Working with Corporates

If you’re talking to a corporate venture partner on the other side of the Atlantic and are worried about protecting your intellectual property (IP), then maybe you shouldn’t be having that conversation in the first place. That at least was the message from IBM’s Claudia Fan Munce when asked what safeguards her Venture Capital Group could provide to small partners concerned about “opening the kimono” and sharing their IP secrets.

“If people come and say they can’t tell us anything unless we sign our life away, my response is don’t show us then,” she said in a recent web seminar on partnerships between corporates and venture-backed start-ups, run by the US National Venture Capital Association. “It might be arrogant, but if there is concern or mistrust then we would prefer not to engage with a company at that stage.”

She added that a start-up that was primarily concerned with commercialising its innovation – rather than incorporating it into a broader solution that IBM could bring to market – would not be a suitable partner anyway. “If your only asset is IP then I don’t think you would make a very interesting partner for us. We are looking to build solution partners.”

Many smaller companies do operate successfully in the ecosystems that exist around larger vendors – and the vendors themselves realise the importance of cultivating such ecosystems to plug gaps in their offerings. And in fact, Fan Munce argues that organisations like the VC Group she heads are designed to insulate everyone involved from the prying eyes of rivals. “We’ve had seven years of bringing thousands of companies into revenue-sharing partnerships and we’ve acquired 28 of them,” she says. “We’ve never had a case where there’s been a violation of IP and when you look at the wording of our IP contracts, that tends to shut down the situation. You should see the venture capital group as a ‘firewall’ so to speak.”

But since all large corporates talk to thousands more companies than they eventually buddy up with, what happens to the secrets of the ones that don’t make it to partnership status? The reality is that in some cases, the corporate may already be working on similar products to yours in its own labs: the attraction of a partner might simply be that they could get to market quicker, or they have a specific vertical market twist. In other cases, if you’re not a good fit, it’s probably safe to assume that a large company isn’t going to spend time reinventing a wheel it doesn’t need. The bottom line is that any time you have to open the lid on your IP, there’s an element of risk: the question is, how far is it outweighed by the potential reward?

By David Longworth, Webster Buchanan Research

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