If you're still in two minds about whether to push ahead with a clean tech or healthcare project, take comfort from the latest VC investment figures. Funds are definitely out there to back good ideas - and record amounts of cash are now being poured into some sectors.
Data released by Dow Jones VentureOne over the weekend indicates that US VC firms pumped $590m into energy investments in the third quarter of 2007, a leap of 28 per cent over the same period last year. Investment in advanced specialty materials and chemicals companies - another substantial subset of the clean tech equation - doubled from the previous year to $277m. UK investment trends don't slavishly follow the US, of course, but with Silicon Valley emerging as a leader in clean technologies, the figures give some indication about where investment preferences might swing in the UK and elsewhere going forward.
Alongside green concerns, of course, healthcare remains a big talking point in the US and has also proved to be fertile ground for entrepreneurs. Earlier this month, the first Baby Boomer, a retired teacher, applied for social security - and as VentureOne points out, there are 76m other Boomers waiting to follow suit. Aside from the impact on social security funds, all of these new retirees are going to need medical care - which helps explain why overall investment in the healthcare sector grew four per cent. The medical devices sector in particular continues to grow strongly - while the number of actual deals fell, total investment climbed 19 per cent to $830m, taking the sector to record annual figures with just three quarters gone.
Elsewhere, traditional information technology investment slipped a little, with ten per cent fewer deals and five per cent less overall investment in the third quarter. It remains, however, the largest VC investment area overall with $3.77bn of investment. Not surprisingly, the information services category - which includes Web 2.0 companies - now accounts for around a quarter of overall IT funds. Significantly, some 60 per cent of IT deals went to second and later round companies, a trend that was borne out across the whole VC arena. While the level of early-stage investment remained steady, this later-stage focus helped push median deal sizes to a new record of $7.92m.
Finally, if you ever decide to seek out US investment, bear in mind that just like house prices, location is everything. New England and New York both saw healthy growth on the East Coast - but it's hard to argue with California, which alone accounts for a staggering 44 per cent of all US VC activity in the third quarter. While the Bay Area's share fell slightly, Southern California saw its biggest deal volume since 2001 - suggesting that we'll have to wait a while before any other state makes a serious challenge for the number one slot.
By Keith Rodgers
For South African Business Invetment Opportunities and Capital check out SA Investors Network
Showing posts with label Investors View. Show all posts
Showing posts with label Investors View. Show all posts
Wednesday, June 24, 2009
Growing your business exponentially
Want to know how to grow your business 20,000 per cent over the next three years? Take a look at the September issue of US entrepreneur's magazine Inc., which contains this year's list of the fastest growing private companies in America.
The ludicrously high headline figure (20,128.9 per cent, to be precise) comes from a company called MemberHealth, which struck it rich in the US health market prior to agreeing a tasty $630m buyout offer earlier this year. But while it leads Inc.'s highly-respected Top 500 listing, it's just one of many companies enjoying super-quick growth. Companies from a broad cross-section of industry have made it into the ratings, and as always, the tech sector has a fair showing.
One point that stares you in the face on the listings is just how big a part luck plays in making silly money. After MemberHealth, the second fastest-growth company on Inc.'s list this year is a telephone switch supplier that happened to get a big break from a deal with a large US cable company. Net result? Three-year growth of 14,853 per cent with current revenue of $68.1m.
But while luck matters, good ideas still count. In the software field, Turning Technologies is the highest ranked company at number 18 - it develops software and hardware extensions to Microsoft PowerPoint which allow members of the audience to interact with a presenter using handheld devices. If the thought of presenting in public makes you break out in a cold sweat, this is probably the last thing you want to get involved with, but the software clearly has applications in education and other fields.
Other noteworthy representatives from the software sector include SPADAC at number 32, which makes predictive geospatial software - the sort of stuff governments use to predict where terrorist infrastructure attacks might take place, and the stuff companies use to work out where they should locate. And then there's TopCoder, 45th in the growth stakes with revenue of $14.8m and three-year growth of 2,459 per cent. This is a company that really is breaking the mould with its software coding competitions, where companies - including blue-chips - submit coding problems to a network of over 115,000 freelances, who compete to provide answers. The set-up works well for everyone: the customers get some relatively cheap development work, while prize money for freelances can reach a cool $100k.
