Centre for Technology Management

Valuation of technology: exploring a practical hybrid model

F H Hunt, D R Probert, J C Wong and R Phaal

Centre for Technology Management, Institute for Manufacturing, Engineering Department, University of Cambridge, UK

Abstract

How much is this technology worth? This is a question of great interest and importance in a wide variety of circumstances. These vary from companies considering investing in R&D projects, to venture capitalists funding start-up companies. However, such valuation is notoriously difficult to get right, and the cost of failure can be very high.

Many techniques have been proposed to assist managers facing this issue, from traditional discounted cash flow analysis to more recent methods based on real options thinking. This paper discusses the practicality of the various methods available, and explores the application of a hybrid model, which aims to make these rather abstract ideas more accessible to practicing managers.