Forum Organizers: 

Forum 2003: Session II
Presentations
Saturday, December 6, 2003
Intel Campus - Hillsboro, Oregon

How to Rebuild, Partner, and Generate Revenue for the Successful Technology Enterprise in 2003

Back to Top
To Session II Index

Opening Speaker:

Critical Hurdles and Solutions in 2003 for the Successful Technology Enterprise
Mark Cameron White – Partner, White & Lee LLP

After briefly introducing the Conference, Mark will identify what in his view are the primary issues that management teams in the current market must address in order to successfully sustain and grow technology companies. Mark will focus on the more complex issues that require judgment and foresight in determining which course of action management might take based on certain key factors. Moreover, Mark will propose positive steps executives can take to preempt common problems before they arise.

Back to Top
To Session II Index

Panel Discussion 1: Making the Tough Call on Whether to Sell or Scale the Mezzanine Stage Company

Board Deliberations, Conflicts, and Protections in Deciding to Sell the Company
Matthew Wilson – General Counsel, Chrome

Chrome is one of the principle suppliers of IT systems and data for the automotive dealer industry. Notwithstanding the Company’s sizable market presence and ability to sustain operations from working capital, the automotive IT industry is consolidating and Chrome must decide whether to raise additional capital to acquire smaller complimentary IT competitors – or to seek itself to be acquired. Matthew will provide this background, and then discuss (i) the factors the Board must consider in deciding whether to fund the Company or sell, (ii) the conflicts, if any, between the Board, management and the employees, (iii) the type of economic, market and competitive analysis the Board should conduct to assess this situation – and whether these studies should be done internally or externally, (iv) how the Board can determine fair value for an acquisition – and whether the Company should engage a banker for this purpose, (v) the internal employee dynamics, any involvement the executive team should have in these discussions…and how the Board can avoid employee knowledge and concern about these discussions, and (vi) how the Board should react when presented by an unsolicited offer…within what period of time…and how or should the Company attempt to create an auction to maximize value…and what, if any, are the risks of doing this or not doing this.

Valuation...How to Know if the Deal is Fair
Greg Endicott – Associate Managing Director, Kroll

Greg will provide an overview of the M&A valuation process, and sense of valuation ranges prevalent in different technology industries and stage of company maturity. Greg will comment on (i) 2003 trends in valuation based on acquisition structure, and the purpose of the acquisition for the buyer, (ii) different valuation methodologies, and which are most accepted and why, (iii) the strategy and negotiation process in determining price with the buyer, (iv) examples of factors or issues that impact valuation…and things target companies do to pre-manage and anticipate problems that affect price, (v) if valuation differs for financings and acquisitions, why, and the range of difference, and (vi) creative deal structures that target companies might adopt that maximize price and what are the negatives of any of these approaches. Greg will focus his remarks on the current market and current valuations, explain what he expects the trends in pricing to be over the next 12 months and why. Is now the best time to sell a company or is it better to wait? After discussing this, Greg will comment on and contrast M&A valuation and pricing to the pricing of mezzanine stage financings….how do the valuation methodologies differ, what is the difference in pricing ranges between M&A and financings for the same company…and how can a company maximize value in the M&A context….and then in the context of a later-stage financing.

Panel Discussion 2: Restructuring the Mature Company that has Lost its Way

Understanding, Changing...and Finally Getting Competitive Positioning Right
Rob Nail – CEO, Velocity11

Rob will discuss V11’s change in competitive positioning, product offerings and partnering alignment from when the Company first spun out of Incyte Genomics 4 years ago. The focus of Rob’s remarks will be on how V11 has adjusted and changed its market, competitive and product strategy as the biotechnology equipment and consumables industry has evolved. Points Rob might cover to illustrate how companies should adjust their strategy to remain competitive include: (i) what businesses (instrumentation, consumables, services etc.) V11 inherited from Incyte, the emphasis and revenue mix each represented to the Company and how that has changed and why, (ii) what V11 is looking at in determining how to grow its business, i.e. new competitive technologies, the needs of targeted corporate partners or other factors, (iii) how V11 has determined what its core competencies are, its competitive advantages over other industry players…and how has V11 used these advantages to win new business, (iv) how has competitive strategy been affected by the Company’s cash resources…how has the Company addressed this, and how has the resource/opportunity issue affected the Company’s decision on prospective partnering, acquisition and financing alternatives, (v) as the Company explores new outside funding for its continued growth…what is the “story” the Company is selling to investors with respect to positioning and focus…and what seems to be more important in this current financing market…aggressive spending for obtaining industry dominance, or controlled spending for a more protected niche approach, and (vi) finally, how is V11 continuing to monitor its competitors' activities and customers’ needs…and what is the mix between adjusting to current trends… and remaining committed to a given course that is recognized, understood and valued by customers but which gives new opportunities to other competitors

