20 March 2006

Valuing the business

A few weeks ago, Chris and I met someone who had developed some interesting new technology. Although the thinking for the technology comes from the world of high-energy physics, the applications are much more mundane - electric motors and generators used at room temperature.

The point of the story is that the person we met was looking for equity investment - but was unwilling to give much away much in terms of equity. That doesn't make him unusual, since businesses looking for technology funding often overvalue what they have done and what they have achieved at the same time as they underestimate how much work will be required to generate revenues out of their idea.

I would be surprised if he found his funding. With technology like this, it is almost easier to licence the idea to a manufacturer who can apply it within their own range of products. The manufacturer moves the technology from 'proof of concept' and 'laboratory prototyping' to industrial scale. Everyone benefits when the IP is licenced more widely.

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