Use the system

Taking into account my previous comments regarding protecting yourself and your idea, there is a range of services and supports available to help entrepreneurs/inventors to develop and commercialise your ideas. You always need to remember who you are talking to and what they specialise in. So talk to:
• Local enterprise/development agencies (including local enterprise offices, partnership companies, local development bodies etc) about pre-enterprise programmes to help you develop your business plan and structure your thoughts on your idea
• University Technology Transfer Offices regarding the development of the idea (technical and commercial), IP protection and possible business incubation. This is for the any idea relating to technology, pharma, telecoms etc. The TTO office has staff who specialise in bringing entrepreneurs through the process and make the connections with the researchers in the university to help develop the idea technically. There may also be funding options available through feasibility grants, innovation vouchers etc depending on the country, region and time.
• Business incubators to help get a business started. There are a range of incubators: for profit, nonprofit, third-level and investment driven. They all provide affordable enterprise/office space for start-up ventures but they all provide other soft supports, networking opportunities and some give access to finance. If your idea is already developed and ready to go, go talk to your local incubator management about practical start-up support. Many incubators also offer business address services, where people can use their business address rather than using their home address if they do not have commercial premises
• Enterprise agencies regarding grants and funding, assistance with internationalisation (exporting), access to trade missions and support from sector-specific experts

Other agencies and enterprise-support organisations offer mentors, advice, connections to key business and public contacts and moral support when things are slow. There is a lot of funding made available by local, regional and national governments to promote innovation and new product development. Officials see this as a key economic growth factor and there is significant lip service made in this direction, even if the technical and economic understanding behind the rhetoric is a little thin at times. Find out what is available to your in your area and leverage the available resources to help you.

A final but important point is that agencies and organisations are made up of individuals and the strength of the agency is only as good as the strength of the people working there at the time. The reality is that many bureaucrats simply ‘do not get it’ and potential entrepreneurs may get frustrated by being ‘bounced around the system’. If you have a negative experience with an agency you must not be put off, it just could be the individual bureaucrat. In every system there are key, competent, people who do ‘get it’ and part of the process is finding the right people. Talk to people who have been through the system and had positive experiences and ask them who they dealt with and how they went about building relationships. Get referrals to the people in the system that do facilitate innovation and work with them. Use the system!

Getting funding

As noted in earlier posts on this blog, the 2 main sources of investment are business angels and venture capital (VC). Angel investors are the single largest source of funds available to start up enterprises (Sudek, 2007; Szerb, Rappai, Makra, Terjesen, 2007). Further many ‘venture capital-funded companies were at least three years old when they received their first round of funding’ (Schramm, 2004, 112). Thus, first get ‘seed’ or ‘angel’ funding and then build on to VC funding. Now it should be remembered that many ‘service’ type businesses can be built up through personal funds, natural growth and financial instruments like term loans, overdrafts and short-term funding but innovation companies tend to be faster growing and in need of higher levels of capital.

Sudek (2007) in his empirical findings noted that there were 4 themes that angel investors focused on:
• the passion of the lead entrepreneur
• the trustworthiness of the lead entrepreneur
• the quality of the management team; and
• the existence of an exit strategy or liquidity potential for the investor’ (p95).

He further noted that investors ‘liked teams that struggled through hard times and kept pursuing the venture’ (p96). Regarding exit, as IPOs are rare, ‘angels are very interested in learning who are the potential acquirers may be for a particular venture’ (p96). This brings us back to a point made in the previous post regarding the importance of building a management team. Investors tend to want to back a team of people rather than an individual. This makes sense as no one person can have all the necessary skills to build a fast-growing business and a team of people allows for the organisation to expand more quickly than a single individual which inevitably becomes a constraint on growth.

