Are you looking to build a business? No matter the stage you’re at, there are three kinds of business assets you will need to be successful in the long run.
A Primer on Business Assets for High Technology Startups
This blog post is a primer on the three different kinds of business assets that a startup team brings to the formation of a new business and continue to accumulate as they find a niche and start to scale. Our goal is to offer entrepreneurs a richer perspective on what constitutes “working capital” for a high technology startup.
The normal definition of working capital is a purely financial one. It ensures that the firm has sufficient current assets to meet current liabilities. Current assets are either cash or assets that can be converted into cash in the next year. Current liabilities are foreseeable obligations the business faces in the next year But we feel that gives too narrow a picture of the assets entrepreneurs will rely on to build your business. They will need intellectual assets and business relationships in addition to financial capital not only to establish and but to grow a business.
A startup has “real” or financial assets in the following categories
- Bank accounts
- Equipment and tools
- Inventory and physical work in progress
- Accounts receivables–payments due for products or services delivered to customers
- Contracts with customers for the delivery of products, services, or subscriptions
- Real property: automobiles, furniture, and real estate
Starting a new business requires some initial money, whether for office space, permits, licenses, inventory, product development, manufacturing, marketing, or other expenses. Initial funding may come from bootstrapping, taking investment, or crowdfunding. Bootstrapping entrepreneurs may rely on savings, they may keep their current employment or they may freelance or consult in parallel to working on the startup. Investors may be friends and family, Angels, or Venture Capital.
Intellectual assets are business assets that demonstrate your business value. They are your know-how or “have done, can do” at both an individual and a team level. This is not just a recipe, but a recipe that you or your team has delivered on in the past. This know-how is typically presented to customers as past accomplishments that are indicative of future performance. These include:
- Patents, trademarks and trade secrets: “classic” intellectual property.
- Copyrighted content.
- Skills or expertise demonstrated in practice at an individual or team level.
- Degrees, certifications, and externally recognized (influence prospect or customer purchase decisions) expertise and capabilities. Any of these that customers either require as a minimum to consider you or help to differentiate your startup can be included.
- Templates, checklists, and other process and diagnostic criteria. These may be disclosed to prospects, customers, or partners, or they may be treated as trade secrets.
Finally, there is the firm’s social capital. This is the set of business relationships that have been established with customers, partners, suppliers, and prospects. These relationships are the source of trusted feedback and early customers.
Entrepreneurs need feedback you can trust to evaluate your business concept, product ideas, or early product iterations (as defined by presentations, datasheets, and demonstration). These business relationships enable access to domain experts, introductions to potential cofounders and early employees, and conversation with prospects who may become your early customers. Even where you cannot be introduced, your reputation at an individual or firm level may make reaching out to strangers–and getting them to respond–much easier.
- Family, friends, and acquaintances
- The firms current suppliers, partners, customers, and advisors
- Co-workers, customers, and suppliers from prior employment
- Alumni: classmates and teachers from high school, college, and university
- Industry, professional, or association memberships
- Permission to contact lists (e.g., mailing lists)
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Related Blog Posts
- SKMurphy Office Hours For Startups: Set Your Own Agenda
- SKMurphy Startup Stages
- Startup Stages: Survive, Explore, Focus, Refine, Grow
- Five Serious Financial Mistakes Bootstrappers Can Avoid
- Treat Social Capital With the Same Care as Cash
Working Capital Series
- A Primer on Business Assets for High Technology Startups
- A Practical Introduction to Financial Capital for Bootstrappers
- Basics of Intellectual Property for Bootstrappers
- A Practical Introduction to Intellectual Capital For Bootstrappers
- A Practical Introduction to Social Capital for Bootstrappers
- Building, Borrowing, and Keeping Trust
- Taking Stock of Your Business Assets
- How to Leverage Current Business Assets For Growth
- A Holistic Approach to Launching a Bootstrapped Startup
Image Credit: “Nested Triangles” (c) Tomas Kovalik (licensed from 123RF Image ID 43567928)