Inevitably, though, the success of some of the top-performers is less about technology and more about its creative application. Take Bill Me Later, number six in the list with three-year growth of 8,650 per cent, revenue of $53.6m and 100 employees. It provides an online billing system that eases consumer concerns about entering credit card details over the internet by using purchasers' birth dates and part of their social security number. As its name implies, consumers also get billed later, which definitely helps get them excited.
And good ideas don't have to be ground-breaking ideas either. Position number 34 in Inc.s' list is held by a company that sells software for medical practice billing and record-keeping, and brings in revenue of $38.2m in the process. Likewise, TaxStream, which makes accounting software for large public companies, comes in at 51.
Finally, if you're of a creative bent, take comfort from the fact that style can indeed win over substance. The consumer products field is led by one of last year's listed firms, Digital Lifestyle Outfitters, which makes a range of accessories, including cases, for iPods and other handhelds, and was recently bought out. No mystery there about the cause of its success - although with revenue of $98.6m and just 70 employees, it definitely fits into the 'wish I'd thought of it first' category.
By Keith Rodgers
The ludicrously high headline figure (20,128.9 per cent, to be precise) comes from a company called MemberHealth, which struck it rich in the US health market prior to agreeing a tasty $630m buyout offer earlier this year. But while it leads Inc.'s highly-respected Top 500 listing, it's just one of many companies enjoying super-quick growth. Companies from a broad cross-section of industry have made it into the ratings, and as always, the tech sector has a fair showing.
One point that stares you in the face on the listings is just how big a part luck plays in making silly money. After MemberHealth, the second fastest-growth company on Inc.'s list this year is a telephone switch supplier that happened to get a big break from a deal with a large US cable company. Net result? Three-year growth of 14,853 per cent with current revenue of $68.1m.
But while luck matters, good ideas still count. In the software field, Turning Technologies is the highest ranked company at number 18 - it develops software and hardware extensions to Microsoft PowerPoint which allow members of the audience to interact with a presenter using handheld devices. If the thought of presenting in public makes you break out in a cold sweat, this is probably the last thing you want to get involved with, but the software clearly has applications in education and other fields.
Other noteworthy representatives from the software sector include SPADAC at number 32, which makes predictive geospatial software - the sort of stuff governments use to predict where terrorist infrastructure attacks might take place, and the stuff companies use to work out where they should locate. And then there's TopCoder, 45th in the growth stakes with revenue of $14.8m and three-year growth of 2,459 per cent. This is a company that really is breaking the mould with its software coding competitions, where companies - including blue-chips - submit coding problems to a network of over 115,000 freelances, who compete to provide answers. The set-up works well for everyone: the customers get some relatively cheap development work, while prize money for freelances can reach a cool $100k.
Inevitably, though, the success of some of the top-performers is less about technology and more about its creative application. Take Bill Me Later, number six in the list with three-year growth of 8,650 per cent, revenue of $53.6m and 100 employees. It provides an online billing system that eases consumer concerns about entering credit card details over the internet by using purchasers' birth dates and part of their social security number. As its name implies, consumers also get billed later, which definitely helps get them excited.
And good ideas don't have to be ground-breaking ideas either. Position number 34 in Inc.s' list is held by a company that sells software for medical practice billing and record-keeping, and brings in revenue of $38.2m in the process. Likewise, TaxStream, which makes accounting software for large public companies, comes in at 51.
Finally, if you're of a creative bent, take comfort from the fact that style can indeed win over substance. The consumer products field is led by one of last year's listed firms, Digital Lifestyle Outfitters, which makes a range of accessories, including cases, for iPods and other handhelds, and was recently bought out. No mystery there about the cause of its success - although with revenue of $98.6m and just 70 employees, it definitely fits into the 'wish I'd thought of it first' category.
By Keith Rodgers
Friday, April 24, 2009
Investors are Still Keen to Invest
We may all be mired in economic uncertainty, but if you’re looking for funding, there’s no need to be unduly discouraged by the current slowdown. Getting funded has never been a pushover, but the current economic uncertainties don’t seem to be stopping the right people with the right product.