The other point that entrepreneurs need to understand is having an ‘exit’ strategy for the investors, especially angels and VC. Too often, entrepreneurs make great pitches on the idea and possibly the market. Usually, they are light on the financial figures (which is inexcusable of making a pitch to investors) but they rarely, if ever, demonstrate a path for the investors to get their money back and make a profit on exit. If investors cannot see a way to get their money back and make a profit then they will never invest. So now you know to focus on building a team, showing how you built the idea, show how you built the team and the organisation and how they can ‘exit’ with profit.

Commercialising the idea

If the idea is commercially and technically viable and you have protected the IP, the next step is to commercialise the new product or service. Gaining IP protection takes time, money and resources and should only be done if you intend to commercialise the protected knowledge. There are a number of ways to commercialise IP, such as
• Starting up your own venture to exploit IP
• Licence the protected IP to larger players and get a fee per year/sale
• Establish a joint ventures between yourself and other business maybe to exploit IP in other countries or regions that you cannot access
• Sell the protected IP for a profit

Starting your own business: this is the DIY option. There are a few things you need to consider before going down this route:
• Build a team: Nobody can build a fast-growing business on their own; no one person has all the skills. The lessons from successful tech companies of all varieties are that people need to build a strong management team first and then utilise their skills and experience to commercialise the product. Usually, this team requires a Chief Executive Officer (strategic boss who oversees the development of the business and strategic deals etc), Chief Financial Officer (the accountant and guardian of the finances: very important if you want angel or VC funding), Chief Operations Officer (the person who runs the floor on a day-to-day basis, usually a tech person), there is also going to be a senior sales and marketing person if not covered by the other positions. A key point; you can be any of the above positions or once the company is up and running you can be the Chairperson of the Board or President. Not all inventors are cut out to be the CEO, many might be COO or just hire in the staff and steer the company from the Board
• Build a market and customer base: Sustainable businesses are built on developing long-term business relationships. Repeat business is the key to building a strong company. Reputation is the most important asset you can have
• Get a good Administrator: You need to have someone who keeps control of the books, invoices, credit control and cash flow issues. Good administration means good cash flow
• Get investors who are committed for the long run: Get investors who will partner you in your business and gain maximum returns through building a strong enterprise, not a quick hit
• Plan, plan plan…: Planning is a process not a document. Constantly update your plans, measure and assess the current plans, tweak for improvements
• Keep an eye out for possible innovations and alternative uses/markets: Look for the outliers, look for different ways to utilise and apply the current products and services, maintain your curiosity and innovation

There are of course other options:
• License the invention to a larger company and take a fee on ever unit sold. Larger companies will have much stronger market power and ability to bring new products to market. You will need professional advice when negotiating with potential companies to ensure you protect your IP and maximise value
• You could sell the rights to the patent, license etc. Valuing IP is as much art than science and again a subject for which you will need to take professional advice.

Protecting intellectual property (IP)

Intellectual property (IP) has been defined as ‘the product of someone’s mental efforts. Its value lies in its appeal to others who might wish to use it or the goods it describes’ (Irish Patents Office, http://www.patentsoffice.ie/en/about_intellectual.aspx).

IP then relates to protecting someone’s idea from being commercialised by others. IP can be protected through 4 main methods:
• Patents
• Trade Marks
• Designs
• Copyrights

A word of warning at this point; applying for IP protection is a legal, technical, bureaucratic and potentially expensive process. This information is given to outline the possible options but cannot cover this subject in depth. Take time to get informed about this process yourself and take appropriate legal and technical advice before making any decision relating to this subject. This is not a subject for amateurs.

Patents
A patent is a legal protection that prevents anyone else using the specific innovation protected without the consent of the patent holder. It is valid only in countries where patent granted so you will probably need to get protection in several countries. Patents are time specific with a full-term patent valid for 20 years and a short-term patent is valid for 10 years. Whether you need a short- or long-term patent may depend on the life cycle of the invention; remembering that software, gadgets, computers etc may only have a 5 year life cycle before becoming obsolete and the expense of a 20 years patent may be questionable. Technically, there is no worldwide patent but there are agreements between several national patent offices which allow for multi-national protection (usually a European or international patent). To get a patent the invention must meet the following criteria:
• Novelty (it must be new and not done before)
• Inventive Step (it must bring an existing product or patentable item to a new stage of development
• Industrial Applicability (it must have a commercial application).

