What Every Engineer Should Know About Starting a High-Tech Business Venture

604 Pages·2009·6.36 MB·English

by  Eric Koester

WHAT EVERY ENGINEER
SHOULD KNOW ABOUT
STARTING A
HIGH-TECH
BUSINESS
VENTURE
© 2009 by Taylor & Francis Group, LLC
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WHAT EVERY ENGINEER SHOULD KNOW
A Series
Series Editor*
Phillip A. Laplante
Pennsylvania State University
1. What Every Engineer Should Know About Patents, William G. Konold,
Bruce Tittel, Donald F. Frei, and David S. Stallard
2. What Every Engineer Should Know About Product Liability,
James F. Thorpe and William H. Middendorf
3. What Every Engineer Should Know About Microcomputers:
Hardware/Software Design, A Step-by-Step Example,
William S. Bennett and Carl F. Evert, Jr.
4. What Every Engineer Should Know About Economic Decision
Analysis, Dean S. Shupe
5. What Every Engineer Should Know About Human Resources
Management, Desmond D. Martin and Richard L. Shell
6. What Every Engineer Should Know About Manufacturing Cost
Estimating, Eric M. Malstrom
7. What Every Engineer Should Know About Inventing,
William H. Middendorf
8. What Every Engineer Should Know About Technology Transfer
and Innovation, Louis N. Mogavero and Robert S. Shane
9. What Every Engineer Should Know About Project Management,
Arnold M. Ruskin and W. Eugene Estes
10. What Every Engineer Should Know About Computer-Aided Design
and Computer-Aided Manufacturing: The CAD/CAM Revolution,
John K. Krouse
11. What Every Engineer Should Know About Robots, Maurice I. Zeldman
12. What Every Engineer Should Know About Microcomputer Systems
Design and Debugging, Bill Wray and Bill Crawford
13. What Every Engineer Should Know About Engineering Information
Resources, Margaret T. Schenk and James K. Webster
14. What Every Engineer Should Know About Microcomputer Program
Design, Keith R. Wehmeyer
15. What Every Engineer Should Know About Computer Modeling
and Simulation, Don M. Ingels
*Founding Series Editor: William H. Middendorf
© 2009 by Taylor & Francis Group, LLC
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16. What Every Engineer Should Know About Engineering Workstations,
Justin E. Harlow III
17. What Every Engineer Should Know About Practical CAD/CAM
Applications, John Stark
18. What Every Engineer Should Know About Threaded Fasteners:
Materials and Design, Alexander Blake
19. What Every Engineer Should Know About Data Communications,
Carl Stephen Clifton
20. What Every Engineer Should Know About Material and Component
Failure, Failure Analysis, and Litigation, Lawrence E. Murr
21. What Every Engineer Should Know About Corrosion, Philip Schweitzer
22. What Every Engineer Should Know About Lasers, D. C. Winburn
23. What Every Engineer Should Know About Finite Element Analysis,
John R. Brauer
24. What Every Engineer Should Know About Patents: Second Edition,
William G. Konold, Bruce Tittel, Donald F. Frei, and David S. Stallard
25. What Every Engineer Should Know About Electronic Communications
Systems,L. R. McKay
26. What Every Engineer Should Know About Quality Control,
Thomas Pyzdek
27. What Every Engineer Should Know About Microcomputers:
Hardware/Software Design, A Step-by-Step Example. Second Edition,
Revised and Expanded, William S. Bennett, Carl F. Evert,
and Leslie C. Lander
28. What Every Engineer Should Know About Ceramics,
Solomon Musikant
29. What Every Engineer Should Know About Developing Plastics
Products, Bruce C. Wendle
30. What Every Engineer Should Know About Reliability and Risk
Analysis, M. Modarres
31. What Every Engineer Should Know About Finite Element Analysis:
Second Edition, Revised and Expanded, John R. Brauer
32. What Every Engineer Should Know About Accounting and Finance,
Jae K. Shim and Norman Henteleff
33. What Every Engineer Should Know About Project Management:
Second Edition, Revised and Expanded, Arnold M. Ruskin
and W. Eugene Estes
34. What Every Engineer Should Know About Concurrent Engineering,
Thomas A. Salomone
35. What Every Engineer Should Know About Ethics,
Kenneth K. Humphreys
36. What Every Engineer Should Know About Risk Engineering
and Management, John X. Wang and Marvin L. Roush
37. What Every Engineer Should Know About Decision Making Under
Uncertainty, John X. Wang
© 2009 by Taylor & Francis Group, LLC
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38. What Every Engineer Should Know About Computational Techniques
of Finite Element Analysis, Louis Komzsik
39. What Every Engineer Should Know About Excel, Jack P. Holman
40. What Every Engineer Should Know About Software Engineering,
Phillip A. Laplante
41. What Every Engineer Should Know About Developing Real-Time
Embedded Products, Kim R. Fowler
42. What Every Engineer Should Know About Business Communication,
John X. Wang
43. What Every Engineer Should Know About Career Management,
Mike Ficco
44. What Every Engineer Should Know About Starting a High-Tech
Business Venture, Eric Koester
© 2009 by Taylor & Francis Group, LLC
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WHAT EVERY ENGINEER
SHOULD KNOW ABOUT
STARTING A
HIGH-TECH
BUSINESS
VENTURE
Eric Koester
Boca Raton London New York
CRC Press is an imprint of the
Taylor & Francis Group, an informa business
© 2009 by Taylor & Francis Group, LLC
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To the extent that this publication may discuss or refer to legal principles or issues, the application of law to a particular
situation may vary depending on the particular facts and circumstances. As a result, nothing contained in this book is to
be considered as the rendering of legal advice for specific cases; readers should always consult their own personal attor-
neys for advice as to their specific situations.
CRC Press
Taylor & Francis Group
6000 Broken Sound Parkway NW, Suite 300
Boca Raton, FL 33487-2742
© 2009 by Taylor & Francis Group, LLC
CRC Press is an imprint of Taylor & Francis Group, an Informa business
No claim to original U.S. Government works
Printed in the United States of America on acid-free paper
10 9 8 7 6 5 4 3 2 1
International Standard Book Number-13: 978-1-4200-7697-4 (Softcover)
This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been
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Library of Congress Cataloging-in-Publication Data
Koester, Eric.
What every engineer should know about starting a high-tech business venture / Eric Koester.
p. cm. -- (What every engineer should know ; 44)
Includes bibliographical references and index.
ISBN 978-1-4200-7697-4 (alk. paper)
1. Engineering firms--Management. 2. New business enterprises. I. Title.
TA190.K637 2009
620.0068--dc22 2008036297
Visit the Taylor & Francis Web site at
http://www.taylorandfrancis.com
and the CRC Press Web site at
http://www.crcpress.com
© 2009 by Taylor & Francis Group, LLC
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Contents
Preface ..............................................................................................................................................ix
