Archive for 'Venture capital.'

The Question VC’s Should Stop Asking, Why, and What Questions Should Be Asked!

December 12th, 2014. Published under 'Safeguarding Intangible Assets', Early stage companies., Venture capital.. No Comments.

Michael D. Moberly   December 12, 2014   ‘A blog where attention span really matters’!

Venture forums…

Venture forums are typically fast paced and highly charged events where management teams of intangible asset intensive startups, university-based spinoffs, and early stage companies give impassioned ‘elevator pitches’ to prospective investors.

Most pitches are purposefully limited to 3-5 minutes wherein the spokesperson explains their companies’ mission, the innovation, further research that’s necessary, fiscal projections, business model, why investment is warranted, and how the investment will be used should an investor deem it a worthy risk. Following the ‘pitch’, prospective investors may ask the company questions, one invariably is, ‘what’s your IP position’?

What’s your IP position…

Of the numerous venture forums I have attended the most consistent answer to this albeit over-rated, misunderstood, yet seemingly obligatory question is, a patent…

  • application has been filed (provisional),
  • is pending, or
  • has been issued.

The attention startup company’s attach to achieving IP status for their innovation, coupled with the consistency which prospective investors ask the IP position question, suggest each party believes that conventional IP, patents particularly are influential requisites to securing investment capital. Of course there are other factors considered in ‘invest – don’t invest’ decisions.

Legal symbolism…

True, IP status does provide investors with the necessary legal standing and recourse options should the invested enterprise fail, not meet its projections, or its IP is infringed or challenged within the 3 – 5 year exit strategy plan investors typically demand. And, yes, patents and other forms of intellectual property are obligatory for WTO and TRIPS signatories.

But, the global business transaction environment is becoming increasingly aggressive, predatorial, competitive, and legacy free. That coupled with the persistent challenges and vulnerability to intangible asset (IP) infringement, theft, and/or counterfeiting make a startups’ IP position little more than legal symbolism. Should companies elect to pursue other strategies to safeguard their proprietary – competitive advantage intangible assets, i.e., trade secrecy for example, those legal portals for bringing action against the inevitable infringers, thieves, and counterfeiters in locales where a company’s most valuable assets are in play also carries some ambiguity.

Legal – economic safety nets…

Through my lens, conventional IP has less relevance as a legal – economic safety net than startup management teams should be assume.  Too, the costs associated with mounting an IP infringement – misappropriation suit are significant, if not cost and time prohibitive for resource conscious startups to pursue regardless of case credibility.

It’s prudent for investors and IP holders alike to acknowledge patents and most other forms of IP, no longer serve as…

  • stand alone deterrents, or
  • reliable prognostications of innovation value.

More relevant venture forum questions…

I urge prospective investors – venture capitalists to re-phrase their venture forum questions. For example, rather than merely asking ‘what’s your IP position’ assuming that is an important criterion to ‘invest-don’t invest’ decisions, perhaps a more relevant and telling question would be…has the proprietary know how, i.e., intellectual, structural, and relationship capital that underlie the startups’ innovation and serve as the cornerstone to the IP on which an investment would be premised, been adequately safeguarded from its inception?

Patents start life as trade secrets…

It’s a well acknowledged adage in the information asset protection arena that patents typically start life as trade secrets and proprietary know how.  Therefore, if the know how underlying a prospective investment has been treated in a cavalier manner absent the

  • requisite minimums of trade secrecy or other best information asset protection practices
  • prior to filing a patent application,
  • it’s only prudent for prospective investors to ascertain
  • the status, i.e., fragility, stability, and sustainability of the assets being considered for investment.

Asset vulnerability, probability, criticality, and speed…

Today, the vulnerability, probability, criticality, and speed which know how, i.e., intellectual and structural capital assets particularly, can be compromised, infringed, misappropriated, or stolen are issues that should be fully explored as being integral to any ‘invest – don’t invest’ decision.

Follow-up questions…

Before making an investment in intangible asset rich and dependant startup companies, it’s important to direct probing follow-up questions to company management teams. Doing so will allow prospective investors to more objectively assess whether control, use, ownership, and value of the underlying intangible assets are…

  • sustainable relative to an intended exit strategy, and
  • reflective of the assets’ functionality and value cycle.

Today, with increasing certainty, ineffectively safeguarded intangible assets (IP) will quickly hemorrhage in value, competitive advantage, and elevate investor’s vulnerability to costly, time consuming, and momentum stifling challenges and exit strategy headaches!

As always, reader comments are respected and welcome.

British Venture Capital Association – A Meeting…

March 16th, 2010. Published under Analysis and commentary, Venture capital.. No Comments.

Michael D. Moberly   March 16, 2010

While in London recently where I served as one of the keynote speakers for the European Information Asset Protection Conference, I secured a meeting with officials of the British Venture Capital Association (BVCA) which serves as UK’s public policy advocate for the private equity and venture capital industry.

