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MORNING SESSION: TECHNOLOGY PARTNERING - SURVIVAL BUILDING WITHOUT CAPITAL

8:00 - 8:30
A STRATEGY FOR BUILDING CRITICAL STRATEGIC PARTNERSHIPS IN THE NEW-NEW ECONOMY
Ernie Bootsma, White & Lee LLP, Portland, OR

Ernie Bootsma provided a detailed review of current trends in strategic partnership formation and outlined steps to create a successful partnership. In the current marketplace, there is increasing pressure for large and small companies to enter into partnerships. Large companies want to access new technology and expertise, stimulate complimentary technologies and decrease their time to market. Smaller companies are trying to lock in large reference customers, access large distribution channels and align themselves with potential acquirors

The secret to successful strategic partnerships is to clearly define the roles and goals of each party by way of a comprehensive agreement. Understand your own goals and objectives in entering into a partnership. Pay close attention on who will own the partnership’s intellectual property and how it will be managed. And finally, understand that strategic partnerships do not always work out; make sure that both parties agree on how disputes will be resolved and how, when and why the partnership can be terminated and assets divided.

8:30 - 9:00
TAX AND STRUCTURING ALTERNATIVES FOR TRANS-BORDER AND DOMESTIC STRATEGIC PARTNERING
David Evans, Andersen, Portland, OR

David Evans discussed the importance of comprehensive tax planning for international business transactions with a focus on the formation of foreign business entities and strategic partnerships. It is important to note that other countries may have very different tax systems and policies than what a US entrepreneur is used to. For example, many countries have much higher social security taxes which must be taken into account when hiring foreign employees. Sending US individuals to foreign locations takes careful planning and a thorough understanding of the tax ramifications on such individuals.

When setting up offshore business operations, it is generally better to form separate foreign entities rather than mere branches. Mr. Evans outlined the rules and objectives for minimizing both US and local taxes on such foreign operations. He then proceeded to discuss the formation of technology partnerships, the financing of foreign ventures, and inter-company pricing polices.

As an aside, when asked to identify “tax-friendly” countries, Mr. Evans listed Ireland, Switzerland, Hong Kong and Singapore and distinguished these from “tax unfriendly” Japan.

                                              

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9:00 – 10:00
First Panel Discussion: INTELLECTUAL PROPERTY, OWNERSHIP AND DEAL-MAKING INVOLVING TECHNOLOGY AND CONTENT

PROTECTING YOUR INTELLECTUAL PROPERTY RIGHTS OVERSEAS
Frank Curci, Preston Gates & Ellis, Portland, OR

Frank Curci reviewed the various intellectual property registration schemes existing today and provided tips on how companies can successfully protect intellectual property assets globally. Mr. Curci also outlined many of the pitfalls of foreign IP laws. It is important to note that with regard to trademarks and patents, much of the world operates on a first-to-file basis as opposed to our first-to-use system in the US. US businesses must realized that first-to-file systems make it possible for third parties to file for patent and trademark protection on your company’s inventions and marks.

While the Paris Convention makes it easier to lock in an earlier filing date for foreign trademark registrations, companies must still register in each and every country in which they wish to receive protection. Some countries, like Japan, have an absolute bar to patent protection which is triggered if you publicly use an application prior to filing. Many countries recognize the concept of moral rights, which forbids purchasers of creative works from “mutilating” or claiming to be the original author of such works.

Mr. Curci suggested that proper multi-national IP management can be achieved be means of careful business partnering and a strict program of IP audits and controls.

THE HOLLYWOOD PARADIGM FOR PROTECTING, USING AND DISTRIBUTING CONTENT IN THE NEW NEW MARKET
Ken Hertz, Goldring Hertz Lichtenstein & Haft, Beverly Hills, CA

Ken Hertz presented an interesting analysis of how the music entertainment industry really works, and why its fundamental differences from the online economy guarantees that most online music content providers will be doomed to fail. Mr. Hertz explained that there are three rules to the music entertainment industry: 1) record companies understand only two things: price and customer base; 2) record companies make money by creating artificial scarcity – that is, they are able to charge high prices only by limiting distribution through oligopolistic cartels; and 3) record companies hate MTV because it is strong enough to do whatever it likes – the record companies will not allow the creation of another entertainment company which is strong enough not to need them.

