Use I.P. To Increase Your Company’s Value

In the knowledge economy, two-thirds of a company’s balance sheet assets are comprised of intangible assets. The true value of companies no longer resides in factories or real estate. It resides in the minds of talented employees and in the intellectual property these employees generate, properties like trademarks, trade secrets, designs, know-how, copyrights and patents.

Yet intellectual property is notoriously hard to value. Why? Because unlike most other assets, there is no transparent public market that matches many buyers and sellers. Also, intellectual property is often highly specialized and context-specific, making it hard to develop value models based on similar transactions.

A similarly difficult value determination involves setting a price on your start-up, since there are few cash flows. However, as entrepreneurship guru Tim Berry mentions in his post “5 Concerete Steps to Starting Valuation“, the value of your start-up depends on the “cards you bring to the table.” As Tim mentions, you can improve your hand by owning a defensible product with intellectual property. So, before you shop around for investors, build a portfolio of intellectual property rights and use them as bargaining chips to negotiate value. It can mean the difference between giving up a majority stake in your business vs. giving up only a minority stake.

To learn more about intellectual property valuation methods click here.

Knock-Off Awards

Can you tell the difference?
Can you tell the difference?

Shame on you. That’s the purpose of Plagarius, a German cereremony that awards the most blatant knock-off  artists. The purpose of the awards is to send a message that stealing innovations is not acceptable.

Having their innovations knocked off in this manner can be an innovator’s worst nightmare. With some money and determination, they can shut down the knock-off artists. This kind of behavior really highlights the law of the market: if you succeed others will imitate.

Click here for the full BusinessWeek story.

Acknowledgment: Thanks to Arvind Natarajan for sending me the link to this story.

What A Business Plan Competition Judge Looks For

Successful entrepreneurs write good business plans. Good business plans win competitions.

I routinely conduct business plan competitions in my entrepreneurship class. As part of the job, I have to recruit savvy and successful entrepreneurs to serve as judges for each competition. Someone who I have often asked to judge is Dan Brown, President of Loggerhead Tools and inventor of award-winning and blockbuster products like the Bionic Wrench. Dan is a true entrepreneur and master of industrial design, patenting, marketing and merchandising.

This year, I want to give my students a leg-up and show them what expert judges look for in a business plan competition. So, naturally, I asked Dan. Here is what he replied.

Dan’s Top 10 Business Plan Presentation Topics:

1. Is there a market opportunity? Does your product or service address an unmet or underserved need and add value to customers?

2. Identify and claim your white space. Have you identified a market segment best suited to establish a strategic foothold for launch?

3. Claim an opportunity gap. Have you realistically identified your competition,  and is there an opportunity for sales based on a value-added strategy?

4. Carefully define the wow-factors. What are the customer-getting differences that add value and compete for the customer’s attention and dollars?

5. Are there opportunities for intellectual property protection? Look at patents, trade names, trade dress and other brand-reinforcing strategies. Do a thorough intellectual property search to be sure there will be no unpleasant surprises after launch.

6. Research several competitive benchmarks and quantify the cost and sales drivers necessary for success in the market.

7.  Have a thorough and realistic development, investment and sales budget, with a realistic cost analysis for development, tooling, and commercialization. Know your costs.

8. Develop a roadmap. Develop an actionable plan that identifies the resources, costs and time required to complete product development and commercialization.  Failure to plan is planning to fail.

9. Generate a simple pro-forma (forward-looking) 3-year sales forecast of investment, cost, and projected revenue with a cash flow analysis. Do you show a return on investment?  Do the numbers support your plan?

10. Assemble a winning management team and advisory board that can succesfully complete the development, commercialization and management of your business.

Kauffman Foundation Lecture

I just finished leading an intellectual property workshop for entrepreneurs here in Houghton, MI. The event was sponsored by the SmartZone, a local high-tech business incubator.

The FastTrac TechVenture Program is a learning program administered by the Kauffman Foundation. Here are some of the topics covered in this program:

  • Determine market opportunities and business strategies and pursue them successfully.
  • Define your target customers.
  • Develop a solid marketing plan.
  • Learn to assess and build a top management team.
  • Calculate the funding needed at each stage of your business and discover the best ways to access it.
  • Learn the importance of protecting your intellectual property through licenses, patents, trademarks, and copyrights.
  • Hone your elevator pitch and investor presentation.

One question was asked, and I think it would be useful to highlight. A participant asked,  “If a small technology entrepreneur has a valuable idea, what can they do to save money and protect their idea from a large company that just takes it without permission?”

Here’s a brief checklist:

1. Make sure you are an expert in your technology space. The more you know what the state of the art is, the less time and money you will spend defining your invention during the patenting process.

