ENTREPRENEURSHIP FOR SCIENTISTS AND ENGINEERS
CHAPTER 13
TECHNOLOGY VALUATION
LEARNING OBJECTIVES
After studying this chapter, students should be able to
2. Explain the various financial models for assessing value
4. Explain how license agreements are valued
CHAPTER OVERVIEW
Anytime a technology is licensed or sold or a technology company seeks funding, is acquired, or
merges with another company, a valuation of its assets takes place. Valuation is simply the
CHAPTER OUTLINE
1. The drivers of value
a. When value is discounted
2. Financial models for assessing value
3. Venture capital methods
a. The hockey stick approach: the basics
Entrepreneurship for Scientists and Engineers
5. Summary
END OF CHAPTER QUESTIONS
1. What are some of the challenges that investors face when employing quantitative methods
such as DCF analysis and real options theory?
Some of the challenges investors face with quantitative methods include: 1) all financial
valuations are based on an analysis of a market at some point in the future under the
2. How do the drivers of value relate to the business model?
The drivers of value are both tangible and intangible and they affect the valuation of the
company at every stage. The rate of growth will affect the business model; high rates of
3. What is the value of the real options approach to valuation?
The real options approach gives the investor the opportunity to be more flexible in the
timing of capital infusions to reduce risk. Real options theory recognizes that R&D, for
Entrepreneurship for Scientists and Engineers
4. How does the valuation process for licenses agreements differ for proven and unproven
technologies?
With proven technologies, setting the correct royalty rate and the total value of the license
CASE STUDY SUGGESTIONS
The case study, “Value is in the Eyes of the Beholder,” offers an opportunity to discuss several
concepts from the chapter.
• The entrepreneur is typically very optimistic in the valuation of his or her company. Mistral
believed that his company was worth $25-$35 million because it was growing faster than
other companies in the industry, and the founders had invested a lot in R&D, and it had
global customers such as Texas Instruments. Did Ahmed have the right to be optimistic?