In recent weeks there have been a plenty of upbeat messages from funding groups - it’s just that the reassuring words tend to be couched with more caveats these days. One venture capitalist told me that business plans were being scrutinised more closely in 2008, especially market forecasts, growth estimates and profit margins. As he succinctly put it: “The dumb money has long gone. The smart money is still there. We back favourites, not the long shots.” Or as David Giampaolo of Pi Capital says: “We are still looking at plenty of deals – but we are in no rush”.
So if funding is still available for the right people with the right ideas – even if they might have to wait longer and it costs them more – how can you make sure you’re first in the queue? One thing to bear in mind is that VCs are looking for more than just a good product, and a compelling business case: it’s also about how you structure your company, how you make it responsive in changing times, and what people you surround yourself with. The latter is often the hardest for entrepreneurs. You know you need someone on your team who’s done it all before – but where do you find them?
For some start-ups, the answer lies with one of the biggest growth areas in the UK in recent years – organisations offering management consultants, business advisors and non executive directors to help young businesses to grow and thrive. It’s not surprising that so many of them are successful – nor that so many are successfully finding funding themselves – since in the main they’re owned by people with a long track record in business advice.
Hiring a non executive director or a business advisor can be a daunting task, but approach it in the same way as you would hire a new employee. Ask them about their experience, to make sure it’s relevant, and establish what they expect to be able to contribute. Start them on a definable task, to see if your ways of working are compatible, and measure their results carefully against their fees. If you feel comfortable with the advisor, and you can see there’s a quantifiable benefit, involve them in more activities. Some advisors will be part of larger networks, offering specialist skills and experience when it’s required. There’s lots of information about what these experts can bring on sites like http://www.non-execs.com/.
Working with a business advisor or a non executive director isn’t just about what they bring to your business – it also sends a clear signal to the investment community that you’re serious about what you’re trying to achieve. It doesn’t guarantee success, of course – but at least you’ll be one of the favourites rather than one of the long shots.
By George Fletcher, Webster Buchanan Research
In recent weeks there have been a plenty of upbeat messages from funding groups - it’s just that the reassuring words tend to be couched with more caveats these days. One venture capitalist told me that business plans were being scrutinised more closely in 2008, especially market forecasts, growth estimates and profit margins. As he succinctly put it: “The dumb money has long gone. The smart money is still there. We back favourites, not the long shots.” Or as David Giampaolo of Pi Capital says: “We are still looking at plenty of deals – but we are in no rush”.
So if funding is still available for the right people with the right ideas – even if they might have to wait longer and it costs them more – how can you make sure you’re first in the queue? One thing to bear in mind is that VCs are looking for more than just a good product, and a compelling business case: it’s also about how you structure your company, how you make it responsive in changing times, and what people you surround yourself with. The latter is often the hardest for entrepreneurs. You know you need someone on your team who’s done it all before – but where do you find them?
For some start-ups, the answer lies with one of the biggest growth areas in the UK in recent years – organisations offering management consultants, business advisors and non executive directors to help young businesses to grow and thrive. It’s not surprising that so many of them are successful – nor that so many are successfully finding funding themselves – since in the main they’re owned by people with a long track record in business advice.
Hiring a non executive director or a business advisor can be a daunting task, but approach it in the same way as you would hire a new employee. Ask them about their experience, to make sure it’s relevant, and establish what they expect to be able to contribute. Start them on a definable task, to see if your ways of working are compatible, and measure their results carefully against their fees. If you feel comfortable with the advisor, and you can see there’s a quantifiable benefit, involve them in more activities. Some advisors will be part of larger networks, offering specialist skills and experience when it’s required. There’s lots of information about what these experts can bring on sites like http://www.non-execs.com/.
Working with a business advisor or a non executive director isn’t just about what they bring to your business – it also sends a clear signal to the investment community that you’re serious about what you’re trying to achieve. It doesn’t guarantee success, of course – but at least you’ll be one of the favourites rather than one of the long shots.
By George Fletcher, Webster Buchanan Research
Monday, March 2, 2009
The Web 2.0 Band wagon
One of the in jokes at IBM’s support centres is about people who ring up asking to upgrade to Web 2.0. Explaining that it doesn’t come in a box, nor can it be downloaded, inevitably leads to the question: “Well, what is it exactly?”
