How To Value New Technologies

By Marco Poma and Jacques Chouchane
How to Value New Technologies

A growing part of our work as consultants has been to assist innovators bring their newly developed technologies to market and to be able to assess a fair value for their products or innovations.

The experience so far, has demonstrated that in most cases innovators are very good at creating new products or technologies but they appear to lack the expertise to properly communicate their benefits and to create a communication process that can attract potential buyers or investors. This is where the correct process can maximize the transaction outcome.

A complete project assessment should include:

  1. An in-depth technology / R&D analysis to understand the new innovation and to compare it to existing products (if they exist). This phase requires also a thorough patent research worldwide.
  2. A survey of international markets to understand the true potential for this innovation as well as the latest trends that could prove to be beneficial for the clients.
  3. A complete marketing plan to highlight the consumer benefits and to potentially establish the requirements for product designs.
  4. A communication / selling plan to attract potential companies
  5. A structured business valuation model to calculate a fair value on the market today.

This last phase is most critical because multiple factors/models must be considered before determining a definitive value for investors or acquirers of this technology.

This thorough valuation process should include:

  • Business risks for the investors
  • A timetable to fully develop this innovation into a final product
  • Investments required in R&D, tooling, manufacturing and marketing to bring the new products to market
  • Revenue streams and profits scenarios over a 5-year period

Once all these elements have been inserted into the business model, Net Present Value (NPV) and Discounted Cash Flow (DCF) are required to calculate the final value of this new product.

From here, various acquisition models are created to include an all-cash option, a royalty payment table or a combination of both.

When entering the transaction phase of a project, there are always intangible factors that can influence the success of the negotiation. Our experience indicates that a structured and transparent assessment and valuation process can greatly contribute to the success of the project by eliminating inflated or undervalued selling demands.

Jacques Chouchane
[email protected]

Marco Poma
[email protected]