To apply for a patent you must apply through your national Patents Office. There are fees involved and you should check these out through your local patent office. If you need assistance with attaining a patent your can employ the assistance of a Patent Agent, who is a specialist consultant/lawyer who works exclusively in this field. Patent agents charge fees but it may speed up what can be a technical process to hire in an expert.

Trade marks
A trade mark can be defined as ‘any sign capable of being represented graphically which is capable of distinguishing the goods or services of one undertaking from those of other undertakings’ (Trade Marks Act, 1996).

A trade mark (TM) protects your ‘brand’ or ‘name’ from being used by anyone else. You would normally apply through your national Patent’s Office. There are also Trade Mark Agents who can help you to apply for the TM but these charge additional fees to the Patent Office. Applying for a TM requires a considerable amount of research and database searching to ensure that your trade mark does not breach an already granted TM. There are initial application fees, registration fees and renewal fees applicable to trade marks.

Designs
A design ‘means the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colour, shape, texture or materials of the product itself or its ornamentation’ (Irish Patents Office, http://www.patentsoffice.ie/en/design_whatis.aspx).

Applying for a design protection is similar in process to applying for a trade mark. You apply through your national Patent’s Office and there are fees applicable. Attaining a design protection also requires a lot of research and database searches and it may require hiring a professional to assist in this.

Copyright
‘Copyright is the legal term, which describes the rights given to authors/creators of certain categories of work. Copyright protection extends to the following works:
• original literary, dramatic, musical or artistic works,
• sound recordings, films,
• broadcasts, cable programmes,
• the typographical arrangement of published editions,
• computer programmes,
• original databases.
The owner of copyright is the author, meaning the person who creates the work.’
(Irish Patents Office, http://www.patentsoffice.ie/en/copyright_whatis.aspx).

Unlike the other forms of IP protection there is no formal registration process for a copyright, there is only legal protection from breach of copyright which requires the owner of the copyright suing the party that breached the right. To apply copyright on a piece of work you should write the following formula; © Copyright [your name], [date].

Copyrights have legally defined durations between 50 and 70 years depending on the category. There are a series of legislative bills and orders relating to copyrights in several countries so to gain full protection you should take specialist legal advice

So to summarise, attaining IP protection is a technical area – not for amateurs. You should always conduct a cost-benefit analysis before going ahead as the financial benefit from protecting the Ip must outweigh the time and cost involved. I cannot emphasise the importance of taking appropriate technical and legal advice and make sure you know what you are doing before you take action. IP covers a wide range of concepts and ideas and IP Protection = Commercial protection. The development of new ideas and innovation is very important for the advancement of society but it is a process for which caution is always recommended.

This may not be the most appropriate place for this but its my blog so…

President Putin must be a really good chess player because he plays the global chess board so well. A chess player not only plays the chess board and the pieces on it but also the other chess player. What has gone on in the last few weeks may say more about how President Putin sees the other chess players and, frankly, the contempt he must hold them in. To continue the chess analogy President Putin saw his opposite players (US, EU, NATO) and the lack of clear thinking and clear objectives and saw a free pawn on the chess board (Crimea) that he could take without incurring any cost…and he took it.

Now unless anybody thinks that this is a good thing then let us remember that the Russian annexing of Crimea is a total and bare-faced violation of international law and the United Nations Charter, as well as, specific agreements signed between Russia, United States and United Kingdom over the sovereign integrity of Ukraine. It is a totally unacceptable breach of the international order by a major power showing contempt for the other international powers and small countries on its borders. So the question becomes how do we prevent something like this happening again? I suspect not by introducing sanctions on one of our major economic partners and this is the rub, we need to integrate Russia more into the international economic order to prevent future repeat violations not isolate it. If President Putin is the chess player then we need to change the balance of pieces on the board and ensure that there are no more free pawns to take.

