Technology entrepreneurship taking innovation to the marketplace PDF

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All about technopreneurship and startups. It is very interesting, you can read it during your spare time or read it because you prof told you so....

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Technology Entrepreneurship

Technology Entrepreneurship Taking Innovation to the Marketplace Second Edition

Thomas N. Duening, Ph.D El Pomar Chair of Business and Entrepreneurship Director, Center for Entrepreneurship College of Business University of Colorado at Colorado Springs

Robert D. Hisrich, Ph.D Garvin Professor of Entrepreneurship Director, Walker Center for Global Entrepreneurship, Thunderbird School of Global Management

Michael A. Lechter, Esq., CLP CEO, Michael Lechter, PC CEO, TechPress Inc. Adjunct Professor, Fulton School of Engineering, Arizona State University

AMSTERDAM • BOSTON • HEIDELBERG • LONDON NEW YORK • OXFORD • PARIS • SAN DIEGO SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO Academic Press is an imprint of Elsevier

Academic Press is an imprint of Elsevier 32 Jamestown Road, London NW1 7BY, UK

525 B Street, Suite 1800, San Diego, CA 92101-4495, USA 225 Wyman Street, Waltham, MA 02451, USA The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, UK Second edition 2015 Copyright © 2015, 2010 Thomas N. Duening, Robert D. Hisrich, Michael A. Lechter. Published by Elsevier Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier's Science & Technology Rights Department in Oxford, UK: phone (+44) (0) 1865 843830; fax (+44) (0) 1865 853333; email: [email protected]. Alternatively you can submit your request online by visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material. Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein. Because of rapid advances in the medical sciences, in particular, independent verification of diagnoses and drug dosages should be made. Library of Congress Cataloging-in-Publication Data Duening, Thomas N. Technology entrepreneurship: taking innovation to the marketplace/by Thomas N. Duening, Robert D. Hisrich, Michael A. Lechter. pages cm Revised edition of the authors’ Technology entrepreneurship : creating, capturing, and protecting value, published in 2010. Includes bibliographical references and index. ISBN 978-0-12-420175-0 (alk. paper) 1. Technological innovations–Economic aspects. 2. High technology industries– Management. 3. Entrepreneurship. 4. Intellectual property. 5. New business enterprises–Management. I. Hisrich, Robert D. II. Lechter, Michael A. III. Title. HC79.T4D84 2015 658.5’14–dc23 2014025056 A catalog record for this book is available from the Library of Congress British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library For information on all Academic Press publications visit our web site at store.elsevier.com Printed and bound in USA ISBN: 978-0-12-420175-0

Dedication

To my mentor, John M. Ivancevich, and to my wife, Charlene. Thomas N. Duening To my wife, Tina Hisrich; daughters, Kary, Katy, and Kelly; son-in-law, Rich; and grandchildren, Rachel, Andrew, and Sarah. Robert D. Hisrich To my wife, Sharon L. Lechter, and children and grandchildren, Phillip, Angela, Kristian, and Dylan; Shelly, Jeff, and Emma; and William Eric, ever the Marine, may he rest in peace. Michael A. Lechter

Acknowledgments

We are grateful for the support, encouragement, and feedback we received during the production of this text. Several people deserve special mention for their unwavering and tireless support of this project. Carol Pacelli assisted in the preparation of many of the chapters. Jonathan Beckley and Jason Babbel provided substantial research support and assistance in developing some of the chapters. Of course, any remaining errors, either of omission or commission, remain the sole responsibility of the authors. In addition, a number of teachers and scholars participated in reviewing this text during its development. In addition to the ones who wish to remain anon ymous, these reviewers include: ■ Frank Hoy, Worcester Polytechnic Institute ■ Thomas E. Kaplan, Wittenberg University

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About the Authors

Dr. Thomas N. Duening is the El Pomar Chair of Business & Entrepreneur ship and Director of the Center for Entrepreneurship in the College of Business at the University of Colorado, Colorado Springs. He is a 1991 graduate of the University of Minnesota with a PhD in Higher Education Administration and an MA in Philosophy of Science. He began his aca demic career as the Assistant Dean for the University of Houston’s College of Business Administration. There, he was also a visiting faculty member in the Marketing Department and a co-founder of its Center for Entrepreneurship & Innovation. Dr. Duening launched his first venture while a graduate student. His international consulting firm served the electric utility industry with information products centered on the issue of health effects associated with electric and magnetic fields from high-voltage power lines. Duening and his partner launched the venture in 1984. He left in 1991 upon com pletion of his doctorate to assume the Assistant Dean position in Houston. After his 9-year stint as Assistant Dean, Dr. Duening founded several more companies. With a partner, he co-founded US Learning Systems in 1998.

