xii ◾ Contents
8.7 Laws of Power Negotiation ............................................................169
8.7.1 The Chicken or Egg Cycle ................................................... 170
8.7.2 The Negotiating Table ......................................................... 171
8.7.3 How Is Your Meeting Progressing? ..................................... 172
8.7.4 Power Negotiator’s TIR ........................................................ 173
8.8 Managing Negotiation Conict ...................................................... 173
8.9 Secrets of Power Presentations ...................................................... 174
8.10 Secrets of Closing the Deal ............................................................175
8.11 The Ten Amendments of Negotiations ..........................................177
References ...............................................................................................178
9 Marketing and Sales ................................................................181
9.1 Introduction .................................................................................... 181
9.2 Selling Your Innovation ..................................................................183
9.2.1 Needs, Wants, and Demands ..............................................184
9.3 Analyzing Your Market ...................................................................185
9.3.1 The Promise of Unmet Needs/Wants .................................186
9.3.2 Costs and Functions of Marketing ......................................187
9.4 Pioneering StartUps ........................................................................188
9.4.1 Crossing the “Chasm” ..........................................................189
9.4.2 Your Pioneer Strategy ..........................................................190
9.5 Setting the Right Price .................................................................... 190
9.5.1 Establishing Your Pricing Tactics ........................................191
9.5.2 Tensions between Marketing and Sales ..............................192
9.6 The Complex Sale ..........................................................................193
9.7 Market Segmentation ...................................................................... 194
9.8 Positioning: Your Place in the Sun .................................................195
9.8.1 Famous Positioning Statements ...........................................196
9.8.2 Template for a Positioning Statement .................................197
9.9 Sales and Sales Promotions ............................................................198
9.9.1 Your Sales Force ..................................................................198
9.9.2 Sales Force Compensation ..................................................198
9.9.3 Sales Force Time Management ...........................................200
References ...............................................................................................201
10 Intellectual Property ...............................................................203
10.1 Introduction ................................................................................203
10.2 Patentable Inventions .................................................................206
10.2.1 Who Benets from Intellectual Property Rights? .........207
Contents ◾ xiii
10.3 Understanding Patents ...............................................................207
10.3.1 Contents of a Patent ......................................................208
10.3.2 Claims: The Heart of a Patent ......................................208
10.3.3 Claims Categories ..........................................................210
10.3.4 Real Estate Analogy ......................................................211
10.4 Provisional Patents .....................................................................212
10.4.1 Time Limits ....................................................................212
10.4.2 Advantages and Disadvantages ....................................213
10.4.3 Patents Can Have Siblings/Children ............................. 214
10.4.4 International Patent Organizations ............................... 214
10.5 Basis for Venture Investment ..................................................... 215
10.6 The America Invents Act............................................................ 215
10.6.1 First to File .....................................................................216
10.6.2 No Grace Period ............................................................216
10.7 The Special Case Involving Biotechnology Patents ..................218
10.7.1 Genetic Engineering Patents ......................................... 220
10.7.2 Microbiological Sciences Patents ..................................220
10.7.3 Plant and Animal Sciences Patents ............................... 220
10.7.4 Pharmaceutical and Chemical Sciences Patents ...........220
10.7.5 Medical Sciences Patents ...............................................221
10.7.6 Microorganisms and Sufciency of Description ..........221
10.8 Practical Advice to Entrepreneurs/Inventors .............................221
10.8.1 Who Is the “Inventor” in Your Company? .................... 222
10.8.2 Conception ....................................................................222
10.8.3 Should You Out-License Your Patent? ..........................223
10.9 Fundraising Importance of Patents ............................................224
10.10 Trade Secrets in the StartUp Environment ................................225
References ...............................................................................................226
11 Meet the JOBS Act ...................................................................227
11.1 Introduction ................................................................................227
11.2 The JOBS Act at a Glance ..........................................................228
11.2.1 Title III of the U.S. JOBS Act ........................................229
11.2.2 Equal Access and Disclosure ........................................229
11.3 Crowdfunding ............................................................................230
11.4 Issuer Requirements ................................................................... 231
11.5 Intermediary Requirements .......................................................231
xiv ◾ Contents
11.6 Funding Portals ..........................................................................232
11.6.1 Restrictions on Funding Portals ....................................233
11.7 Mini-IPOs....................................................................................234
11.8 Emerging Growth Company IPOs .............................................234
11.8.1 Relief for EGCs ..............................................................235
11.8.2 Condential Filing Process ...........................................236
11.8.3 Relaxed Restrictions on Investor Communications ......237
References ...............................................................................................238
12 Strategic Management .............................................................239
12.1 Introduction ................................................................................239