Financial Restructuring and Operational Change...the Infrastructural Side of the Equation
Bill Deihl – CEO, CEO Dashboard

In contrast to Rob’s presentation, Bill will discuss financial strategies that companies should follow, both to scale down operations and to ramp up. Topics Bill will address include (i) how management charts the infrastructural implications of change in competitive strategy, (ii) how to identify the core, minimal infrastructure required to allow companies to significantly reduce burn, yet continue operations necessary to support current customers and products…and invest in new development and market penetration strategies, (iii) how to construct and implement an effective outsource strategy…what to outsource, how to control quality…and when to fold back into the Company critical operations, and (iv) how to manage company operations, who should do it at what stage of a Company’s maturity cycle, how involved the CEO should be involved in operations….who the critical members of the executive team are in Bill’s view for mid-stage and more mature companies, how should candidates be identified, recruited and compensated in the current market. It would be good to get Bill’s view of how companies are managing operations and financial functions in the post bubble market correction period, and now in 2003 in a period of slow recovery. Given where the market now is, should companies invest more in R&D or in market and sales infrastructure? Which costs more, how can these functions be scaled up over time….and what elements of these functions can be effectively outsourced? Bill will comment on the current rise in activity in the venture funding of companies. How should companies reaction to this…and what are the best strategies and company positioning of more mature companies for mezzanine rounds? Bill will also comment on effective management organization and accountability for companies with 10-25 employees, 25-100, and above 100. Finally, given what Bill is now seeing in the Valley, he will also comment on (v) creative compensation plans for employees and management that reduce cash burn, and what to watch out for; and (vi) the structure and use of cash bonus plans to substitute for incentive option plans that are underwater.

The Legal Side of Restructuring, Re-negotiating, and Rescinding Financial and Commerical Commitments
Ward Greene – Partner, Greene & Markley, P.C.

Whereas Bill is going to focus on strategies of outsourcing and selective deployment of limited resources in order to control burn and preserve key company operations, Ward will direct his remarks on legal strategies to scale back or restart operations for financially distressed companies. Specifically, Ward will comment on tactics and strategies such as (i) whether and how to use the threat of bankruptcy to restructure trade debt; (ii) how to re-negotiate onerous terms in bank loan and real estate leases…leverage to use for positive results, and what not to do; (iii) leverage for exiting commercial partnering agreements, license agreements or other vendor or customer agreements that are uneconomic and unsustainable; (iv) in the context of mergers and corporate consolidations….how to pass on liabilities, or if that can’t be done, how target company shareholders can minimize, restructure or avoid remaining liabilities that are not assumed by an acquirer; (v) in the context of obtaining capital under secured bridge note arrangements…how existing investors can loan funds, secure critical company assets and exercise their rights on default under the UCC without incurring liability to unsecured creditors and shareholders, and (vi) whether and how to exit and shut down an existing company – and restart operations in a new corporation which is not a “successor-in-interest” to the predecessor company which is liable for that company’s operations. In addition to the foregoing, Ward will identify other effective strategies companies successfully use to jettison creditor obligations and sustain operations.

Back to Top
To Session II Index

Panel Discussion 3: Strategic Patents, Strategic Partnering, and How Tax Factors In

Using IP Strategy to Block the Competition...and Enter New Market
Dennis Fernandez – Fernandez & Associates

Rather than simply discuss what patent protection provides and how the process works, Dennis will focus on (i) recent changes in the patent field that protect new types of inventions, such as business methodology, (ii) what constitutes a public disclosure that starts the one-year clock for submission of a patent application, (iii) the fundamental building blocks of an effective “offensive” and “defensive” patent protection strategy, (iv) what patent strategies a more mature company can employ when it has not used patents to protect its core technology….but where it now has new derivative technology which might be patentable, and (v) how blocking patents work, and what is the strategy used here. Dennis will also discuss practical strategies companies are now using to prosecute patent claims through contingency lawsuits, suits funded by outside investors, and other strategies. Finally, Dennis will comment how companies in the current market are deploying these IP protection strategies, how these strategies are perceived by investors and strategic partners…and once these strategies are in place, how to enforce and use patents to maximize competitive advantage. On this last point, Dennis will comment on how to enforce IP rights with limited resources against larger, well funded adversaries.