The firm provided e-learning content to providers around the country. US Learning Systems was acquired in December 1999 by Aegis Learning. Aegis provided e-learning services to corporations around the world. Dr. Duening left Aegis in 2002 to launch the Applied Management Sciences Institute (AMSI). The orga nization was created to develop educational products for business students. As part of this firm, Professor Duening co-wrote three business textbooks, which now enjoy wide circulation around the world. Dr. Duening next founded INSYTE Business Services Group and launched a project to study best practices in business process outsourcing. The result of this effort was two trade books: Business Process Outsourcing: The Competitive Advantage and The Essentials of Business Process Outsourcing. Both books were published by John Wiley & Sons in 2004 and 2005, respectively. As he was xix xx About the Authors

conducting the research for these books, Dr. Duening co-founded INSYTE InfoLabs India, Pvt. Ltd., a business process outsourcing firm based in Bangalore, India. The firm provides outsourcing services to a wide range of companies, enabling them to reduce their cost structure. Infolabs was acquired by ANSRSource in 2004. In 2004, Dr. Duening accepted a position as Director of its Entrepreneurial Programs Office with Arizona State University’s Ira A. Fulton School of Engineering. In that role, Dr. Duening taught courses in Technology Entrepreneurship to engineers at the graduate and undergraduate levels. He also co-authored a textbook titled Technology Entrepreneurship: Creating, Capturing, and Protecting Value published by Elsevier. He is currently a senior advisor to ANSRSource (www.ansrsource.com) and a founding partner in a Bangalore, India-based global accelerator called Kyron (www.kyron.me). Dr. Robert D. Hisrich is the Garvin Professor of Global Entrepreneurship and Director of the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management. Dr. Hisrich received his BA from DePauw University, his MBA and PhD degrees from the University of Cincinnati, and honorary doctorate degrees from Chuvash State University (Russia) and the University of Miskolc (Hungary). He was a Fulbright Professor at the International Management Center in 1989 and a Fulbright Professor at the Foundation for Small Enterprise Economic Development in Budapest, Hungary, from 1990 to 1991. He has held or now holds visiting professorships at the University of Ljubljana (Slovenia), the Technical University of Vienna (Austria), Donau University (Austria), Queensland University of Technology

(Australia), and Jilin University (China). Dr. Hisrich has authored or co-authored 34 books, including: Marketing for Entrepreneurs and SMEs: A Global Perspective (2014), Managing Innovation and Entrepreneurship (2014), Entrepreneurship: Starting, Developing, and Managing a New Enterprise, 9th edition (2013—translated into 13 languages), Governpreneurship: Establishing a Thriving Entrepreneurial Spirit in Government (2013), Corporate Entrepreneurship (2012), International Entrepreneurship: Starting, Developing, and Managing a Global Venture, 2nd edition (2012), Technology Entrepreneurship: Value Creation, Protection, and Capture (2010), and The 13 Biggest Mistakes That Derail Small Businesses and How to Avoid Them, and over 300 articles on entrepreneurship, international business management, and venture capital. About the Authors xxi

