Successful technology businesses tend to develop rapidly and that rapid growth can bring challenges – whether to do with corporate infrastructure keeping pace with that growth or to do with carrying out trade on a global stage. Click here to read our factsheet.
Growing a technology based business
The rapid growth of technology businesses and the speed of development means they have to address a wide range of business issues in a relatively short space of time.
These issues will be driven by the core technology and how it is commercialised. For example, when a technology business is at its earliest stages, one of the most fundamental issues to address is how the company is intending to extract value from the underlying technology.
Strategic Planning for Growth
Once that strategy is defined, the company’s management team then needs to:
- Establish what the company needs to do, the resources it requires, and the structure that will be needed to achieve that.
- Plan the availability of sufficient funding to continue the development of the technology.
- Ensure the ability of the management team to deliver what the business needs at each stage of its growth.
It is rarely the case that the entrepreneurs or academics who founded the company will be the right people to lead it in the long term. This is because the fundamental focus of the business shifts away from the perfection of the R&D towards the marketing and sale of the product or as the company seeks to exit.
Extracting Value from Technology
Licensing the Technology – Develop the technology to a certain point and then license it out to a range of users. Following this route is relatively cheap and leaves others to bear the risk. However, the ultimate revenue generation may be limited.
Selling the Business or a Part of It – Development to a certain level and then selling the business or part of it. This is more usual in drug or medical device development, perhaps once the product has gone through a certain level of clinical trials.
Full Control and Commercialisation – The company could seek to retain total control over the technology and the product and take it right through to manufacture and marketing. This route can be expensive and risky, but ultimately if successful, far more profitable than either of the other two options.
Read more in our factsheetInternational Expansion and Considerations
Technology businesses, by their nature, tend to be international. Very often, key employees will come from overseas – in which case there are many considerations to go through, including:
- How they are to be remunerated
- Whether they have appropriate visas to work here
- Their general terms and conditions
Many businesses seek an overseas presence to access grant funding, investors, new markets, specialised research teams, skilled talent, or to conduct clinical trials.
Establishing an Overseas Presence
Whatever the reason, serious thought needs to go into how that presence is to be effected – it’s certainly not as simple as setting up a company in the location of choice.
Consideration will include:
- How that entity is to be funded
- The relationship with the original company
- Who is going to run the new entity
- Whether there will be employees
- Tax considerations
Business Growth Through Acquisitions
Other companies will have, as part of their strategy, a policy of acquiring other businesses in similar or complementary areas of trade. The acquisitions may be opportunistic or the result of a search.
Regardless of how an acquisition begins, the process typically follows these steps: an offer is made, Heads of Terms are agreed upon, due diligence is conducted to assess the business's true value, and contracts are finalised.
Post-acquisition, there will be other challenges – working out how the merged entity will operate, properly integrating employees, and ensuring that common systems are adopted.
Read more in our factsheet