helpful in your career. If your workplace is managed by individuals who have minimal formal management or leadership training, they may be less effective than they could be. Thus, limiting your learning of business and management to observation alone may, in the end, only serve to suboptimize your effectiveness.

The focus of this book is on technology ventures—how they start, operate, and sometimes exit profitably. To understand technology ventures (or any other type of venture), it is critical that you understand fundamental business concepts. Fortunately, you don't necessarily need to enroll in a formal business degree program to learn important basic principles. In fact, a limited number of fundamental business concepts can be learned and absorbed relatively quickly, giving you a leg up on the next step toward higher levels of mastery. It is our hope that you will continue your learning beyond the basics described here, by reading business publications, watching business programming on television, and thinking about the business issues that are described in those media.

Tech Micro-Case 1.1

Mastering the Fundamentals

Consider the example of a professional golfer like Tiger Woods. Mr. Woods would not be the extraordinary golfer he is today without having previously struggled with and mastered the fundamentals of golf. In his case, that means he had to learn the mechanics of the golf swing, the placement of the hands on the golf club shaft, the focusing of the mind before each shot, and myriad other details. As these fundamentals became habits through practice, Mr. Woods was able to take them for granted and shift his attention to other factors of the game. Having mastered the fundamentals, he is, for example, now able to experiment with hand placement on golf shots that present unusual challenges, such as those out of rough grass, behind a hazard, or those that require a certain type of spin to be placed on the ball. Experiments such as these can only take place after the fundamentals have been mastered. Tiger Woods is a multi-millionaire, with many opportunities in his life. Without his world-leading mastery of the fundamentals of golf, none of those other things would be options for Mr. Woods. ³

Section 1.1 is intended to guide you, the technology-oriented student, through what we have determined to be the fundamentals of business. If you have already taken basic business courses, undoubtedly you will find some familiar material here. In that case, use the chapter as a reminder of the fundamentals, in the same way star athletes need to be reminded from time to time to “go back to the fundamentals.” If you are being exposed to these concepts for the first time, your goal will be to learn and then practice the fundamentals until they become habits.

The first chapter aims to initiate a personal interest in the business side of the technical field that you have been studying. Whether you are an engineer, scientist, or studying other technical disciplines, there is a business aspect that generates the capital to pay for lab equipment, computers, salaries, etc. Getting to know this side of your technical field of study will enable you t...

Table of contents

• Cover image
• Table of Contents
• Copyright
• Dedication
• Preface
• Acknowledgments
• About the Authors
• Chapter 1. Fundamentals of Business
• Chapter 2. Fundamentals of Economics in a Global Context
• Chapter 3. Technology Ventures in a Global Context
• Chapter 4. Legal Structure and Equity Distribution
• Chapter 5. Capital and Deal Structuring
• Chapter 6. Exit Strategies for Technology Ventures
• Chapter 7. Intellectual Property Management and Protection
• Chapter 8. Contracts
• Chapter 9. Negotiating Fundamentals
• Chapter 10. Launching the Technology Venture
• Chapter 11. Going to Market and the Marketing Plan
• Chapter 12. Financial Management and Control
• Chapter 13. Venture Management and Leadership
• Chapter 14. Venture Risk Management
• Chapter 15. Your Entrepreneurial Career
• Appendix. Model Business Plan
• Index