Dr. Hisrich has been involved in the creation of numerous ventures including: H&B Associates (consulting), Illuminations (rainbow stickers and ornaments), Jameson Inns (hotels), La Bella Terre (organic sugars), Noteworthy Medical Systems (medical software), Polymer Technology (Boston Lens) and Xeta Technologies (telecommunications). Michael A. Lechter is an attorney, certified licensing professional and entrepreneur, CEO of TechPress Inc., a publishing and liter ary agency company, CEO of Michael Lechter PC, and Adjunct Professor in the Entrepreneurial Program in the Ira A. Fulton School of Engineering at Arizona State University. Lechter is also the best selling author of OPM, Other People's Money, How to Attract Other People's Money for Your Investments—The Ultimate Leverage (2005, 2nd edition 2010) and Protecting Your #1 Asset, Creating Fortunes from Your Ideas (2001, 2nd edition 2014). An internationally known expert in the field of intellectual property, his clients have included breweries, fast food companies, casinos, professional sports teams, major software companies, semiconduc tor and medical device manufacturers, start-ups, venture capitalists, and Fortune 100 companies. When asked what he does for a living, he typically replies, “I build forts and fight pirates.” Michael has been the architect of strategies for building businesses, using both conventional and unconventional forms and sources of “Other People’s Money and Resources.” His experience in representing both venture capital ists and start-up and emerging businesses, and experience as an angel investor

himself, provides a unique perspective to the subject of building a business. Michael is also the author of The Intellectual Property Handbook, TechPress (1994), coordinating editor of Successful Patents and Patenting for Engineers and Scientists, IEEE Press (1995), and contributing author to the Encyclopedia of Electrical and Electronics Engineering, Wiley (1999), and Licensing Best Practices: The LESI Guide to Strategic Issues and Contemporary Realities, Wiley (2002). Over the years, he has also written monthly columns for INC.com, IEEE-USA Today’s Engineer, and Washington Technology. Michael has been an active member of the Licensing Executives Society (LES) USA/Canada, serving as a trustee (1996-2000), and as Computer and Electronics Industry Sector Chair (1992-1996). He has been a LES USA/ Canada delegate to LES International since 2001 and has served as Chair or Vice Chair of a number of LESI committees. Since 2013, he has been counsel to the LESI board. xxii About the Authors

He has lectured extensively throughout the world on intellectual property law and entrepreneurship. Upon request of the House Judiciary Committee he has submitted testimony to the Congress of the United States and has participated in various United Nations and foreign government proceedings on intellectual property law and technology transfer.

Preface

Michael is also the owner of Cherry Creek Lodge LLC, a resort/guest ranch in the Tonto National Forest of Northern Arizona (www.CherryCreekLodge. com), a study in rustic elegance where modern comfort meets The Old West. The Cherry Creek Lodge specializes in corporate and family retreats. change in the years ahead. Not only are new technologies emerging to enable interconnectivity on an unprecedented scale, but new mar kets are also emerging. Today’s technology entrepreneur must be nimble, fast, and creative in product design and development, marketing and selling, and in protecting the all-important intellectual property that makes the product unique.

In this book, we chart a course for technology entrepreneurs interested in bringing products to the global marketplace. The book provides a compre hensive perspective to the challenge of launching, growing, and exiting a tech nology venture. Our unique collaboration has resulted in a book that will be useful to anyone starting and/or growing a technology venture. The technology venture landscape has changed radically in the last decade and will continue to

Each author of this book has incorporated his own perspectives and those of leading scholars and practitioners in technology entrepreneurship. As such, you will find our voices mixed with the voices of those whom we believe to be generating important new insights into the secrets of venture success. Where appropriate, we have cited these other scholars and practitioners, and we encourage you to follow the links we provide at the end of each chapter to further readings and websites that may be

useful. We organized this book to represent the flow of challenges that confront a technology entrepreneur. Our first section is “You Are Here: X.” This section attempts to convey a sense of place, similar to when you consult a directory in a complex shopping mall that you’re visiting for the first time. “X” denotes where you are currently standing and helps you determine the best path to get to where you want to go. Our first section is intended to give you that same sense of determining where you currently are so you can determine your most likely path to entrepreneurial success. Section 2 is titled “Countdown to Launch.” Here, the topics of product devel opment, intellectual property, legal structure of the venture, and the business plan are covered. Each of these is a vital consideration for the technology