12.2 Strategic Corporate Planning .....................................................240
12.3 Core Values and Core Purpose ..................................................242
12.4 Mission, Vision ...........................................................................242
12.5 Competitive Intelligence.............................................................244
12.6 Marketing Intelligence ................................................................ 246
12.6.1 The Pizza Analogy ........................................................248
12.7 Strategic Marketing Goals by MI ...............................................250
References ...............................................................................................252
13 Valuation Techniques ............................................................... 255
13.1 Introduction ................................................................................255
13.2 Value vs. Price ............................................................................256
13.3 Pre-Seed Financing ....................................................................256
13.4 What Is Your Company Worth at StartUp (Seed Round)? .........257
13.4.1 Initial Valuation at Seed Round ....................................257
13.4.2 Valuation at Series “A” Round .......................................258
13.5 Valuation Approaches—Companies with Revenues .................259
13.5.1 Income Approach ..........................................................260
13.5.2 Discounted Future Returns Method .............................261
13.5.3 Capitalized Returns Method ..........................................261
13.5.3.1 Assumptions ..................................................262
13.6 Market Approach ........................................................................263
13.7 Asset-Based or Cost Approach ..................................................263
13.8 Venture Capital Valuation...........................................................263
13.8.1 Staged Capital Infusions ...............................................266
13.8.2 Venture Capital Metrics ................................................. 267
13.8.3 The Investment “Hurdle Rate” ......................................268
13.8.4 Top Ten Lies VCs Tell....................................................268
Contents ◾ xv
13.9 Vulture Capitalist ........................................................................269
13.10 Last Words of Advice .................................................................270
13.10.1 How to Maximize Your Company’s Value ...................270
References ...............................................................................................271
14 Writing a Winning Business Plan ............................................273
14.1 Introduction ................................................................................273
14.2 Need for a Winning Business Plan ...........................................274
14.3 The Essential Components ........................................................276
14.3.1 Common Parts of a Good Business Plan .....................277
14.4 Risk Is a Four-Letter Word .........................................................277
14.5 Management Team That Can Execute .......................................280
14.5.1 Competent Team ...........................................................281
14.6 How Innovative Is Your Invention? ...........................................282
14.7 Ignore Naysayers (and Prove Them Wrong) .............................282
14.8 Milestones Make Your Plan Real and Believable ......................284
14.9 The Value of Your Plan Will Be Measured by Its
Implementation Potential ...........................................................284
14.10 Example of a Winning Business Plan .......................................285
References ...............................................................................................285
15 Harvesting ...............................................................................335
15.1 Introduction ................................................................................335
15.2 Start at the End ...........................................................................336
15.2.1 Who Needs an Exit? ...................................................... 336
15.3 Capitalization Principles ............................................................. 337
15.3.1 How to Capitalize Your StartUp ...................................337
15.4 Going Public ...............................................................................339
15.4.1 Advantages ....................................................................339
15.4.2 Disadvantages ................................................................340
15.4.3 The Going Public Process.............................................340
15.4.4 The Registration Process ............................................... 341
15.5 Strategic Alliances ......................................................................343
15.6 The “Big Question” ....................................................................344
15.6.1 Drivers of M&A Activities .............................................345
15.6.2 Advantages of Strategic Alliances .................................345
15.6.3 Pitfalls of Strategic Alliances.........................................347
15.6.4 Best Practices ................................................................347
15.7 Mergers and Acquisitions ...........................................................350
15.7.1 Mergers ..........................................................................350
xvi ◾ Contents
15.7.2 Acquisitions ...................................................................350
15.7.3 The Challenge of M&A ................................................. 351
15.7.4 The Enduring Questions ...............................................352
15.8 The Day That Little David Acquired Giant Goliath—A Case
Study ........................................................................................... 352
15.8.1 The Acquisition .............................................................354
15.8.2 Open Heart Procedures ................................................ 355
15.8.3 CardioTech as the White Knight ...................................355
15.8.4 Risk Factors SWOT Analysis of the Gish Acquisition ... 357
15.8.4.1 Strengths ........................................................359
15.8.4.2 Weaknesses....................................................359
15.8.4.3 Opportunities ................................................360
15.8.4.4 Threats ...........................................................360
15.8.4.5 The Stock-for-Stock Transaction ...................361
15.8.5 An Accretive Acquisition ............................................... 361
15.9 Sample Prospectus .....................................................................362
References ...............................................................................................394
About the Author ............................................................................ 407
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