These rules lead the online entertainment content provider to an interesting catch-22: Online content providers must license their content from the record companies. The record companies will not license content to the providers unless a provider can show that it has a sufficiently large customer base to make it profitable. If the provider can show that it has secured a sufficiently large customer base, it is strong enough to be able to do whatever it likes and the record companies will not allow them to exist out of fear of creating the next MTV. Unfortunately, Mr. Hertz does not believe that the online provision of music entertainment content is at all viable with the current state of the industry.

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10:15 – 11:30
Second Panel Discussion: TECHNOLOGY LOOKING FOR DISTRIBUTION—THE TECHNOLOGY COMPANY PERSPECTIVE

MARKETING SOFTWARE ENTERPRISE TOOLS AND SERVICES
Gary Allen, President and CEO, Sabrix, Inc., Lake Oswego, OR

Gary Allen first described how Sabrix, Inc. was formed and outlined the company’s primary product: single-source systems for centralized management of sales tax. Mr. Allen outlined the company’s strategy to transition from a direct-sales oriented marketing program to one which relies heavily on channel partners (big-5 accounting firms and consultants), and identified key issues in forming channel partner relationships.

The characteristics of a successful channel partnership include mutual profitability (achieved through jointly developed business plans) and a referenceable customer base. It’s important to clearly identify what your needs are when selecting a proper channel partner – make sure that they possess unique strengths which can solve your weaknesses. Thorough due diligence, joint training, and a formal alliance agreement are critical to the effective development of a channel partner relationship. Ultimately, it comes down to a matter of mutual trust and commitment; the human relationships are what will make a partnership successful.

FABLESS SEMICONDUCTOR PARTNERING AND HOW TO CHANGE PARTNERS AND TERMS WITH A NEW BUSINESS MODEL
Ron Nikel, Chief Technology Officer and Co-Founder, TriCN, Inc., San Francisco, CA

Ron Nikel discussed the evolution of TriCN’s business plan from that of design and consulting services, to developing high-bandwidth input/output interface standards for integrated circuits, to the development and sale of standardized I/O chips. Ron explained how the company has leveraged its partnerships at each stage of the company in order to achieve competencies in channel sales, marketing exposure and production and development capacity.

Prospective partnerships must be analyzed in three areas: (i) Synergy, where the partners’ technologies and products compliment each other to form a complete solution; (ii) Strategy, where the partners’ business strengths compliment each other to eliminate business shortcomings; and (iii) Growth Potential, where the partnership can evolve and grow to provide new future benefits.

Ron provided the following 10 must have’s for partnerships:

1. Clear & Identified Goal.

2. Mutual Trust.

3. Open Communication.

4. Understand each other’s Problems.

5. Help others accomplish “their” goals.

6. Know your limits...”be willing to give up”.

7. Like Visions...”meeting of the minds”.

8. Know when the Partnership is over.

9. Trust your Instincts.

10. Win-Win Relationship.

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11:30 – 12:15
Third Panel Discussion: THE LARGE COMPANY PERSPECTIVE

THE IC SECTOR—INTEL’S PARTNERING PROGRAM AND PROCESS
Jim Huston, Intel Capital, Hillsboro, OR

Jim Huston provided a unique look at the big-firm view of strategic investing and strategic relationships. While companies will typically enter into strategic partnerships with the intent to generate profit, acquire technology and develop distribution channels, Intel seeks out strategic relationships which can help accelerate Intel’s own business growth, fill gaps in Intel’s technology solutions, and generate market leaders who build solutions around Intel core technology. Intel only seeks deals where other VCs are present to negotiate valuation, recruit management, support exit strategies, and maintain a board presence, as Intel prefers to focus its efforts on supporting the venture’s technology and marketing efforts.

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AFTERNOON SESSION: THE END GAME IN A DOWN MARKET - AND SURVIVAL STRATEGIES UNTIL THINGS CHANGE

1:00 – 2:15
Fourth Panel Discussion: ACQUISITIONS—THE ONLY GAME IN TOWN?

