Economical aspects and success measures of high tech ventures
Yossi Dashti, BGU

The success of high tech ventures is measured in various ways. Some empirical studies of entrepreneurship have used profitability or rate of growth, or both, as measures of venture performance (Lee and Tsang, 2001). Nevertheless, ventures often compromise profitability in order to support growth and therefore profitability can not be a sole indicator of success. In their study of technology-based strategic business units, Dvir and Shenhar (1992) suggest success dimensions such as profitability level, orders generating, new opportunities capturing, and preparing infrastructure for the future. Rodriguez (2003) suggests a combined approach that measures business model benchmark and top management team scorecard for ventures' valuation. Hoang and Antoncic (2003) specified entrepreneurial outcomes as: the founding, performance, as well as exit events such as going public, mergers, acquisitions, formation of alliances, and firm dissolution. In researching the effect of alliances on venture performance, Sarkar, Echambadi and Harrison (2000) measured success in terms of sales growth, market share, product development, and market development. Davila, Foster, and Gupta (2003) measured success in terms of headcount increase, involvement of venture capitalists, financing rounds obtained, time to first financing round, amount of capital raised, post-money valuation for each round, and liquidation events such as IPO, acquisition or cease to exist. Due to the high risk and capital investment involved with the venture, financial rewards are at the center of the expected results and measurements of success. "Exit strategy", a term used for cashing in, or reaping the rewards of putting capital at risk became a key success factor. "Exit strategy" is commonly a term used by stakeholders, from inventors to investors, as early as the conceptual stage of the venture through its life cycle.

Factors contributing to the success of the Israeli high tech industry are: a fertile ground that is supported by governmental initiatives, a demand from the defense industry for sophisticated technology, the emergence of venture capitalists in Israel, and participation in global markets. During 2004, 428 high tech Israeli companies raised $1.46 billion from local and foreign venture investors (Israel Venture Association, 2005). According to Haour (2004), 158 new Israeli high tech ventures were created during 2003, exceeding the number of startups that ceased operations during the same year. In a study of Israeli ventures in the United States, Malevich (2001) indicated success factors such as government involvement, human capital, innovativeness, financial resources, and support networks. When examining economical aspects in this study, focus will be given to success in terms of value creation, financial performance, employment growth, market share, and "exit" events. Factors such as market value, sustainable revenue, growth rate, market share, capital raised, number of patents, innovation milestones, mergers and acquisitions, and Initial Public Offering (IPO) will be examined in the context of successful and unsuccessful ventures. Successful and unsuccessful ventures will be evaluated subjectively by the entrepreneur's perception and objectively by analysis of data collected from industry experts, publications, and financial reports such as the SEC filling.

Copyright © 2005 by Yossi Dashti, Ben Gurion University of the Negev, Beer-Sheva, Israel
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