patents and finance : affording partners patents, attracting … · investment ! as an information...
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Capr
icor
n Ve
ntur
e Pa
rtne
rs Patents and finance : affording
patents, attracting investors - a VC perspective
Marc Lambrechts OECD Expert Workshop on Patent Practice and Innovation
May 10, 2012 Paris
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Capricorn Venture Partners
2 OECD Paris
Your speaker today
Dr ir Marc Lambrechts research in microsystems and PhD on biosensors
at KU Leuven industrial R&D experience at Terumo Europe RTD programme management experience at IWT + 10 years experience as senior investment manager in early stage
venture capital technology fusion as special area of interest active on the board of EpiGaN, Leuven.Inc and Punch Powertrain
Capricorn Venture Partners founded in 1993, independent and partners-owned pan-European activity, located in Leuven, Belgium hands-on venture capital & technology focus investing out of Capricorn Cleantech Fund (CCF I)
and Capricorn Health-tech Fund (CHF) merged with Quest Management
2012-05-10
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Capricorn Venture Partners
The Venture Capital business model
4 OECD Paris 2012-05-10
IP knowledge experience
+ proof of concept
business plan +
market +
customers .. entrepreneurs and team
board of directors investors
€ € € € € € € € € € € € € € € €
€
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Capricorn Venture Partners
5 OECD Paris
Tech VC’s prefer to invest in
Entrepreneurs and a team Technology as sustainable competitive
advantage strong and clean intellectual property/capital proof of concepts exists and mode of action is
understood
A business model we understand and like Growing and huge markets ‘Need to have’ proposals with ‘identified
customer pain’ Focus combined with mutant potential Well funded and capital efficient companies Exit perspective @ 5 to 10 x multiple
2012-05-10
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Capricorn Venture Partners
6 OECD Paris
Business model
i.e. the architecture of revenue and profit The functions of a business model are to:
articulate the value proposition, that is, the value created for users by the offering based on the technology;
identify a market segment, that is, the users to whom the technology is useful and for what purpose;
define the structure of the value chain within the firm required to create and distribute the offering and determine the complementary assets needed to support the firm’s position in this chain;
to specify the revenue generation mechanism(s) for the firm and estimate the cost structure and target margins of producing the offering, given the value proposition and value chain structure chosen;
describe the position of the firm within the value network linking suppliers and customers, including identification of potential complementary firms and competitors;
formulate the competitive strategy by which the innovating firm will gain and hold advantage over rivals.
Based on : Open Innovation, Henry Chesbrough, HBS Press
2012-05-10
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Capricorn Venture Partners
7
Choosing the business model
Leo Baekeland on the IP license business model "I firmly intended to escape the recurrence of business occupations, as in my Velox days. So I planned, instead of manufacturing myself, to grant licenses to established manufacturing concerns, especially experienced in plastics. But I soon was confronted with a repetition of my former experience with Velox: that it was very difficult to teach new methods to men who had acquired routine in older processes. The preparation of the new resinoid and its molding compositions, which to me seemed very simple, appeared either very difficult or needlessly complicated to others. Reluctantly I had to start manufacturing the raw materials in a sufficiently advanced stage so that the users had only to complete the operation of molding and polymerization.“ See also ”The Baekeland story - Lessons for today’s ventures in new materials” http://be.linkedin.com/in/marclambrechts
2012-05-10 OECD Paris
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Capricorn Venture Partners
8 2012-05-10
Importance of patents
Patents are important in any phase of a VC investment ! As an information source for deal selection Before making an investment During the investment period At exit (most likely via M&A transaction)
OECD Paris
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Capricorn Venture Partners
Patent database = information source
9 OECD Paris 2012-05-10
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Capricorn Venture Partners
10 2012-05-10
Importance of patents
Patents are important in any phase of a VC investment ! As an information source for deal selection Before making an investment
Strong and clean IP ( co-ownership, right of first refusal, inventor rights, …)
Full ownership of patent(s) by the company remains the preferred model!
Exclusive license with transfer rights and right/obligation to defend source IP?
FTO - Freedom to operate is key During the investment period At exit (most likely via M&A transaction)
OECD Paris
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Capricorn Venture Partners
FTO – hybrid drive trains
11 OECD Paris 2012-05-10
Source : Ambercite – Griffith Hack http://www.ambercite.com/downloads/ambercite_hybrid_car_report.pdf
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Capricorn Venture Partners
FTO – hybrid drive trains
12 OECD Paris 2012-05-10
Source : Ambercite – Griffith Hack http://www.ambercite.com/downloads/ambercite_hybrid_car_report.pdf
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Capricorn Venture Partners
First patent for hybrid
13 OECD Paris 2012-05-10
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Capricorn Venture Partners
14 2012-05-10
Importance of patents
Patents are important in any phase of a VC investment ! As an information source for deal selection Before making an investment During the investment period
Expand and strengthen the IP position by own R&D, partnerships, …
Create a unique IP fingerprint addressing a sizeable market Patent maps and landscapes as tool IP bundling opportunities IP pipeline agreements with R&D centre(s)
At exit (most likely via M&A transaction)
OECD Paris
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Capricorn Venture Partners
Patent mapping
15 OECD Paris 2012-05-10
Source : www.patanalyse.com
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Capricorn Venture Partners
16 2012-05-10
Importance of patents
Patents are important in any phase of a VC investment ! As an information source for deal selection Before making an investment During the investment period At exit (most likely via M&A transaction)
Beware of “Change of Control” clauses Tough IP due diligence (patents, trademarks, use of open
source, ..) Reps and warranties Not the most interesting moment to receive patent
infringement claims Value of patents at exit?
OECD Paris
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Capricorn Venture Partners
17 OECD Paris 2012-05-10
Value of IP at exit : FillFactory Case
Source : SEC files Cypress
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Capricorn Venture Partners
Value of patents at exit
In case of a failed business that received + € 7 M from investors, clients, subsidies, …
… all assets have been acquired for +/- € 50k
Source : final report of the receiver
18 OECD Paris 2012-05-10
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Capricorn Venture Partners
19 2012-05-10
For further discussion
Most of the patents are about a unique feature not a sellable (whole) product a valuable patent is only part of a valuable business
Patent cost versus patent value : taking a patent maintaining a patent + translations defend yourself in case of litigation follow-up in case of infringement of your patent portfolio
IP protection in open innovation models IP litigation as a business model – what about NPE’s? IP and developing economies
China : not infringing but building own IP portfolio
OECD Paris
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Capricorn Venture Partners
An example : smartphone patent war
20 OECD Paris 2012-05-10
Source : Verizon/Forbes
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Capricorn Venture Partners Patent monetization : threat or opportunity for a VC backed company?
21 OECD Paris 2012-05-10
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Capricorn Venture Partners
22 OECD Paris
For more information
Contact: Marc Lambrechts
Capricorn Venture Partners marc [at] capricorn.be
Lei 19/1, B-3000 Leuven, Belgium Tel. +32 16 28.41.00 Fax +32 16 28.41.08
http://www.capricorn.be
2012-05-10
http://creativecommons.org/licenses/by-nc-sa/3.0/