Hide and seek patenting - sometimes you hide what you are doing

When a technology startup meets a VC, there is a question guaranteed to crop up - is there any IP?

This means is there something we can patent......well in fact is there something that increases the barriers to entry of gives you a unique advantage..........or (if I am being cruel) are there any guarantees that I am going to make my money back as I hate losing money.
IP is a problem for some companies for a variety of reasons. They might be doing software (notoriously hard to patent in Europe) or they may just be combining things in a new way. However, it is not also obvious what to do when you have something to protect. The traditional route of filing and then daisy chaining filings around the world is fine but you do tip your hand to your competitors. Something to perhaps consider is just putting your code, designs etc. into escrow such that you can claim prior art later on if it becomes necessary.
© Copyright 2005 Richard A D Jones 2005

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Panning for gold...... the endless cycle of doomed start-ups

Most weeks I try to meet a start-up with an interesting angle on technology. Partly this is because I like helping out and partly because occasionally I will find something that is worth investing in and building.

However, I was thinking today about how many companies I have seen in the last few weeks where people are just working like mad. Committed, clever people who are out-punching their weight but...........(yeah that word) they are in overly competitive and crowded areas.

Company A (let's protect the guilty) has developed a software application and have done a good job. The only problem is Google gives 750,000 results when you put the search term into it. The world and his dog are doing it. This is the time that working with Stefan is really great. He is the more cynical/skeptical of the two of us and sometimes grabs my ankles when I am diving into a company because I just so want it to work. It is later on that I recognise the problems and pull back but finding someone that stops you deluding yourself is great.

The problem for some startups and corporate ventures is that there are no realists - only dreamers and the delusional fools.

The downside of what I do is I get to meet great people whose ships are never going to float (in any sense) and they don't realise it.

It's like panning for gold - you have to sieve through a lot of crud and then hope you recognise something good when you find it!

© Copyright 2005 Richard A D Jones 2005

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Want to join our gang - why corporate ventures fail 3

Okay so you might struggle to get someone from the company to join a new venture for reasons already discussed. So, it's easy isn't it. Get someone from outside. But can you attract them? To be honest - probably not!

If you want someone good. And I mean really good - then can you offer them:

• rewards equivalent to those they would receive in a normal startup (upside, salary, options etc.)
• autonomy
• flexibility
• speed of decision making
• etc.

The simple answer is generally no. This means corporate ventures often:

• struggle to build their team early on - going through cycles of failure to recruit when people reject their offers
• simply don't get the best people - leading to potential issues with staff churn and under-performance

© Copyright 2005 Richard A D Jones 2005

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Where's the lifeboat? - why corporate ventures fail 2

Okay you have been following the fast-track in a big company. Your reviews put you as a future big-hitter and now someone has identified you as a key element of a new internal startup/venture. So what's the problem?

Well there are a few actually. The sort of person who has worked hard to forge a career in a company may not:

• be suited to join a very entrepreneurial internal venture;
• want to leave their career path to move to an inherently risky venture.

Suited? Yeah seriously. Managerial ability may not cut it in a venture with autonomy to break rules and move faster than previously possible. There are operational roles which might match those find in the bigger company and be well filled but the needs of the venture and the team within it may just not suit people from the umbrella company.

Want to leave? Well, if the rewards aren't set up correctly to balance the risk then again the chances of the internal candidates jumping to the new ship is very limited.

One large company had a scheme where the CEO of a new internal venture could, if the first three years went right, and then they gambled on the fourth year results, earn a £1 million. That's not bad money but the odds of it occurring were not great and what would someone succeeding in a normal startup receive if it went well? See - it's just not that attractive as it undervalues the internal people.

© Copyright 2005 Richard A D Jones 2005

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Startup psychology 101 - 1

Living in Cambridge, I get into discussions all the time with people who don't really understand how startups work. Being clever types (well clever in some ways - they still wear their pants outside their trousers for the most part), they can still miss the point about their part of any new venture.

When the business get it's intitial funding round, they are always pleased and always quote the percentage of the company that they 'own'. The difficulty is they never let go of the percentage fixation so when more money comes in, they get all upset about the dilution instead of concentrating on the 'value' of their shares.

They will have a lower percentage of the company after more money comes in but the value of the shares should have gone up considerably more. You might 'lose' share of the company by say 25 - 40% but your shares might be worth ten times as much.

Think about this example if you dare. If you choose not to continue then I don't blame you as it is a bit dull but you need to understand this in a startup to avoid looking a prize fool in front of investors. (I'm not reading any further as I am boring myself with this but my fingers will keep typing anyway).

Imagine you have 10% of a company initially with your shareholding having a value of £10,000 equalling 10,000 shares issued at £1. That values the whole company at £100,000. Now in the next round of funding someone comes in with £1,000,000 for 40% of the business. The 40% is after there money has been added so increases the number of shares to 140,000.

The interesting thing is that the shares are now worth far more. The amount paid for the new ones was £25 a share. The person with 10% of the company now only has 10000/140000 of the company or 7.1%. Should they be upset? Well actually no. Their shares were worth £10,000 but are now worth £250,000 (£25 x 10,000).

The moral of this tale. Look at the value and forget the percentage shareholding.

© Copyright 2005 Richard A D Jones 2005

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