Nesheim - High tech start up, revised and updated: the complete handbook for creating successful new high tech companies

W hy bother trying to help more entrepreneurs succeed? Start by listening to an icon of venture funding, Don Valentine, founder of Sequoia Capital (that funded Apple, Cisco, Yahoo, MP3.com and more):

Sequoia is focused on the concept of bigness: big thinkers, big markets, big companies. Employing thousands of people paying millions in taxes and hundreds of millions in salaries. Thats bigger than people who just want to become millionaires.

Too many new businesses fail to become successful, including high-tech start-ups. If we could improve the proportion of successes, the economic benefits to nations stagger the mind.

In The Winning Performance, which reported the results of research on 525 of Americas midsize companies, Clifford and Cavanaugh (1985) say that If just 1% of the companies in existence today had had the will and the skill to reach midsize$ 25 million in salesthe American economy would be more than double its current size. Yet the fact remains that more than 999 of every 1,000 companies stay small.

Peter Drucker, in his book Innovation and Entrepreneurship, reported that America created 40 million new jobs over twenty years since 1970. The jobs came from small and new enterprises.

Professor David BenDaniel, professor of entrepreneurship at Cornell Universitys Johnson Graduate School of Management, explains how the world has been impacted by high-tech start-ups:

High-growth ventures have emerged as economic power houses in the United States, generating thousands of jobs, diffusing technological knowledge, and creating a culture of innovation that has ripple effects through out every type of business organization, and indeed their impact has changed business around the world.

The typical venture-backed high-tech start-up has a 60 percent likelihood of going bankrupt. What are the areas in which start-ups need help, and what are the payoffs for helping them?

• High cost of capital. Venture capital investors take high risks and require high compensation. Most founders have little idea how to value their start-ups and how to negotiate with suppliers of capital.
• Increased competition between more numerous, similar start-ups. Large influxes of billions of dollars to venture capital pools have increased competition between start-ups in any given business sector.
• Big companies react more quickly. In response to changes in market conditions, the billion-dollar companies detect and act on business opportunities faster than they used to.

This book is intended to help the leader of a high-tech start-up improve his or her odds of success. It also aims to help the corporate venture capitalist evaluate start-up candidates for acquisition, as well as the new internal start-ups that are emerging. We will analyze successful and unsuccessful high-tech start-ups and the techniques their management use to start, finance, value, and launch a new business from seed financing through initial public offering. We will provide data on the financial rewards of equity ownership and dilution by venture capitalists of famous high-tech start-ups.

This book has six goals:

1. To prepare the CEO for the surprises yet to come.
2. To prepare the CEO for negotiations.
3. To make clear the personal cost of leading a start-up.
4. To improve the CEOs odds of success.
5. To assist corporate development managers work with new ventures.
6. To help new venture capitalist partners and associates get off to a running start.

Most case studies use disguised names. Each case is based on actual events. Research for this book was conducted regularly since 1984, during which more than 300 interviews were done with over 200 individuals in more than 150 companies in the United States and abroad.