A significant percentage of my discussion with BVCA officials evolved around comparing and contrasting UK’s VC industry with the US, and the so-called ‘silicon valley’ model which my hosts did not advocate tyring to replicate in the UK.

Our discussion also explored possible differences between US and UK entrepreneurs.  One such difference expressed by BVCA was that some would be UK entrepreneurs may be more reluctant to start an entrepreneurial business compared to their US counterparts due to stronger personal concerns about the consequences of (business) failure.  It was said that a contributing factor to this perception lie in UK bankruptcy laws that are not considered particularly entrpreneur friendly.  That is, company and personal bankruptcies in the UK are generally considered indistinguishable, therefore a combination of business failure and bankruptcy may discourage, in a entry barrier context, more entrepreneurial activities because it elevates-carries a sense (probability) of personal failure.

While UK’s VC industry is generally considered to be the most advanced in the EU, BVCA officials suggested there are relatively few (UK-based) investors with the financial capability to fund promising (innovative) companies through each stage of their development.  If reality, this contributes to the perception that UK’s VC industry focuses more on later stage and more established companies vs. start-ups and early stage companies. 

In that regard, the BVCA concedes there may be structural problems (within UK’s VC industry) that need to be addressed to ease the flow of equity capital into early stage and innovation intensive companies particularly. With that, the BVCA is exploring-seeking ‘the most suitable type and/or correct mixture of interventions.

What’s Your IP Position? – Is The Question Still Relevant To Investors?

June 1st, 2009. Published under Analysis & Commentary: Studies, Research, White Pap, Fiduciary Responsibility, Venture capital.. No Comments.

Michael D. Moberly   June 1, 2009   ‘A blog where attention span really matters’!

In the high stakes – high risk arena of investing in intangible asset intensive early stage companies, ‘what’s your IP position’ is one of several questions prospective investors (venture capitalists) pose.

Of all the venture forums I have attended, by far, the most frequent response to that seemingly obligatory question from those making the proverbial elevator pitch is, ‘a patent application has been filed, a patent is pending, or has been issued’.

While the ‘what’s your IP position’ question still has some relevance, albeit far less in my judgment than it has previously, prudent prospective investors will have an array of follow-up questions at the ready relative to making their ultimate ‘invest – don’t invest’ decision.

Given the consistency which both prospective investors asks the IP position question and the IP holders’ response, it’s evident both parties still believe patents are requisites to investment and eventual commercialization.  However, in light of the increasingly and globally predatorial, competitive, and winner-take-all business transaction environment coupled with the essentially unfettered expansion of IP infringement, theft, and product counterfeiting-piracy, the IP position question has come to be, in my view, little more than legal symbolism.

Yes, patents and other forms of intellectual property are obligatory to signatories to WTO and TRIPS in as much as they provide not just legal standing, but a legal portal for commencing – taking action against the inevitable infringers, misappropriators, and counterfeiters in countries where a company and its IP are in play.  That said, it’s prudent for both investors and IP holders to acknowledge that patents and most other forms of IP, no longer serve as…

  • stand alone deterrents, or
  • reliable prognostications of value of the innovation under patent.

This is why I urge prospective investors to re-phrase the question, e.g., rather than merely asking ‘what’s your IP position’ as one of a series of criteria for making invest-don’t invest decisions and receiving the proverbial and well-rehearsed response from the company (spokesperson) seeking capital, there is a more relevant question to be asked.  That question is, has the proprietary know how, i.e., intellectual, structural, and relationship capital that underlie the innovation (IP) and which the investment is premised, been adequately safeguarded from its inception?

It’s a well acknowledged adage in the information asset protection arena that patents typically start life as trade secrets and proprietary know how.  Therefore, if the know how underlying a prospective investment has been treated in a cavalier manner absent the

  • requisite minimums of trade secrecy, or
  • best information asset protection practices
  • prior to patent filing and/or issuance,
  • it becomes essential for prospective investors to ascertain
    • the status, fragility, stability, and sustainability of the assets being considered for investment.

Today, the vulnerability, probability, criticality, and speed which know how assets can be compromised, infringed, misappropriated, or stolen are issues that should be fully explored because they are certainly integral to ‘invest – don’t invest’ decisions.

So, before making an investment in proprietary know how rich – dependant companies, knowing and posing the right follow-up questions to the IP holders and their startup management teams. Doing so will allow prospective investors to more objectively assess whether control, use, ownership, and value of the intangible assets are…

  • sustainable relative to an intended exit strategy, and
  • reflective of the assets’ functionality and value cycle.

Today, with increasing certainty, ineffectively safeguarded intangible assets will quickly hemorrhage in value and competitive advantage and elevate investor’s vulnerability to costly, time consuming, and momentum stifling challenges, disputes, and certainly, exit strategy headaches!