Getting commercialisation right to realise the value of emerging technology start-ups

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.

As a result, many technology start-ups 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 robust technology development and commercialisation strategy around five critical success factors:

• retaining control of core intellectual property
• extracting maximum value from strategic partners
• establishing a credible development programme for the core technology
• focusing on fast track commercialisation for early revenue generation
• 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.

Retaining control of core intellectual property

Strong and well-controlled intellectual property can significantly boost a technology start-up's valuation. This is because a company built around intellectual property 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 intellectual property 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.

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 technology independent and capable of exploitation by multiple partners – ultimately resulting in a higher valuation through competitive bidding for the company.

Establishing a credible development programme for the core technology

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.

Focusing on fast-track commercialisation for early revenue generation

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.

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 more cost-effectively, and ultimately be sold at higher valuations by:

• driving innovative product development and manufacturing
• creating commercial advantage from technology.