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entrepreneur seeking to launch a venture with a foundation that augurs future success. Section 3 is titled “Into the Breach.” This phrase is borrowed from Shakespeare’s

play “Henry V” where the English King invokes the phrase “once more unto the breach” to motivate his soldiers to battle. Although starting a venture is not equivalent to battle, the technology entrepreneur certainly will face many challenges, expected and unexpected. This section covers these challenges with topics such as raising capital, launching the venture, marketing and selling, and contracts. Finally, Section 4,“Growth and Exit,” addresses topics such as leading and man aging the growing venture and valuing and exiting the venture. Most technol ogy entrepreneurs build their companies with an exit strategy in mind. This is advisable at the outset because different exit strategies require different growth objectives and organizational structures. Leading is also an important topic for growth-oriented technology entrepreneurs. Growth inevitably requires add ing people and structure. Entrepreneurial leaders must strive to keep everyone aligned with the venture’s vision and strategies, a task that many technology entrepreneurs find, at least at first, quite daunting. We provide some tips and insights that should prove helpful to technology entrepreneurs faced with leadership responsibilities. This book has been undertaken with the same passion that technology entre preneurs must bring to their ventures. We have spent many hours debating, discussing, and refining our thoughts concerning what will be the most essen tial material for technology entrepreneurs in our evolving global marketplace. The result of this continual conversation is the book you are holding in your hands. As an author team, we take great pride in presenting this book to you. We are genuinely interested in your success, and we look forward to the next genera tion of innovative technology products that will make the future brighter for all of us. Each of us has committed to playing a role in the development of technology entrepreneurs, and we are grateful for the opportunity to play a role in realizing your entrepreneurial dreams. Thomas N. Duening Robert D. Hisrich Michael A. Lechter May 2014

CHAPTER 1

Technology Entrepreneurship Today: Trends, Opportunities, Challenges

HIKE LEVERAGES LOCAL MARKET KNOWLEDGE TO SUCCEED IN INDIA In just its fourth month since its launch, Indian startup Hike, a mobile messaging app, had more than five million registered users who exchanged over one billion messages per month. The app allows users to send free SMS messages, even to contacts that do not have Hike on their mobile phones. Users can also share location information, photos, and videos. Of course, compared to some more established firms like WhatsApp, which have more than 200 million active users and 600 billion messages per month, Hike seems like a small player. But Hike is using its knowledge of the Indian market to develop features that serve the unique needs of the Indian user. For example, Hike has developed a patent-pending SMS conversion tool into its app to manage the fragmentation in the Indian market that has resulted in relatively low distribution of data capable smart phones. If it was just a matter of incorporating SMS messages into a unified app, that has already been done by Google’s Hangouts app. Instead, Hike focused on making sure data messages can reach users who don’t have data via the SMS channel. This feature differ entiates Hike nicely in its home market (about 60% of users are in India) and in other emerging markets like Indonesia and Malaysia. Hike received about $7 million in funding from Japan-based Softbank in April 2013. The found ers believe that their primary goal in the short term is to aggregate users and build a dominant position in India and other markets with similar telecom dynamics. They believe that their main source of revenue will come from content that is relevant to the local market, such as entertain ment and games. Hike founder Kavin Mittal explained why it is so important for his company to be located in India and serving the market there: “India is a country of 20 countries. There’s so much diversity, cul tural differences, dialects, languages that one has to cater to … There are about 150 million people that are experimenting with the Internet, but they have a lot of churn because the Internet is still not a utility for these guys; and then you have a billion people at the bottom of the pyramid that have no clue what the Internet is. As you go further down in India, how do you tackle the one billion people? No one knows, but we’re in India here, and we’re the guys to figure it out.” Sources: Adapted from Natasha Lomas, “How Hike, India’s Fastest Growing Mobile Messaging App is Banking on SMS & Local Diversity to Beat the Big Boys,” TechCrunch.com, May 18, 2013; “Free Mobile Messaging App ‘Hike’ Crosses 5 Million Users,” Hindu Times Business Line, April 21, 2013.

3 Technology Entrepreneurship Copyright © 2015, Thomas N. Duening, Robert D. Hisrich, Michael A. Lechter. Published by Elsevier Inc. All rights reserved. 4 CHAPTER 1 Technology Entrepreneurship Today

1.1 INTRODUCTION This chapter will provide you with insights into trends, challenges, and opportunities for today’s technology entrepreneur. Much has changed since we wrote the first edition of this book in 2009, and we are excited to write about and reflect on these changes. We think this new book provides useful,...