Acknowledgments .........................................................................................................................xi
How to Use This Book ................................................................................................................xiii
Author ..........................................................................................................................................xxv
Part I. Becoming a High-Tech Entrepreneur
Chapter 1. The Startup Life .........................................................................................................3
Chapter 2. Your High-Tech Business Concept .......................................................................23
Chapter 3. The Startup Road Ahead ........................................................................................39
Part II. Starting It Up
Chapter 4. Forming a Founding Team .....................................................................................63
Chapter 5. Working with an Attorney .....................................................................................95
Chapter 6. Leaving Your Employer ........................................................................................117
Chapter 7. Forming the Business ............................................................................................129
Chapter 8. Planning for Your Business .................................................................................159
Part III. Building a Startup Success
Chapter 9. Raising Money ........................................................................................................203
Chapter 10. Venture Capital ....................................................................................................237
Chapter 11. Building Your Team .............................................................................................313
Chapter 12. Your Boards and Board Members ....................................................................359
Chapter 13. Protecting Your Intellectual Property .............................................................383
Chapter 14. Product Development ..........................................................................................411
Chapter 15. Marketing Efforts ................................................................................................421
vii
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viii Contents
Chapter 16. Sales Organizations .............................................................................................433
Chapter 17. Operational Matters of the Business ................................................................443
Chapter 18. Contracts and Product Warranties ....................................................................457
Chapter 19. Startup Accounting ..............................................................................................469
Chapter 20. Tax Considerations for a Startup ......................................................................481
Chapter 21. Issuing Securities .................................................................................................505
Part IV. Next Steps and Stages
Chapter 22. International Expansion .....................................................................................521
Chapter 23. IPOs, Mergers, Acquisitions, and Sales ..........................................................545
Chapter 24. The Entrepreneurial Circle of Life ...................................................................567
Definitions ...................................................................................................................................569
Additional Resources ................................................................................................................575
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Preface
To think like an engineer is to think of situations in their entire context, including the
laws and regulations of society and the actions of all the people necessary for success.
Dr. John H. Marburger III
Director of the Office of Science and
Technology Policy,
Executive Office of the President
Innovation is the centerpiece of the global economy, and the seeds of that innovation are
sown by individuals starting new businesses to tackle the world’s challenges.
So if you’ve made it this far—welcome. Picking up this book to learn about starting a
high-tech business venture is a good first step. This book has been written to assist both
brand new entrepreneurs and those who have been around the block once or twice before.
Hopefully, it will be a useful tool and something you turn to at numerous points in your
startup life.
Now is a tremendous time for entrepreneurship. More people than ever are starting new
businesses. Although there have been periodic slowdowns for new technology businesses,
the long-term trend over the past 25 years has been increased availability of human and
financial resources available to high-tech entrepreneurs.
This book is part of the Taylor & Francis/CRC Press series “What Every Engineer
Should Know About.” As a result, it is focused primarily at entrepreneurs and poten-
tial entrepreneurs coming from a technical background such as engineering, medi-
cine, science, computers, biotechnology, and numerous other related “high-tech”
fields. But don’t fret; anyone should be able to use this book, with or without a high-
tech background or experience. To aid those entrepreneurs without a strong business
background or training, I have included plenty of business, finance, marketing, and
related acumen.
Why are engineers, scientists, and technical individuals so successful as entrepreneurs?
Some experts believe it is just because engineers approach problems from a different angle
and find solutions. The website http://engineeringteacher.com describes how engineers
think:
Engineers are problem-solvers.
Engineers use knowledge.
Engineers are creative.
Engineers solve problems by using knowledge and creativity, making them some of the
best-positioned people to find a solution to a problem and hence why more and more engi-
neers are becoming entrepreneurs . . . and succeeding at it.
As you read through this book, you will find it is chock-full of statistics, data, anecdotal
evidence, tools, spreadsheets, questions and answers, and research to help guide an entre-
preneur through the startup process. But I’d be kidding myself if I said it contained every-
thing you’ll need. The resources section at the end of the book has more books, articles, and
websites, but I’ve packed more onto the book’s website at http://www.myhightechstartup.
com. Visit the website for updates, new articles, answers to questions that are submitted, links
ix
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