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UNLOCKING THE VALUE OF YOUR IP UNLOCKING THE VALUE OF YOUR
Creative Venturing: Upping your Valuation Moderator: Fas Mosleh, SVP, IP M&A Panelists: Praveen Gupta, VP, SK Telecom Tony Quintong, CEO, Securieon Clive Surfleet, Former IBM Executive Mark Heyl, Partner, M&A, Hopkins & Carley
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Rights to trademarks referenced
herein, other than Kanzatec
trademarks, belong to their
respective owners. We disclaim
proprietary interest in the marks
and names of others.
UNLOCKING THE VALUE OF YOUR IP
• Introduction
• Panelist views
• Questions
• Open session
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Agenda
Kanzatec is a leading Patent Research and Transaction Advisory firm serving private and public high tech companies to help drive greater business success through high-performance patent strategies. Our senior consultants combine operating company experience in business management, information systems, patent strategy and operations, with analysis and research capabilities spanning many high tech segments. The company collaborates with a wide range of high tech companies, from startups to the Fortune 500.
UNLOCKING THE VALUE OF YOUR IP
Corporate Introduction
• Founded in 2008 to focus on IT analysis and research – grew into IT product and system research, prototyping for F500 for IP projects – IT systems heritage
• Emerging, SMB & Fortune 500 companies in high tech – imaging, web, software, enterprise datacenter, systems, semiconductors, mobile/wireless telecom
• IP Brokerage Palo Alto, CA - Sales, Acquisitions, Valuation, Research/Analysis
• Global team members and Subject Matter Expert network – Silicon Valley, NY, Kansas, San Diego, London, Netherlands, Korea, China
– India, Europe, SMEs
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UNLOCKING THE VALUE OF YOUR IP
Example Industries We Serve
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Energy
Transport
Networking Medical
Imaging
Mobile
Data Center Semiconductor Cloud
Social Web E-Commerce Software
UNLOCKING THE VALUE OF YOUR IP
The Value in a Tech Company
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Products & Technology
Management Processes & Operations
Customers and Channels
Team & Brand
Patents
UNLOCKING THE VALUE OF YOUR IP
The Value in a Tech Company
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Products & Technology
Management Processes & Operations
Customers and Channels
Team & Brand
Patents
UNLOCKING THE VALUE OF YOUR IP
• Situation – Need another round of funding
• Challenges – Business doing poorly – New funding hard to get at reasonable valuation
• Action
– Divest patents with a license grant back
• Results
– Obtained $2M to extend runway another 18 months
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Upping Valuation– IP Funding
UNLOCKING THE VALUE OF YOUR IP
• Situation – $1B+ revenues semi company
• Challenges – Unnecessary IP found every year
• Action – Create a regular revenue stream
• Results – Sell $1M of patents every quarter garnering 75% margins
– Healthy, dynamic IP strategy
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Upping Valuation– IP Income
UNLOCKING THE VALUE OF YOUR IP
Why Do Companies Patent?
10 Source: HIGH TECHNOLOGY ENTREPRENEURS AND THE PATENT SYSTEM: RESULTS OF THE 2008 BERKELEY PATENT SURVEY
UNLOCKING THE VALUE OF YOUR IP
Praveen Gupta
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Creative Venturing
Upping Valuation Creative Exits Creative Funding
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Upping the Valuation: When do I start?
What can I do early on?
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Praveen Gupta
Vice President – Corporate Business Development
October 4, 2013
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When do I start? – At Idea Conception Stage
Source: Wikipedia - derived from work by Kompere
Goals to get from Idea Conception to Exit: Maximize Value (Wealth) at Exit Minimize Time to Exit at the peak of growth curve Target IPO, but Position for Getting acquired not sold
Idea Conception
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What can I do early on?
