Published April 7, 2009 – National Post

Start-ups with good products need to demonstrate value to VCs.

The process of valuing early-stage companies is more of an art than science. This is because traditional valuation methodologies require financial data. But another method venture capitalists use to measure value is a firm’s ability to execute technology

Executing technology milestones is not an easy task for an early stage company. Usually a VC will look for an experienced chief technology person in the team who has to champion the complex task of designing the technology strategy, co-ordinate all R&D activities and product features and think in terms of a commercial and marketable product.

Examples of technical milestones include product specifications, detailed design prints and pre-commercial and production prototypes. An experienced VC can assign a financial value to the company based on the stage and status of its technical milestones. A well-executed technology road map can create significant value for the shareholders of an early-stage company.
National Post article thumbnailTo get insights on how to best execute technical milestones, I talked to Avanindra Utukuri, CEO of Nytric Inc. Nytric is a Toronto based innovation consulting and product commercialization company that has helped a diverse group of clients, from Fortune 500 companies to early-stage VC backed start-ups.

“Even though many companies invest significant time and resources in developing a business plan which justifies the go to market strategy and financials,” Mr. Utukuri said, “very few feel the need to develop a technology plan that is able to demonstrate the specific set of features that the customer is looking for.”

He believes the business strategy and risk of achieving various milestones and the correlation between the technical and business strategies is usually missing.

“It is usually after the company has burned through the initial investment and not achieved its original objectives that investors and management teams start asking the basic question of where the failure occurred,” he said.

Here are some strategies that Nytric recommends when developing and executing on the technology strategy:


Usually in the early-stage companies, a lot of product and feature detail is left to the imagination of the engineering team and there is no or limited feedback between market expectations and development activities until it is too late. Even though the company might not understand all the details of the product at the start of the project, there should be urgency to try to communicate the production specifications from customer’s and partner’s expectation as early as possible to the engineering team. The longer this activity is delayed the more risk to the company that the market will not accept the product.


A business plan usually has sales projections based on number of items or products sold over a given period of time. During due diligence, most investors immediately drill down to understand the validity of this claim, competitive landscape, comparable numbers that could justify this claim, before assuming that this was possible. A sound business plan assessment also requires a through analysis of the product development costs and a realistic expectation of the Bill of Materials, also known as BOM. Unfortunately, without a thorough analysis of features, technology strategy, and implementation strategy, these numbers can set up unrealistic expectations of what is possible in a given timeframe.


Although a large percentage of investors and management teams put a lot of emphasis on developing a patent and IP strategy, the importance of IP and patents has changed dramatically in today’s world. Companies that implement an IP strategy that focuses on reducing time to market and monetizes the idea has a better chance of success than one that focuses on creating the largest barrier to entry using as IP portfolio.


Finally, once a company has secured development dollars and starts development or commercialization activities, problems such as managing development resources and minimizing feature creep must be addressed. If the technology road map and core objectives were properly defined, the entire team must revisit the original assumptions before changing direction. Investors and management teams must realize and accept the true cost of change of direction. Too many times, managers fool themselves into believing that adding a particular feature or change in design direction is trivial and will not affect the schedule of the project.

— – Dr. Amit Monga is an executive professor of finance at the School of Business at the University of Alberta. He is co-founder of Baanto, a Toronto-based technology company.

Tuesday, April 07, 2009