ACQUISITION TRENDS, STRUCTURE AND PROCESS IN 2001
Mark White, White & Lee LLP, Menlo Park, CA

Mark White provided a brief review of the state of venture financing and current trends in deal structures. We are facing a rough economic ride for the foreseeable future, as deal volume and deal valuations are down. Companies are not trying to diversify, but rather their acquisitions are motivated by the desire to fortify existing key technology and products. Valuations are driven by price/engineer, make/buy analysis, and contributed value, rather than the traditional methods of market multiples or net present value analysis. Earnouts of 50% or more of the total deal price are becoming common compared to the typical 10-30% of last year.

Mark pointed out that management incentive is a critical issue, because equity incentive pools don’t really work during a recession. It is not uncommon for 10-15% of deal proceeds to be placed in cash bonus pools for management. In general, cash driven deals are becoming more common as equity is viewed as an increasingly volatile commodity.

M & A BANKING FOR THE BEST DEAL—ANY DEAL—IN THE CURRENT MARKET
Erik Krieger, Chairman and Managing Director, Pacific Crest, Portland, OR

Eric Krieger discussed the current trends for mid to large-scale M&A deals, the role of the M&A advisor and investment bank, and the typical process and timing of M&A deals in the current market.

Through a series of charts and tables, Mr. Krieger showed that the current level of deals is largely on track with the growth trends exhibited prior to the .COM bubble of 1999 and 2000. Deals are still happening, but to a large extent the deals tend to be corrections of the unprecedented investment growth and diversification of the .COM era. Companies are trying to consolidate, focus on their core technologies, and build up scale with respect to their core product lines. Enterprise software and communications are the hot sectors this year.

Investment banks are looking for client companies with strong financial performance, scale, simple businesses, and real commercial partnerships. Retainers are becoming popular as investment banks are looking to filter out the serious clients. The real value of a good M&A advisor is their ability to effectively integrate the two merged businesses – to manage the people and the loose ends of the deal.

CREATIVE DEAL MAKING—GETTING CURRENT INVESTORS TO FUND THE ACQUISITION
Jed Kleckner, Vice President, Field Marketing, Informative Inc., Brisbane, CA

Jed Kleckner provided a series of tips and rules for successfully navigating (and surviving) the acquisition process, as learned through his experience in selling Informative, Inc. There are three rules to the process: Rule 1: Assess exit strategy with time to spare: don’t wait for new capital that never arrives and act now and act quickly. Rule 2: Move on if something is not within your time frame. Rule 3: Your biggest problems may wind up being opportunities: competitors can be acquirors, trouble finding capital can signal you that it’s time to sell.

Make sure you take careful stock of all your assets, including people, IP, and customers. Keep the flow of information to your employees wide open. Try to find a champion at the acquiring company, someone who trusts you and will plead your case.

Jed reminded the audience that the most important rule of all is to keep in mind why you’re doing the deal. You’re working to create shareholder value.

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2:15 – 3:00
Fifth Panel Discussion: IPOS—IS THERE A MARKET?!

THE NEW GAME PLAN FOR AN IPO—HAVE THE RULES CHANGED?
Todd Bauman, Stoel Rives, Portland, OR

Todd Bauman reviewed the current state of the IPO market and provided the following list of steps to take to prepare your company to go public:

· Pick a top-flight team: Now is the time to find securities and corporate counsel, accountants, and key management which can put your company in order and bring it through the IPO process.

· Put your house in order: Begin your corporate cleanup and financial audits now. These things take time; the earlier the better.

· Select your underwriter: Look for those who can lend credibility to your deal.

Mr. Bauman then walked through the elements of a thorough accounting cleanup, proper financial disclosure and the typical time frame for an IPO. Be aware of such issues as rules on cheap stock issuances, insider lock-ups, the need to publicly disclose certain major contracts, rules on public statements during registration and the need to hire outside directors.

UNDERWRITING IN THE CURRENT MARKET—THE IPO PIPELINE AND WHAT TO EXPECT
Bill Rodoni, Vice President, Investment Banking Division, Credit Suisse First Boston Technology Group, San Francisco, CA

Bill Rodini provided a review of the current state of the equity markets and how this has impacted the IPO process. By means of extremely informative slides, Mr. Rodini discussed long-term equity trends, the changing criteria for a successful IPO candidate, and the elements that institutional investors are really looking for in a deal.

