IP Funding – an Investor’s perspective

N Shekar

6 traits of an entrepreneur

1. They questioned what their purpose was while in school, after graduation, or early in their career.

2. They are very curious. 3. They networked extremely well. 4. They developed their mentors and advisors. 5. They learned how to NOT be afraid. Born risk

takers.6. Once started, they don’t quit.

Investor life cycle

F, F & FIncubator Accelerato

rAngel VC Series A VC Series B VC + PE

Series C Exit

0 - 25K 25K – 50K 100K – 1M 2M – 5M 5M – 25M 25M – 150M

IP becomes critical from Series A funding onwards when the VCs get involved

2015 Start up Eco System Ranking

Possibilities for TN Startups

Chennai Start up Map

Chennai Start ups – to watch out for

• Zoho• Fresh Desk • Indix• Orangescape• Bank Bazaar• Chargebee• Stayzilla• Vakilsearch

• Caratlane• Contus• Unmetric• Frilp• Konotor• ContractIQ• Stickystamp• Termsheet.io

VC vs Private Equities

• Private equity is control investing. Venture Capital is minority investing.

• Private equity can’t afford to lose money on an investment. Venture Capital requires it.

• Private equity generates leverage from financial engineering. Venture Capital generates leverage from technology driven disruption and the opportunities that presents.

IP and Venture Capital

• Some serious IP acquistions– Nortel patent sale to a consortium of Microsoft,

Apple and others– Google acquisition of Motorola Mobility & patents– Microsoft Nokia acquisition and 8500 patents

• Patent trolls have shaken up the market leaders with litigation and this is making the companies make defensive moves like above

A VC’s criteria for investing in IP

• Technology Investment Fund criteriaWe invest in technologies that meet the following criteria:– A foundation technology with multiple industry or

market applications– A strong and durable intellectual property position– The ability to generate a minimum of US$50m in

earnings, and– Technology that is targeted at international markets

How to build an IP foundation?1. Identify your core technologies2. Audit your technology, understand your rights3. Gauge your chances of IP protection4. Get employees to assign inventions to the company5. Implement non-competition and confidentiality agreements6. Establish procedures to protect your IP rights7. Use patent applications offensively and defensively8. Focus on the scope of your claims9. Keep informed of your competitors' rights10. Seek low-cost revenue opportunities

Why is IP important?• We are in an era where anyone and everyone

are capable and have the resources to implement an idea. It has become more important than ever to have an IP strategy that considers how IP will be protected and monetized.• Important for startups take necessary steps to

have an IP strategy. Investors making long-term investments, looking for an ROI, are looking for security in the future. Without IP protection it can become questionable and riskier.

What does a VC look for?• When evaluating a company for investment, there are a few key items

VCs look for:– Did the company take the steps necessary to evaluate and assess

their IP through a lawyer or third party company to determine their needs?

– Upon receiving an evaluation, did the company take appropriate measures to secure and protect their IP?

– The importance of the IP is always considered as part of an investment analysis: the more important the IP is to the business, the more important the IP strategy becomes.

– Depending on the type of the IP, they will analyze the scope of what the IP covers and its potential for monetization. This will often affect the valuation of the company as part of the investment.

Situation in India

• IP based VC investment is still low• Most VCs are investing in high growth areas

such as e-commerce, services and logistics• There are some quiet performers with some

deep IP in product companies in SaaS market• An IP portfolio is seen as good but not

essential today – if you have it, on top of other things VC looks for, then better chances.