2. Understand the nature of your intellectual property rights. If you have a broad and solid patent, you can obtain, or threaten to obtain, a speedy injunction to stop competitors from copying your technology.

3. Patent litigation can be very expensive, with a full patent trial costing millions of dollars. A technology entrepreneur can share the expense of a patent trial with a contingency fee patent litigator. Several law firms specialize in taking these cases if: the inventor has a strong patent, there is a clear case of infringement, and the accused infringer has deep pockets. Here is one law firm that specializes in these cases.

Seeking Female Inventor – Apply Within

Bed Bath & Beyond has partnered up with EdisonNation to sponsor a competition that will reward the next great home product, invented by a woman. The competition commemorates the 200 year anniversary of the first patent granted to a female inventor, Mary Kies for a weaving process in 1809.

Throughout the years, women have patented many important inventions. Here’s a short list of several:

  1. Heddy Lamar – Early wireless technology pioneer (and Hollywood actress)
  2. Mary-Dell Chilton – Biotechnology pioneer
  3. Anna Connelly – The fire escape
  4. Bette Nesmith Graham – Correction fluid
  5. Sharen Brower – Soy-based ink

So, if any ladies have an idea for an invention that would make life easier at home, this might be a good opportunity. The deadline for submissions is April 30.

To learn more, please visit the competition website.


News Brief: Lingerie Entrepreneur gets to Bottom of I.P. Controversy

Pop culture critic and journalist C.E. Hanifin recently pointed out a fascinating intellectual property controversy at Target Addict. That blog comments on a news story run by The Virginian-Pilot, involving I.P. and lingerie.

April Spring, of Norfolk Virginia,  obtained a design patent in December, 2008 for a design of women’s briefs marketed under her Foxers brand. This is the image of the design patent, as it was issued by the U.S Patent Office.

Design Patent D581,628 for Women's Briefs
Design Patent D581,628 for Women's Briefs

Spring’s design attaches an elastic waist band to the briefs, much like those seen on men’s boxer shorts.

Spring filed a lawsuit against Target, Corp. alleging the retailer knocked-off her design. The Foxers briefs are normally priced at between $20 to $26 a pair. The Target briefs that allegedly rip-off her design are priced at around $5 a pair.

Note: design patents are a special type of patent and differ from utility patents, which cover working inventions. Design patents cover only the ornamental look of a product, as opposed to how the product works.

Entrepreneurship in Hard Times

Dr. Kanwal Rekhi’s innovations provided the foundations for the Internet. His start-up company, Excelan, developed and sold the computer hardware that allowed distributed computing to flourish, helping to usher in the age of the network. Dr Rekhi eventually sold Excelan to Novell and then eventually became a venture capitalist, helping to fund more than 50 companies in Silicon Valley. Six of them went public.

Michigan Technological University had the honor of hosting this very distinguished alum. Dr. Rekhi received his masters in electrical engineering in 1969 from Michigan Technological University.

I had the unique pleasure of hosting Dr. Rekhi in my Entrepreneurship class. I also attended his lecture on “Entrepreneurship in Hard Times” on March 4, 2009. Dr. Rekhi gave an amazing an inspiring speech. During this speech he spoke about the virtues of bucking the trend, and starting your own business during tubulent times.

These are Dr. Rekhi’s top 10 traits for an entrepreneur. They readily apply to anyone who aspires to innovate:

Top Traits of an Entrepreneur

1.    Intellectual honesty. Brutal honesty. You can never fall in love with your business. If you do, you will fail to make the hard but necessary decisions.

2.    Humility.

3.    Accountability to yourself and your team. You ultimately have to be able to say that you accomplished something or that you did not. If not, why not? You cannot ever blame others. If you fail, it is on your shoulders — no excuses. If there is no accountability at the top, others below also will not feel accountable.

4.    Fairness. You have to be able to make sure the rewards are proportional.

5.    Economics. You have to be able to determine values and prioritize these values. The highest value-added issues get prioritized. You also have to understand the fundamentals related to costs and margins.

6.    Expertise. You have to be an expert when it comes to your customer and competition.  Although you also have to quickly become a generalist. You don’t have enough money when you start out to hire specialists.

7.    Execution intelligence. Investors pay a premium for this rare skill. For every great idea that you have, there are 10 very smart people with the same idea. What will make the difference is the ability to execute. Ideas are a dime a dozen.

8.    Leadership. When times are tough, pull everybody up. Inspire others to look beyond today. When times are good, keep everybody grounded; don’t get too exuberant.

9.    Self-reliance. Entrepreneurs do not need any approval. This comes from within. Also, there is little daily satisfaction; success comes in the long run.

10.    Confidence. Success loops are long, so you need to be confident and patient to reap your rewards.