Mr. Rodini also discussed the advantages of hiring a major investment bank and how a larger organization can add value to the IPO process. Mr. Rodini then led the audience through the typical IPO deal process in the current market.

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3:15 – 4:30
Sixth Panel Discussion: STAYING ALIVE IN A DOWN MARKET— SURVIVAL STRATEGIES UNTIL GOOD THINGS HAPPEN

SURVIVING IN THE “NEW” NEW ECONOMY
Brian Sterling, CEO, Safe Harbor Technology Corporation, Satsop, WA

Brian Sterling discussed the history of Safe Harbor Technology Corporation, a company which develops web-based self help services for enterprise customers, and discussed how the company has adapted and changed with the changing economy.

Most interesting is the way in which Safe Harbor has had to transition from a .COM customer base to an enterprise customer base and how the company’s selling process has had to change accordingly. Enterprise selling is an extremely involved process which takes a minimum of 5 months and three departments to identify and contact leads, to assess customer needs and opportunities for value, and to negotiate and begin managing a service contract.

Brian stressed the importance of dramatically cutting costs and discussed how to maintain morale in the face of layoffs. In general, the new economy dictates a plan of controlled long-term growth and a reduced reliance on outside capital.

THE LAST MAN STANDING IN E-COMMERCE?!
Greg Drew, President and CEO, 800.com, Portland, OR

Greg Drew presented the story of online consumer electronics retailer 800.com to illustrate how the world of retail sales has not changed with the introduction of the Internet.

Consumer electronics are complex goods, requiring top-notch customer service. The reason that many online retailers have failed is that they tried to apply a commodity product business model to a complex product. 800.com has survived because it has focused on top service and has understood the importance of managing its business no differently from a brick and mortar business. Inventory management is surprisingly critical in the world of online retailing.

Greg also identified the two things that a company must have to survive as a market leader: business principles and personal principles. Having survived an extremely rough contraction of the consumer electronics market, Greg has learned that you cannot take business events personally; keep a clear head and take advantage of down markets to acquire and diversify.

CHANGING THE BUSINESS MODEL, PRODUCT DEFINITION AND CUSTOMER PROFILE MIDSTREAM
Charles Hart, CEO, SurfMonkey, Inc., Campbell, CA

Charles Hart explained how SurfMonkey has been forced to adapt to the changing marketplace and how the decision to change the company’s business model effectively saved the company. Mr. Hart explained how the company was forced to lay off employees, cut costs, and seriously rethink its distribution model. In the face of a limited budget, the company recently chose to market its content-filtering web browser to ISPs instead of directly to end users. By doing so, SurfMonkey has been able to access a broad customer base of ISP customers and has slashed its software distribution costs.

SurfMonkey has discovered that many companies are looking for ways to leverage their existing assets and products. Strategic partnering with software manufacturers is one way that ISPs were willing to leverage their existing customer base. Companies want short contracts and are no longer willing to pay for territorial exclusivity.

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4:30 – 5:00
THE INSIDE STORY ON OREGON’S MOST RECENT GRAND SLAM
Allen Alley, President, CEO and Chairman of the Board, Pixelworks, Tualatin, OR

Allen Alley provided an inside look at the rise of Pixelworks, the fabless designer of system-on-a-chip integrated circuits. The company recognizes that new video display technologies are not merely substitute solutions for existing uses, but that they will open up an entire new market of display products. An untapped market potential is waiting.

Having experienced the trials and tribulations of the technology venture first hand, Allen has formed the following 6 business tips:

1. A fundable deal has three elements: a huge market, an easily explained business model, and a “secret sauce” – the proprietary advantage that will allow your solution to work better than any other.

2. He with the gold rules.

3. The best time to raise money is when you don’t need it.

4. Every person you hire creates the need for more people; keep your ranks as lean as possible.

5. Many people confuse “being rich” with “being smart”.

6. If someone offers you money, figure out a way to take it. Don’t pass up money you don’t like – find a way to make it work for you.

      

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