Volume VII 67$57,1*#$#+,*+07(&+#&203$1< by Michael L. Baird Netw ork ing t he W orld TM The Institute of Electrical and Electronics Engineers, Inc. New York, New York IEEE Engineers Guide To Business Series Editor: Barbara Stoler Typographer: Jill R. Bagley Copyright © 1995 by THE INSTITUTE OF ELECTRICAL AND ELECTRONICS ENGINEERS, INC. 345 East 47th Street, New York, NY 10017-2394 All rights reserved. No part of this book may be reproduced, in any form nor may it be stored in a retrieval system or transmitted in any form without written permission from the publisher. Printed in the United States of America CONTENTS Foreword Preface Acknowledgements Introduction PART ONE THE GENESIS Chapter 1 Start-up Opportunities for High-Tech Entrepreneurs Chapter 2 Technology-Oriented Professional as Company Founder Chapter 3 Life in Your Start-Up PART TWO GETTING DOWN TO BUSINESS Chapter 4 Market- Versus Technology-Focused Approach to Growing a Business Chapter 5 When High-Growth Business is Desirable and Necessary Chapter 6 Start-Up Financing Terminology and Stages PART THREE DUE DILIGENCE Chapter 7 Elements of a Successful Start-Up Chapter 8 Create Your Management Team and Board of Directors Chapter 9 Evaluate Markets and Target Customers Chapter 10 Define Your Product or Service Chapter 11 Write Your Business Plan Chapter 12 Funding Issues SIDEBARS Resources Available to Start-Up Entrepreneurs Symantec Corporation: Responding to a Changing Need Financials for Engineers—A Crash Course Trials and Tribulations in the Financing of One Start-Up Company Business Plan Writing Aids and Financial Planning Aids One Venture Capitalists Perspective on Plan Emphasis Software Success—Who Gets Funding How and Where )25(:25' Entrepreneurship is the call of the l990s. This is particularly the case in high technology, where our society continues to place more feverish demands on American ingenuity for improvement and innovation in the products and services that surround our lives. Everyone looks to create the fastest chip, the lightest laptop, and the most powerful software. There is no limit to the technological advances realized with every new product introduced, which is exactly why there has never been a better time to consider an entrepreneurial venture. It is hard to escape the image of entrepreneurial success in today’s media-conscious environment. Multi-billionaire founder Bill Gates of Microsoft has appeared repeatedly on the covers of business magazines. Entrepreneur Ross Perot reaches out to be the president of the United States. Successful entrepreneurs are ubiquitous at a time when loyalty to Fortune 500 companies continues to diminish amid the trend of layoffs and reorganization. When you consider that the overwhelming majority of new jobs created this decade will come from start-up companies, a high-tech business venture seems a reasonable, if not downright admirable, proposition. As the president and chief executive officer of Silicon Valley Bank, I have met with thousands of ambitious entrepreneurs from every walk of life. I am very proud to have provided guidance and assistance to many of these individuals, many of whose companies are now quite successful. What do these successful individuals all have in common with each other? You will not find it surprising when I tell you that these individuals all share the same trait: motivation. Not motivation for wealth, money, or power, though. Rather, the more successful people are those who desperately want and seek out autonomy and challenge. They want to use their drive, skills, and hard work to turn an idea or a dream into a company. Start-up entrepreneurs have a special passion for life and view each new workday as a new challenge. Of course, I know my generalities cannot assimilate life in a high-tech start-up, but I believe Starting a High-Tech Company delivers the important information and sage advice those of you considering a high-tech venture need in order to make informed decisions on how to proceed. Many entrepreneurs who want to start a venture do not know where to begin or what to expect. In this book, classic formulas for success are laid out in no-nonsense terms. Life in a start-up is described vividly, and real-world anecdotes detail both failures and successes. Valuable advice is presented for creating wealth using founder’s stock and stock options, which are topics not always familiar to technically oriented entrepreneurs. Whil