All the usual suspects have had a go at providing an answer and as usual, when the subject is rather nebulous, nobody can come up with a very good explanation. So it was interesting to see Stephen Fry, the well known “Writer, Broadcaster and National Treasure” as he’s now billed, having a go.
He does a pretty good job, explaining that it’s “an idea in people's heads rather than a reality. It’s actually an idea that the reciprocity between the user and the provider is what's emphasised. In other words, genuine interactivity, if you like, simply because people can upload as well as download’. In other words, it’s the way we use it.
When we were first connected to the internet, we booked flights and read the football scores. Then we started using the web to communicate, writing blogs and interacting with friends through social networking sites such as Friends Reunited, MySpace, Facebook, and YouTube. And without anyone telling us, we were upgrading to Web 2.0.
Human nature being what it is, though, it wasn’t long before we got bored with who we are, and started to step into the shoes of the character we’d like to be. And so we expanded our networks to meet lots of other characters doing just the same thing, using Virtual Worlds, such as Second Life or moove.
Because these virtual worlds became so popular so quickly, and because they’re being used innovatively, it was inevitable that businesses would see commercial opportunities for them. IBM, Cisco, Mattel, HP, MTV and Disney are all at the forefront of exploiting the opportunities that virtual worlds offer. You can buy and sell virtual stuff already, while you chat with virtual friends over a virtual drink and listen to the London Philharmonic playing a virtual concert.
It’s not just the chance to trade that’s attractive though – there’s plenty that we can do in a virtual world to help us in the real world. Many of the firms spearheading the use of virtual worlds are looking to find better ways to do things that they have to do anyway. Some of the first applications were fairly obvious ones – technical or post sales support for example, where the graphic capabilities of virtual worlds offer a great way to show someone what to do, rather than just tell them.
Teleconferences, online meetings and web seminars are also starting to move into virtual worlds, again because of the interactive and graphic potential. And companies like IBM are now setting out to move business processes and procedures onto a virtual world, where they can be done better, more quickly and more efficiently. IBM already communicates with business partners and some customers like this. New hires, for example, go through the onboarding process on Second Life, and are trained in the same way. It’s also used as a collaborative tool for remote teams to work together on projects and delegate tasks to contractors, and a host of other tasks and applications will follow.
Onboarding and training are necessary if somewhat mundane tasks that confront us all – being able to do it in IBM’s virtual replica of the Forbidden City might at least make it a bit more fun.
By George Fletcher, Webster Buchanan Research
For South African Business Invetment Opportunities and Capital check out SA Investors Network
All the usual suspects have had a go at providing an answer and as usual, when the subject is rather nebulous, nobody can come up with a very good explanation. So it was interesting to see Stephen Fry, the well known “Writer, Broadcaster and National Treasure” as he’s now billed, having a go.
He does a pretty good job, explaining that it’s “an idea in people's heads rather than a reality. It’s actually an idea that the reciprocity between the user and the provider is what's emphasised. In other words, genuine interactivity, if you like, simply because people can upload as well as download’. In other words, it’s the way we use it.
When we were first connected to the internet, we booked flights and read the football scores. Then we started using the web to communicate, writing blogs and interacting with friends through social networking sites such as Friends Reunited, MySpace, Facebook, and YouTube. And without anyone telling us, we were upgrading to Web 2.0.
Human nature being what it is, though, it wasn’t long before we got bored with who we are, and started to step into the shoes of the character we’d like to be. And so we expanded our networks to meet lots of other characters doing just the same thing, using Virtual Worlds, such as Second Life or moove.
Because these virtual worlds became so popular so quickly, and because they’re being used innovatively, it was inevitable that businesses would see commercial opportunities for them. IBM, Cisco, Mattel, HP, MTV and Disney are all at the forefront of exploiting the opportunities that virtual worlds offer. You can buy and sell virtual stuff already, while you chat with virtual friends over a virtual drink and listen to the London Philharmonic playing a virtual concert.
It’s not just the chance to trade that’s attractive though – there’s plenty that we can do in a virtual world to help us in the real world. Many of the firms spearheading the use of virtual worlds are looking to find better ways to do things that they have to do anyway. Some of the first applications were fairly obvious ones – technical or post sales support for example, where the graphic capabilities of virtual worlds offer a great way to show someone what to do, rather than just tell them.