David McWilliams (@davidmcw) commented earlier that the perception in Berlin is very different to that in Washington and he is correct. Chancellor Merkel is looking at Russia and seeing a country that has broken the rules but is also the supplier of 40% of German oil and gas supplies. An intelligent lady, she would also know that if there was a free and internationally overseen referendum in Crimea that a majority would still likely want to rejoin the Russian Federation. In the short term there is virtually nothing that Germany or the EU can do to overturn the annexing of Crimea. If President Putin has played the short game then Chancellor Merkel, as the de facto leader of Europe must play the medium to long game. She needs to change the Russian perspective of both the pieces on the board but also the intent of the player opposite them. What does this entail?

Let us start with the one weapon that the EU can use to get Russian attention, energy independence. I do not have a magic wand and I do not underestimate the work needed to achieve this but any political leader in the EU system that today does not understand that something like 55% of the total Russian Federal budget is made up of the taxes and duties on the gas and oil it sells and that gas and oil sales to the EU makes up the biggest part of that revenue, is in need of new political and economic advisors. The EU process may appear slow and cumbersome but that is because it is incredibly democratic. 28 countries have to agree to new laws and procedures and the result is that the process is very detailed and compromise normally requires time and discussion. This is a strength to the EU system; I personally want to live in a liberal democratic system where one person does not have the power to drag us all to the brink. However, back to energy independence; this will take some time to achieve but every step the EU takes is a step in the right direction. Today, the real concern is whether Russia turns off the flow of oil and gas. In a few years we need to ensure that the fear is what happens to the Russian economy if the EU turns off the taps. That is a deterrence that President Putin would start to pay attention to. Achieving energy independence must become a tier-one strategic objective for the EU resulting in a series of agreed common actions that counties start to implement immediately.

The next point is more controversial as I am not in any way war mongering but looking at how we can alter the perception of the global chess board from the Moscow perspective. It may also appear rich as I live in a country, the Republic of Ireland, which is militarily non-aligned. So with all the caveats in place may I suggest that NATO really needs to get its act together. The reality is that Russia is not looking for a shooting war (it went to great pains and showed very high levels of discipline to avoid a shoot out with the Ukraine military held up in Crimea) but it will take loose pawns if we offer them. I have no desire to see NATO get into a war mentality but NATO was set up as a defence mechanism and the stronger that the Russian perspective is of that defence mechanism the less likely it is to cross any lines. Now Ireland is not in the eye of the storm but if I were living in Estonia, Latvia, Lithuania, Romania, Bulgaria, Poland and more presciently Ukraine and Moldova, I may have a real and substantive fear for my countries security today. Russia will not like this and will wail loudly but this may be the only real price that Russia will pay for gaining Crimea and they have most certainly built this into their cost-benefit analysis, including the deployment of the anti-ballistic defence system (which they may have calculated was going to get deployed anyway and at least this way they got Crimea and the Sevastopol naval base).

The world is a complicated place. On the same day we are talking about introducing further sanctions on Russia, the EU and US and working with Russia on the same side of the table on the Iranian negotiations. In the last few days Russia has used the old Soviet playbook to great success from their point of view but that does not mean that Russia is the old Soviet Union. Russia is an early-stage democracy, it is a major economic market and player, it is a UN Security Council member and we need to integrate Russia more into the world economic order. If we accept that President Putin is the chess player then our response must be intelligent. We need to rearrange our pieces so that our position in the middle of the board is very strong and that we have no free pawns and pieces undefended on the board. It then becomes in Russian interest to play the game by the same rules as the rest of us. Throwing the pieces in the air may be the emotive response but it is not the intelligent response.

