What Is Technology Worth Essay

3418 Words14 Pages
What is Technology Worth? A Real Options Case Study on Technology Carve-Out Venture Valuation TOBIAS EICHNER, HANS GEORG GEMÜNDEN, AND THOMAS KAUTZSCH TOBIAS EICHNER is a project manager with Oliver Wyman and part of the private equity practice in Munich, Germany. tobias.eichner@oliverwyman.com HANS GEORG GEMÜNDEN is the chair professor of Innovation and Technology Management at the Technical University of Berlin in Berlin, Germany. hans.gemuenden@tim.tu-berlin.de THOMAS KAUTZSCH is a senior partner with Oliver Wyman and leads Oliver Wyman’s private equity practice in Munich, Germany. thomas.kautzsch@oliverwyman.com 96 nvestors in high-tech industries face a common issue: how to put a valuation on a technology based venture or project? Although classic investment valuation methods, such as discounted cash flow, are well understood, they tend to fail in this environment. Technology investments not only look into an uncertain future, they also have a business plan that is still flexible and subject to change. Both issues often make an investment decision a matter of a mere “judgment call.” In this article, we provide a compelling solution to assist investors in high-tech investment decisions: the Real Options Toolkit. This model allows one to capture and evaluate the flexibility of managers to adjust their strategy to alterations in the uncertain high-tech environment. This type of managerial flexibility is modeled as a “real option.” Based on the actual investment case of SemCo., a technology carve-out venture, we give clear guidelines on when and how to use real options analysis to evaluate technology-driven investment decisions. Beyond its appeal for pure investment valuation, the real options framework also provides another insight: the hidden “option value” in a technology investment does not just unfold

More about What Is Technology Worth Essay

Open Document