Risk Appraisal and Venture Capital in High Technology New Ventures (Routledge Studies in Global Competitioná)

241 Pages·2007·2.83 MB·English

by  Gavin C Reid

Risk Appraisal and Venture Capital
in High Technology New Ventures
This book is a ‘crossover’ treatment of quantitative and qualitative risk analysis
within the setting of new high-technology ventures in the UK. Reid and Smith
have based their research on extensive fieldwork in patent-intensive, high-
technology firms. This has included face-to-face interviews with leading
investors, and is illustrated by two chapters of case studies. Their aim is to
advance the understanding of methods of risk assessment and to illuminate
current policy concerns about stimulating innovative output and securing intel-
lectual property.
This book is unique in being academic in intent and purpose, yet strongly
grounded in practice, without becoming merely a practitioner volume. Reid and
Smith find a considerable consensus in the venture capital industry on the spec-
trum of investments by risk, and on key commercial factors affecting risk. This
book offers a useful and interdisciplinary approach to an increasingly popular
field of study. It provides novel insights into valuing high-technology invest-
ments, and managing their risks.
This book will be of considerable interest to students of financial and indus-
trial economics, and financial and management accounting, as well as practition-
ers in banking, private equity and business and management consultancies.
Gavin C. Reidis Director of CRIEFF and Professor in Economics and Finance
at the University of St Andrews. Julia A. Smith is Reader in Accounting and
Finance at Strathclyde Business School.
Routledge studies in global competition
Edited by John Cantwell
University of Reading, UK
and
David Mowery
University of California, Berkeley, USA
1 Japanese Firms in Europe 8 Strategy in Emerging Markets
Edited by Frédérique Sachwald Telecommunications
establishments in Europe
2 Technological Innovation, Anders Pehrsson
Multinational Corporations and
New International 9 Going Multinational
Competitiveness The Korean experience of direct
The case of intermediate countries investment
Edited by José Molero Edited by Frédérique Sachwald
3 Global Competition and the 10 Multinational Firms and
Labour Market Impacts on Employment, Trade
Nigel Driffield and Technology
New perspectives for a new
4 The Source of Capital Goods century
Innovation Edited by Robert E. Lipsey and
The role of user firms in Japan and Jean-Louis Mucchielli
Korea
Kong-Rae Lee 11 Multinational Firms
The global–local dilemma
5 Climates of Global Competition Edited by John H. Dunning and
Maria Bengtsson Jean-Louis Mucchielli
6 Multinational Enterprises and 12 MIT and the Rise of
Technological Spillovers Entrepreneurial Science
Tommaso Perez Henry Etzkowitz
7 Governance of International 13 Technological Resources and the
Strategic Alliances Logic of Corporate
Technology and transaction costs Diversification
Joanne E. Oxley Brian Silverman
14 The Economics of Innovation, 22 Entrepreneurship
New Technologies and A new perspective
Structural Change Thomas Grebel
Cristiano Antonelli
23 Evaluating Public Research
15 European Union Direct Institutions
Investment in China The U.S. advanced technology
Characteristics, challenges and program’s intramural research
perspectives initiative
Daniel Van Den Bulcke, Albert N. Link and John T. Scott
Haiyan Zhang and
Maria do Céu Esteves 24 Location and Competition
Edited by Steven Brakman and
16 Biotechnology in Comparative Harry Garretsen
Perspective
Edited by Gerhard Fuchs 25 Entrepreneurship and Dynamics
in the Knowledge Economy
17 Technological Change and Edited by Charlie Karlsson,
Economic Performance Börje Johansson and
Albert L. Link and Roger R. Stough
Donald S. Siegel
26 Evolution and Design of
18 Multinational Corporations and Institutions
European Regional Systems of Edited by Christian Schubert and
Innovation Georg von Wangenheim
John Cantwell and
Simona Iammarino 27 The Changing Economic
Geography of Globalization
19 Knowledge and Innovation in Reinventing space
Regional Industry Edited by Giovanna Vertova
An entrepreneurial coalition
Roel Rutten 28 Economics of the Firm
Analysis, evolution and history
20 Local Industrial Clusters Edited by Michael Dietrich
Existence, emergence and
evolution 29 Innovation, Technology and
Thomas Brenner Hypercompetition
Hans Gottinger
21 The Emerging Industrial
Structure of the Wider Europe 30 Mergers and Acquisitions in
Edited by Francis McGowen, Asia
Slavo Radosevic and A global perspective
Nick Von Tunzelmann Roger Y.W. Tang and
Ali M. Metwalli
31 Competitiveness of New 33 Changes in Regional Firm
Industries Founding Activities
Institutional framework and A theoretical explanation and
learning in information technology empirical evidence
in Japan, the U.S. and Germany Dirk Fornahl
Edited Cornelia Storz and
Andreas Moerke 34 Risk Appraisal and Venture
Capital in High Technology New
32 Entry and Post-Entry Ventures
Performance of Newborn Firms Gavin C. Reid and Julia A. Smith
Marco Vivarelli
Risk Appraisal and
Venture Capital in High
Technology New Ventures
Gavin C. Reid and Julia A. Smith
First published 2008
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
Simultaneously published in the USA and Canada
by Routledge
270 Madison Ave, New York, NY 10016
This edition published in the Taylor & Francis e-Library, 2007.
“To purchase your own copy of this or any of Taylor & Francis or Routledge’s
collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.”
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2008 Gavin C. Reid and Julia A. Smith
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in
any information storage or retrieval system, without permission in writing
from the publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
A catalog record for this book has been requested
ISBN 0-203-94038-5 Master e-book ISBN
ISBN10: 0-415-37351-4 (hbk)
ISBN10: 0-203-94038-5 (ebk)
ISBN13: 978-0-415-37351-7 (hbk)
ISBN13: 978-0-203-94038-9 (ebk)
GCR:
To my children Neil, Eilidh, Annabel and Kenneth
JAS:
To my parents John and Eileen

Contents
List of figures xiii
List of tables xiv
Preface xv
Acknowledgements xviii
List of abbreviations xix
PART I
Conceptual framework 1
1 Background 3
Introduction 3
Risk appraisal in high-technology ventures 5
The UK venture capital market 7
The policy context 8
Research methodology 9
Outline of this book 14
Conclusion 16
2 Risk and uncertainty 18
Introduction 18
Qualitative and quantitative uncertainty 19
Agency, innovation and business risk 22
Uncertainty and risk assessment 27
Risk and uncertainty in high-technology ventures 29
Intellectual property 32
Conclusion 33