• Fundamental • Identify and Focus on Value Drivers • Be driven by Passion not Emotion • Selfless Leader - Think Team not individual • Flexible and Realistic
• Don’t be blinded by your own thoughts • Open mind - No Tunnel Vision • Excellent Listener – Open to Criticism and act on it appropriately • Admit mistakes, learn from them, fix, and execute
• Strategic
• Build A-Team – Core expertise and relationships in your target area • Solve a real problem not a me-too solution • Get on the Radar of potential acquirers and investors
• Tactical
• Understand market, competition, & Customers – Outside-In • Seek Value add Partners and relationships • Build fundamental IP – Tweaks are not differentiators • Create work environment that encourages creativity
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Examples: Good, Bad, & Tough-Luck
• Good • GSM Switch Company
• Decided to focus on 2nd and 3rd tier markets • Built a highly reliable full feature GSM switch at affordable prices • Avoided competition with big guys • Fast revenue growth as 3G market took-off • Sold to a US based company focused on Asia market to enable their expansion in emerging markets • Very good returns for investors
• Bad • VoD server Company
• Focused on serving VoD Applications over DSL • Great vision but too many bells & whistles • Great strategy but very low flexibility on tactical side • Targeted very small size customers without fully validating their financial credentials • By year 3, broke-even on booked revenue, but mostly turned out to be uncollectible • Company shut-down – tried to sell but no buyers
• Tough-Luck • Enterprise Software Company
• Built A-Team • Focus on CRM with defensible IP and Fortune 500 customer base • Positioned to price at $1+ Bn for IPO but market crashed that day • Sold 6 months later for low valuation due to ongoing Stock market issues
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Tony Quintong
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Creative Venturing
Upping Valuation Creative Exits Creative Funding
UNLOCKING THE VALUE OF YOUR IP
Upping Valuations Without Emotions “Everything in life is for sale except for your family, friends and your soul” Izzy Orin
UNLOCKING THE VALUE OF YOUR IP
Pre 2008-A false sense of value was masked by great waves of optimism and available credit. You just had to be at the right place and the right time to catch a wave of success.
UNLOCKING THE VALUE OF YOUR IP
The Reality-Fault lines eventually cracked and a tsunami of economic waves of disaster caused wipeouts
UNLOCKING THE VALUE OF YOUR IP
Connecting the Dots for Higher Values-Milk Shakes and Life What is the real value you are delivering to the client?
RFP-reading between the lines-Medical Sterilization
Knowing the IP value of your employees Bentleys-M5s-S55-Posers-Furniture
Lipstick on a Pig Fire-Ready-Aim Is not Sustainable-Used Tech Equipment
Radura is not a river in Italy-NAFTA Cows, Spinach and the FDA
The difference between Arrogance and Confidence is-Competence Ballast Water
UNLOCKING THE VALUE OF YOUR IP
We deviate from the norm and quickly look at the systemic issues preventing real value
UNLOCKING THE VALUE OF YOUR IP
Systemic Challenges to Value Revenue Sustainability and Scalability Masked Misalignment of Culture and Infrastructure from the top False Sense of Core Expertise-Ego What markets can you win? Who are the top three companies that would buy your firm? Silos and misalignment Investor Fatigue/Founder Fatigue
UNLOCKING THE VALUE OF YOUR IP
Decision Points to Upping Your Valuation Why sell or buy today? What would your customers says? Blunt Employee Feedback Competitive Market Position and Differentiation Growth by Acquisition or by Execution? Valuations you can justify
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Clive Surfleet
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Creative Venturing
Upping Valuation Creative Exits Creative Funding
UNLOCKING THE VALUE OF YOUR IP
BLADE NETWORK TECHNOLOGY (BNT) VALUATION STORY
Clive Surfleet – Former BNT SVP, HP & IBM Executive
October 4, 2013
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UNLOCKING THE VALUE OF YOUR IP
• Technology from Alteon & Nortel
• Business Started at Nortel in 2003
– Networking switches for Blade Server market
• By 2006, business was struggling due to lack of focus in Nortel
• Spun out as a private company in 2006
• Acquired by IBM in 2010
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BNT Background
UNLOCKING THE VALUE OF YOUR IP
• Valuation Measures – Revenue, Growth, Margins, Expenses, etc.
– Perception of Value by the Buyer
• Valuation Issues – Weak Gross Margins
– Product Breadth
– Route to Market – Direct, Reseller, OEM
– Customer Breadth
– Perception of Low Value Add
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BNT Valuation Issues
UNLOCKING THE VALUE OF YOUR IP
• What we did – Very tight operational management
– Technical Field Sales Engagement
– Product Expansion – First to market with new technology
– New Routes to Market
– New Product Categories
– Make yourself look bigger than you really are
– Customer Intimacy
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Steps Taken to Improve Valuation
UNLOCKING THE VALUE OF YOUR IP
• Build exceptionally close relationships with a few large customers – Long Term Relationships – Daily, weekly, monthly interaction at all levels – Multi-function relationships – R&D, Support, Sales,
etc.