Europe vs. America...What's Different and What's the Same Across the Pond
Jon Rortveit – Co-Founder and President, International Business Accelerator

Jon’s presentation will address the similarities and differences in doing business in Europe and in the U.S. for technology companies, with a particular focus on how U.S. based companies can effectively enter European markets. To approach this topic, Jon will comment on (i) the specific technologies and technology industries that are today successfully entering Europe; (ii) which major EEC regulations or restrictions to consider before launching in Europe; (iii) how to select European OEM and channel partners, based in which countries… and when and how to transition to company offices and staff in Europe; (iv) the size and current activity of the European private equity markets, whether U.S. based companies should seek European venture capital…and the differences, if any, in how European investors participate in company operations; (v) the new emergence of attractive markets in Eastern Europe and Russia…in which countries, what risks to be aware of and how to protect against them. Jon will also comment on how U.S. companies can work with European vendors of technology and outsourced services. Here, Jon will (vi) identify which technologies/industries are most actively providing outsourced services to the U.S., (vii) how to screen, procure and support technology obtained from European vendors, and (viii) what are the common business arrangements and structures under which European-sourced technology is utilized. Finally, Jon will spot trends and critical issues in European – U.S. strategic partnering….what are the opportunities and risks.

Tax and Structuring Alternatives for Trans-Border and Domestic Strategic Partnering
Glen Ulmer – Partner, KPMG

In contrast to Jon’s remarks on the general structure of and issues to address in international strategic partnering, Glen will discuss the complications of trans-border and domestic partnering and structuring alternatives to resolve these complications. The topics David will address include (i) identifying tax and accounting concerns under GAAP and foreign accounting rules that cause problems for US technology companies, (ii) how the development and ownership of new technology impacts both domestic and foreign partners under the US tax laws, (iii) internal transfer pricing guidelines between domestic and foreign partners, (iv) tax and structuring issues to address in commercial agreements if the end-objective of the partners is a business combination, (v) in commercial partnerships involving equity investment, what foreign taxes might apply on the sale of securities, and how to avoid or minimize these taxes or assessments, (vi) tax and accounting issues for domestic companies placing US employees overseas to work with foreign partners, (vii) tax and accounting issues in hiring foreign employees working for US companies, and (viii) the general process and expectations US companies should have on obligations to pay foreign tax based on different levels of operations in foreign jurisdictions. Finally, Glen might also touch on creative structuring to locate operations to minimize both foreign and US tax.

Back to Top
To Session II Index

Luncheon Speaker:

The Market in China...How to Understand It, Enter It, and Succeed in It
Robert Theleen - Chairman, ChinaVest Ltd.

Robert will provide a general picture of doing business in China, and how the government, the market and conditions of doing business in China have evolved in the past 12 months. As a way of highlighting positive changes in China, Bob will talk about his own activities in China with the formation of Chinavest Merchant Bank…and the financial and commercial developments in China that make such a venture possible. After giving this background, Bob will comment on the following with respect to U.S. companies wishing to do business in China: (i) what industries are most attractive for foreign investment and strategic partnering opportunities, (ii) if the opportunities are mostly with larger multi-national companies and if mid-market companies in China are now doing business with foreign partners, (iii) how to identify and work with local partners in China, (iv) what are the principle risks of doing business in the country and how to mitigate these risks (such as repatriating to the U.S. funds invested in Chinese enterprises…), (v) if it's premature for mid-sized private companies to do business in China, or is it better to wait, (vi) how U.S. investors and companies can assure a return on investment in Chinese companies – and (vii) the nature of government involvement in private enterprise in China. Aside from these more pragmatic points about doing business in China, Bob will comment on current trends in economic, social and government policy in China…and how these policies and trends currently will continue to influence the way business is conducted in China over the next 5 years. With respect to technology, Bob will comment on intellectual property piracy, how the issue is perceived in China by business and by the government….and current strategies employed to protect foreign developed IP. Finally, given the enormity of China, and the fact that most U.S. companies will most likely partner with smaller mid-market companies than larger enterprises…what are the best sources of market intelligence, which provinces are best for launching initiatives in China…and what type of infrastructure or physical presence is needed in China to monitor and manage Chinese operations.

