Start-up – RBSU Success Dependent On Safeguarding Contributory Intangible Assets

Michael D. Moberly     January 21, 2015    ‘A blog where attention span really matters’!

For start-up management teams, the importance attached to launch their product or service cannot be overstated. It is important on many levels, one of which, it puts a new venture, on ‘the public stage’ and subject to all of the like – dislike variables which inevitably follow.

Should stake holder, prospective user, and investor reaction be favorable, launches can put a start-ups’ innovation a few steps closer to profitability, says Ans Heirman and Bart Clarysse formerly of Ghent University in their fine paper ‘Do Intangible Assets at Start-Up Matter for Innovation Speed?’

The speed which an innovation arrives at its launch stage is also important insofar as attracting initial rounds of investment. Another increasingly crucial factor that affects the speed which start-up innovations’ are positioned for launch is early recognition for safeguarding an innovations’ enabling and contributory intangible assets which in most instances are embedded in – underlie the innovation itself, i.e., intellectual, structural, and relationship capital or the proprietary know how and processes.

Unfortunately, I have observed many start-up management teams, be they RBSU’s or independent, imprudently directing their aspirations to seeking the issuance of a patent. Routinely, innovators rather naively assume ‘the patent route’, standing alone, will serve as sufficient safeguards for their innovation. And, most, if not every investor prefers, if not demands, an innovation be patented as a prelude to favorable investment consideration..

What innovators tend to discount or altogether overlook are equally valuable (enabling) intangible assets that routinely serve as the underlying foundation to every innovation. It’s now quite routine that 90+% of start-ups’ – innovations’ sources of value, revenue, and ‘building blocks’ for growth, profitability, and sustainability to reside in – evolve directly from intangible assets.

Even though Heirman and Clarysse’ paper was published in 2004, it still carries much relevance insofar as making a convincing case that antecedents to innovation, i.e., speed emminates from recognizing, safeguarding, and managing key intangible assets, again particularly, the intellectual, relationship, and structural capital.

Heirman and Clarysse also make a very favorable case that other equally important intangible assets, which they refer to as ‘pre-founding R&D efforts’, e.g.,

  • innovation team tenure,
  • the experience level of the start-ups’ founders and management team members, and
  • third party collaborations, are also important contributors to innovation speed.  

To this perspective, Heirman and Clarysse collected a dataset on 99 research-based start-ups (RBSUs) and applied an event-history approach. From this they found that experienced entrepreneurs understand that innovation speed is important for many reasons, i.e.,

  • attracting – acquiring early investment to achieve more (greater) financial independence,
  • achieving broader external visibility and legitimacy for their innovation as quickly as possible, and
  • delineating the innovations’ competitive advantages as early as possible.

I agree with both Heirman and Clarysse that innovation R&D cycles can vary widely based on, among other things, the number and phases of product development, along with specialized technologies that may be required.  Being an intangible asset advocate and strategist no surprise here.

Collectively, this confers additional credence on the view that identifying inter-connected clusters of contributory intangible assets is important insofar as they may re-emerge at some point as enablers to another RBSU innovation. In other words, RBSU management teams should avoid dismissing or neglecting intangibles as if they are a single use asset. Too, it’s perfectly feasible that certain intangibles can be extracted from an already launched innovation to become independent sources of value and revenue.

Heirman and Clarysse also found that RBSUs frequently differ with respect to their starting conditions, for example…

  • start-ups which are further in their product development cycle (at founding) will likely launch their initial innovation (product) faster.
  • innovations that require a beta-version (test) will obviously experience slower product launch times.
  • experience level of startup founders and management team members can lead to faster launch times.
  • a start-ups’ alliance with other firms does not significantly or favorably affect innovation speed.
  • startups which collaborate with universities (perhaps as a spin-off, etc.) generally lead to longer innovation development and launch times.

As always reader comments are encouraged and welcome!

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