Teleconferences, online meetings and web seminars are also starting to move into virtual worlds, again because of the interactive and graphic potential. And companies like IBM are now setting out to move business processes and procedures onto a virtual world, where they can be done better, more quickly and more efficiently. IBM already communicates with business partners and some customers like this. New hires, for example, go through the onboarding process on Second Life, and are trained in the same way. It’s also used as a collaborative tool for remote teams to work together on projects and delegate tasks to contractors, and a host of other tasks and applications will follow.
Onboarding and training are necessary if somewhat mundane tasks that confront us all – being able to do it in IBM’s virtual replica of the Forbidden City might at least make it a bit more fun.
By George Fletcher, Webster Buchanan Research
For South African Business Invetment Opportunities and Capital check out SA Investors Network
Thursday, July 24, 2008
Looking abroad for Business Investment
Frank Lavin, under secretary for international trade at the US Department of Commerce, knows as well as anyone how difficult it is for tech entrepreneurs to market their wares internationally. Dubbed 'America's salesman-in-chief', part of his job is to help US businesses partner and collaborate abroad.
Speaking at a briefing this week focused on clean technology opportunities in the Nordic region, Lavin pointed out that many businesses with disruptive technologies don't have the scope to handle international opportunities. For one thing, it's not part of their corporate culture - and for another, they tend not to be structured in a way that lets them market systematically around the world. It's down to his International Trade Administration team, with 2200 people around the world, to help US companies take advantage of those opportunities.
The breakfast briefing - hosted in San Francisco by law firm Heller Ehrman and, unusually, featuring three US ambassadors on a roadshow in their home country - was designed to focus attention on clean tech opportunities in Denmark, Sweden, Finland and oil-rich Norway. There's no shortage of entrepreneurs in the region and no shortage of technology - in fact, James Cain, US ambassador to Denmark, described it as the most wired market in the world, the most tech savvy of its size anywhere, and highly innovative in alternative energy. But what many entrepreneurs in the region lack, according to participants at the event, is both the capital and marketing expertise to turn great ideas into great businesses.
That, in theory, presents a big opportunity for foreign investors and tech companies looking to partner and collaborate. And while the whole focus of the briefing was on the Nordic region's relationship with the US, the opportunities aren't purely transatlantic. Just as Germany is a global leader in the adoption of solar energy, so the Nordic regions are making great strides in areas such as wave and wind power, biofuels and carbon sequestration - and that's got to present opportunities for London clean tech entrepreneurs as well.
In fact, proximity may even give UK entrepreneurs an advantage over their US counterparts, particularly in their awareness of the cultural differences between the four Scandinavian countries. Although the ambassadors urged attendees to consider the four countries as one region, they acknowledged local cultural rivalries. Benson Whitney, US ambassador to Norway, couldn't resist telling how he'd been approached by a Swedish woman asking him what Norway had that Sweden didn't. 'I was thinking oil', he mused, to laughter. 'Then she said: 'Good neighbours.''
By Keith Rodgers, Webster Buchanan Research
Speaking at a briefing this week focused on clean technology opportunities in the Nordic region, Lavin pointed out that many businesses with disruptive technologies don't have the scope to handle international opportunities. For one thing, it's not part of their corporate culture - and for another, they tend not to be structured in a way that lets them market systematically around the world. It's down to his International Trade Administration team, with 2200 people around the world, to help US companies take advantage of those opportunities.
The breakfast briefing - hosted in San Francisco by law firm Heller Ehrman and, unusually, featuring three US ambassadors on a roadshow in their home country - was designed to focus attention on clean tech opportunities in Denmark, Sweden, Finland and oil-rich Norway. There's no shortage of entrepreneurs in the region and no shortage of technology - in fact, James Cain, US ambassador to Denmark, described it as the most wired market in the world, the most tech savvy of its size anywhere, and highly innovative in alternative energy. But what many entrepreneurs in the region lack, according to participants at the event, is both the capital and marketing expertise to turn great ideas into great businesses.