Panel Discussion 4: Advanced Business Development and Sales Straegies for Product Launch and Market Penetration

Indirect Sales and Partnering in Storage...Domestic and Overseas
Peter Herz – Founder and Vice President of Business Development, 3ware

Peter will comment on (i) how 3ware changed its product deployment strategy from a storage board company, to a storage solutions company…and then back to a board and sub-systems company…and why these changes were made; (ii) how the storage industry has evolved in the 5 year period since the Company was founded, and how this has impacted the Company’s direct and indirect sales strategy; (iii) how 3ware selected its target customers when it first launched its products, were these the “right” customers to focus on…and how the sales team has refocused and reprofiled targeted customers as the industry has matured; (iv) how 3ware has balanced the longer timeline, evaluation process and uncertainty of working with prominent OEM and channel partners with direct sales to enterprise customers; and (v) the organizational, cultural and financial adjustments that 3ware had to make internally as the sales strategy evolved. On this last point, Peter might comment on how sales and the sales process was addressed by (vi) the founding management team, (vii) the second management team when 3ware was a mid-stage company, and (viii) the current management team.

From Vitria to Savvion...Building an Effective Direct Sales Strategy Before, During, and After the Bubble
Shawn Price – CEO, Savvion

Shawn will comment on and contrast his personal experiences in Vitria and now in Savvion to highlight how successful companies conceive of and execute on an effective indirect and direct sales strategy, with a particular focus on (i) what he found at Vitria when he first joined that company, and how Vitria’s sales strategy evolved during the periods when it was a rapid growth mid-stage and mezzanine stage private company…and then as a prominent and highly visible public company; (ii) what pressures and effect Vitria’s prominence as a public company during the bubble had on sales, how sales was addressed…and the resources devoted to growing sales; (iii) as the post-bubble market correction came about, how Vitria’s stock dive impacted sales…and Shawn’s observations on how any company should best handle similar public market pressures; (iv) now, with Savvion as a restructured mezzanine stage company…how Shawn has reviewed and repositioned Savvion’s products within the business applications software space to build on Savvion’s existing customer and partnering base without abandoning and losing that base needed to sustain current revenues; (v) how Shawn has internally rebuilt and redeployed Savvion’s sales team, why…and how this was done quickly and how it was coordinated with current customers; and (vi) how Shawn has rebuilt the current executive team in marketing, sales and business development…how he brought in many of his colleagues from Vitria to staff the new effort while maintaining current employee morale and Board support for the hard changes that needed to be made. On these last few points…it would be interesting to get Shawn’s perspective as a new CEO on how to make team change in a positive way…and how, as a CEO brought in by the Board mainly to ramp revenues, Shawn is dividing his time between overall company management and his direct involvement in the business development and sales effort.

Building Channel Sales in 4 Verticals from a Cold Start...When Focus is Not an Alternative
Abdi Shayesteh – General Counsel, Director of Legal Affairs and Business Development, FinancialCircuit

Abdi will tell the FinancialCircuit story, touching on (i) how the Company has developed new service products (such as the new “liability management” product) to distinguished its financial services platform from other competitors in the industry…and how this new service product was conceived and developed; (ii) how the Company has determined that its best strategy is not to focus the implementation of its platform on any single vertical markets…but instead to defy conventional wisdom by simultaneously developing key channel partners in different vertical markets to grow the Company’s financial professional network and utilization of its platform; (iii) how the Company has gotten the attention of the trade press to write about the Company’s liability management products…and how that has, in turn, given the Company credibility needed to work with prominent channel partners that formerly would likely not have been possible; (iv) how the Company is executing on its strategy of “fast deployment” in order to block competitor threats to develop and deploy similar service products now offered by the Company; and (v) more generally, what kind of strategy and sales infrastructure Abdi found at FinancialCircuit when he first joined the Company…how the new product and sales strategy was developed and implemented (in less than 6 months!), and how Abdi has internally changed the Company’s staffing to match this effort. Essentially, Abdi will discuss how an earlier-stage company can assess an industry from customer input, develop a realistic and distinct strategy…and then rapidly deploy the strategy with limited resources.

Back to Top
To Session II Index

Forum 2003 Sponsors:

Forum 2003 Contributors: