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 different kinds of business assets that a startup team brings to the formation process and continues to accumulate as it finds a niche and starts to scale. Our goal is to offer you a richer perspective on what constitutes “working capital” for a high technology startup.
The normal definition of working capital is a purely financial one. The firm has sufficient current assets (cash or assets that can be converted into cash in the next year) to meet foreseeable obligations for the next year (current liabilities). But we feel that gives too narrow a picture of the assets you will rely on to build your business. You will need intellectual assets and business relationships in addition to financial capital to establish and grow your business.
Starting a new business requires some initial money, whether for office space, permits, licenses, inventory, product development, manufacturing, marketing, or any other expense.
As a startup, you might have “real” or financial assets in the following categories
- Bank accounts
- Equipment and tools
- Real property: office building, automobiles, furniture
- Inventory and physical work in progress
- Accounts Receivable–including recurring revenue obligations
Startup capital is also referred to as “seed money.” Here are some typical sources:
- consulting / freelancing / day job
- VC funded
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.
You 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.
- Who do you know and how do you know them?
- Alumni: school, prior employment
- Permission to contact (e.g., mailing lists)
- Industry, professional, or association memberships
- Supplier contracts that provide a predictable cost or service advantage
- Customer contracts that deliver predictable revenue
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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
Image Credit: “Nested Triangles” (c) Tomas Kovalik (licensed from 123RF Image ID 43567928)