That, in theory, presents a big opportunity for foreign investors and tech companies looking to partner and collaborate. And while the whole focus of the briefing was on the Nordic region's relationship with the US, the opportunities aren't purely transatlantic. Just as Germany is a global leader in the adoption of solar energy, so the Nordic regions are making great strides in areas such as wave and wind power, biofuels and carbon sequestration - and that's got to present opportunities for London clean tech entrepreneurs as well.
In fact, proximity may even give UK entrepreneurs an advantage over their US counterparts, particularly in their awareness of the cultural differences between the four Scandinavian countries. Although the ambassadors urged attendees to consider the four countries as one region, they acknowledged local cultural rivalries. Benson Whitney, US ambassador to Norway, couldn't resist telling how he'd been approached by a Swedish woman asking him what Norway had that Sweden didn't. 'I was thinking oil', he mused, to laughter. 'Then she said: 'Good neighbours.''
By Keith Rodgers, Webster Buchanan Research
Show me the money
A quick flick through the sheer multiplicity of grants on offer is enough to make any entrepreneur’s mouth water. And unlike VC money, grants don’t have to be repaid and they don’t – big sigh – dilute your shareholding. So it’s worth spending a bit of time considering this funding option, whatever your viewpoint on “free” money.
But grants come with a couple of downsides. The first is that the terms and conditions can be excruciatingly restrictive. While it’s not a common occurrence, it’s certainly not unheard of that a start-up will go through all the hassle of finding what they think is the right award scheme, filling in the application forms and going through due diligence, only to find at the last minute that something in the small print – like the fact that part of their R&D is conducted overseas - disqualifies them.
Secondly, as we’ve pointed out before, many awards schemes are actually run as competitions – including one of the most lucrative in the UK, the Technology Strategy Board, which includes the wonderful Knowledge Transfer Partnerships. Want to get your research done by some whiz kid PhD students at a University department specialising in your particular field? Then a KTP is the thing for you. The only snag is you’ve got to prove you’re more deserving than your competitors (which could be many or few, depending on when you apply) and there’s a strict timeline you have to adhere to.
So if you haven’t got the time to find the right award scheme and jump through hoops to meet the application criteria, take the advice of one entrepreneur we recently spoke to. He used an outside adviser to secure an award from the DTI, working on a no-win-no-fee basis. “It worked well for us because it can be difficult when you’re already working an 18-hour day to find the time to identify which awards are right for you,” he points out. Of course, you can’t shift responsibility for funding entirely to a third party, but if you can devolve much of the grunt work to them – and incentivise them in a way that means you don’t lose money if they fail – then you should be onto a winner. And better still, you might get to meet Stelios in the process.
For South African Business Invetment Opportunities and Capital check out SA Investors Network
But grants come with a couple of downsides. The first is that the terms and conditions can be excruciatingly restrictive. While it’s not a common occurrence, it’s certainly not unheard of that a start-up will go through all the hassle of finding what they think is the right award scheme, filling in the application forms and going through due diligence, only to find at the last minute that something in the small print – like the fact that part of their R&D is conducted overseas - disqualifies them.
Secondly, as we’ve pointed out before, many awards schemes are actually run as competitions – including one of the most lucrative in the UK, the Technology Strategy Board, which includes the wonderful Knowledge Transfer Partnerships. Want to get your research done by some whiz kid PhD students at a University department specialising in your particular field? Then a KTP is the thing for you. The only snag is you’ve got to prove you’re more deserving than your competitors (which could be many or few, depending on when you apply) and there’s a strict timeline you have to adhere to.
So if you haven’t got the time to find the right award scheme and jump through hoops to meet the application criteria, take the advice of one entrepreneur we recently spoke to. He used an outside adviser to secure an award from the DTI, working on a no-win-no-fee basis. “It worked well for us because it can be difficult when you’re already working an 18-hour day to find the time to identify which awards are right for you,” he points out. Of course, you can’t shift responsibility for funding entirely to a third party, but if you can devolve much of the grunt work to them – and incentivise them in a way that means you don’t lose money if they fail – then you should be onto a winner. And better still, you might get to meet Stelios in the process.
For South African Business Invetment Opportunities and Capital check out SA Investors Network
Monday, March 24, 2008
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
For South African Business Invetment Opportunities and Capital check out SA Investors Network
“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
For South African Business Invetment Opportunities and Capital check out SA Investors Network
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