• Build a strategic alignment – If your customer wins, you win
• Allow them to help guide your product and business plans.
• Continually bring new ideas to your customer.
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Customer Intimacy
UNLOCKING THE VALUE OF YOUR IP
• Displaced Cisco in a large number of accounts
• Grew to 70% market share in Blade server networking
• Several customers became minority shareholders
• Eventually sold the company to our largest customer
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Results
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Mark Heyl
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Creative Venturing
Upping Valuation Creative Exits Creative Funding
UNLOCKING THE VALUE OF YOUR IP UNLOCKING THE VALUE OF YOUR
Upping Valuation: Pre-Exit Considerations
Presented by
Mark A. Heyl Hopkins & Carley, A Law Corporation
UNLOCKING THE VALUE OF YOUR IP
Priorities of a Founder
Develop Product or Service
Raise Capital
Minimize Operating Expenses
Minimize Taxes
UNLOCKING THE VALUE OF YOUR IP
Priorities of a Founder
Develop Product or Service
Raise Capital
Minimize Operating Expenses
Minimize Taxes
UNLOCKING THE VALUE OF YOUR IP
Priorities of a Founder
Develop Product or Service
Raise Capital
Minimize Operating Expenses
Minimize Taxes
UNLOCKING THE VALUE OF YOUR IP
Priorities of a Founder
Develop Product or Service
Raise Capital
Minimize Operating Expenses
Minimize Taxes
UNLOCKING THE VALUE OF YOUR IP
Priorities of a Founder
Develop Product or Service
Raise Capital
Minimize Operating Expenses
Minimize Taxes
UNLOCKING THE VALUE OF YOUR IP
Paradigm Shift Preparing for the Exit
• Financial Statements
• Establishing a Consensus
• Timing
• Consult with Advisors
UNLOCKING THE VALUE OF YOUR IP
Paradigm Shift Preparing for the Exit
• Financial Statements
– Profits Most Substantial Factor in Determination Price
– Shift Focus from Reducing Taxes to Maximizing Profits
– Remove Unnecessary / Inappropriate Expenses • Take Non-Contributing Family Members off Payroll
• Take Personal Items off Balance Sheet (i.e., cars, boats, 2nd homes)
• Establishing a Consensus
• Timing
• Consult with Advisors
UNLOCKING THE VALUE OF YOUR IP
• Financial Statements
– Profits Most Substantial Factor in Determination Price
– Shift Focus from Reducing Taxes to Maximizing Profits
– Remove Unnecessary / Inappropriate Expenses • Take Non-Contributing Family Members off Payroll
• Take Personal Items off Balance Sheet (i.e., cars, boats, 2nd homes)
Paradigm Shift Preparing for the Exit
• Establishing a Consensus
• Timing
• Consult with Advisors
– Dissenting Family Members
– Identify Key Employee
– Retention Bonuses
– Stock Options
UNLOCKING THE VALUE OF YOUR IP
• Financial Statements
• Establishing a Consensus
– Dissenting Family Members
– Identify Key Employee
– Retention Bonuses
– Stock Options
Paradigm Shift Preparing for the Exit
• Timing
– Health Considerations
– Economic Considerations
– Transition
• Consult with Advisors
UNLOCKING THE VALUE OF YOUR IP
• Financial Statements
• Establishing a Consensus
• Timing
– Starting or Buying Another Business
– Retirement
– Funding the Plan
Paradigm Shift Preparing for the Exit
• Consult with Advisors
– Corporate Transaction Attorney
– Business/Industry/Valuation Consultants
– Estate Planning Attorney
– CPA
– Financial Advisor
– Business Broker / Intermediary
UNLOCKING THE VALUE OF YOUR IP
Thank you.
Mark Heyl [email protected]
Hopkins & Carley, A Law Corporation
70 S. First Street San Jose, CA 95113
200 Page Mill Road, Suite 200
Palo Alto, CA 94306
(408) 286-9800 hopkinscarley.com
UNLOCKING THE VALUE OF YOUR IP
Thank You
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Creative Venturing
Creative Exits November 8 Creative Funding December 6