Assess the idea

This is where you definitely need external assistance. Assessing a new idea requires a technical and business assessment; is it feasible and viable?  There are ways for you to get support in these tasks.

Technical assessments usually involve a third-level institution. Depending on the country, there may be vouchers, feasibility grants, technology transfer programmes to assist with this. Again, this is done within the protection of a public body and there would be a formal contract entered into and a safe disclosure process. Academics or technicians would work with you to develop the technical features of the idea and develop a prototype and test it. If the technical side can be verified then you need to do a market analysis.

Market assessment is usually done through a business plan. In most countries, pre-enterprise or ‘start your own business’ courses are offered by a range of enterprise-support organisations; business incubators, innovation centres, local, regional or national enterprise-support agencies, regional development bodies etc. If they are not free then they are usually heavily subsidised. In this case, you can do the course and develop a business plan to assess the idea. You may also contract a consultant to do the work but this is more expensive unless there is a formal subsidised ‘mentor’ programme available locally.  Just remember one thing; if a consultant writes your business plan then the consultant will gain the internal insights into your business idea and will present you with a document that they have written assessing your idea.  If you write the business plan yourself by going through a business planning process then you gain the internal insights and your internalise the learning.  Much of the real benefit of writing a business plan is not in the final document but in the learning that goes into writing the document in the first instance.

Having done a technical assessment to verify that the idea is feasible and a business assessment to determine if a market exists and it is a viable market, you can then make an informed decision as to whether you bring the idea to the next stage, commercialisation. If you are going to go ahead and bring the now new product or service to the market, the next thing to do is protect your intellectual property.

Develop the idea

Contrary to the belief of inventors, people cannot read their minds. Before you can talk to anybody about commercialising your idea you do need to bring it to a level where you can present an understandable message. So before you talk to others please develop the idea somewhat first. It could be a prototype or beta copy or rough make-up but even simply putting down the idea on paper, with a coherent structure, will allow others ‘get it’ quickly. There are a number of basic questions that people will have regarding a new idea which can be summarised as:

What is it? What does it actually do in 30 words?

What does it do for a customer? This is an important difference from ‘what does it do?’ Customers will buy a ‘benefit’, so develop a concise answer to explain what a customer gets from this new concept.

How much will it cost to make/provide? You should have some rough calculations on what it would cost to make or deliver at cost.

What is involved in making/delivering it? Can you do it yourself, does it require mass production, can it be web based? How many other people need to be in the chain of distribution from manufacture to customer?

How much will customers be willing to pay? If you do not have a clue of this, then ask people who have a good handle on the market.

Is this viable? This is your assessment from the initial answers to the questions above.

These are basic questions you will be asked at concept stage. Now, many innovators are afraid to ask for help as they are afraid that the idea will be ‘ripped off’. You can of course protect yourself in a number of ways such as:

• Ask people to sign a non-disclosure agreement (NDA). This is a legal document which outlines a number of clauses which means that the other person agrees not to disclose any knowledge of the idea to any other party, or use it themselves, without prior agreement. Boilerplate NDA can be downloaded from the net and tweaked or you can get a solicitor to write up a template NDA for your specific purposes for minimal cost
• Ensure that business advisors and consultants have professional indemnity insurance (PII) and are members of reputable institutes. The importance of the reputable institutes, having certified management consultant (CMC) qualifications or similar, is that they have signed up to the Code of Conduct and ethical guidelines of those institutes.
• Get personal referrals; people do not refer on people they do not trust
• Check people out before you talk to them

The final point to remember here is that few people have the time and interest to develop ‘your’ idea. Following this road to commercialisation tends to be a labour of love and the uncommitted tend to have other ways to allocate their time.

That being said you should protect yourself and your idea. The NDA is a commonly used commercial tool that professionals will not be offended to be asked to sign and would use themselves in your place; so use them.