Protecting the tech
Develop and defend all
Keep China away
Develop and defend all
Keep China away
Showing posts with label intellectual property. Show all posts
Showing posts with label intellectual property. Show all posts
Monday, March 12, 2018
Friday, June 27, 2014
Thursday, March 20, 2014
Generating Alpha From An IP Portfolio
I suspect that some of the concepts useful in financial portfolio management also apply to managing a portfolio of intellectual property. The IP portfolio will not be as liquid as a basket of stocks or bonds, but there may be a common intellectual framework for all of these asset classes. Intellectual Asset Management refers to IP finance and valuation in ways that beg for more analysis.
Notional IP portfolio holdings must start with bottom-up valuation. Standards from USPAP, IVSC, FASB, and IFRS/IASB establish baselines for assessing IP value. WIPO's list of documents on IP valuation help build out the methodologies needed. Valuation matters for establishing an investment's entry point. I wouldn't pay a million bucks for some patent that's only worth a nickel. The "cost" method reminds me of equity valuation methods that use book value and Tobin's Q. The "income" approach is pretty much the discounted cash flow method that most equity analysts should recognize.
The illiquid nature of IP means a pure-play investment in a bunch of intangible assets would bear more resemblance to a private equity investment than a public stock. Liquid proxies for an illiquid patent portfolio do exist. These include ETFs based on the Ocean Tomo 300 Patent Index. The simplest way to measure the alpha of a pure-play IP portfolio is to compare it to that index's return over whatever holding period is relevant.
There are "unknown knowns" that pose risk management challenges to IP portfolio management. Patent quality matters. There must be some way to perform statistical analysis of an IP portfolio's quality beyond just number of filings by country or sector. WIPO's PATENTSCOPE database and the USPTO probably have enough data to make this analysis worthwhile. Managing an IP portfolio's risk should consider litigation trends within the taxonomy of patent classifications. The risk breakdown would assign different risk weights to electronics, hydraulics, or whatever to avoid overconcentration of ownership in some class subject to heavy litigation (like software). My Google searches for "patent portfolio theory" and "patent portfolio race" reveal a notable amount of theory addressing these issues. Finally, I wonder whether IP portfolio considerations should differentiate by type of IP: patent, trademark, copyright, etc. A diverse portfolio containing many IP types may achieve an optimal risk-return tradeoff, or it may be an encumbrance to the search for pure-play returns.
Investing in IP or IP-heavy companies reminds me of the "innovation premium" theory. I proposed my own metrics for an innovation premium in an Alfidi Capital blog article last year. Those metrics can be weighted differently to account for qualitative differences; i.e. "number of patents filed" can carry a smaller weight if patent quality declines. I feel like publishing a longer research report on generating alpha from an IP portfolio but I will only do so if it adds something not already covered in WIPO's literature. Good knowledge of IP valuation would make a huge difference in technology transfer from research laboratories to the marketplace. I would consider commercializing tech from a government or university lab if I understood how its valuation fit into a larger portfolio.
Full disclosure: No positions in any investment products mentioned at this time.
Notional IP portfolio holdings must start with bottom-up valuation. Standards from USPAP, IVSC, FASB, and IFRS/IASB establish baselines for assessing IP value. WIPO's list of documents on IP valuation help build out the methodologies needed. Valuation matters for establishing an investment's entry point. I wouldn't pay a million bucks for some patent that's only worth a nickel. The "cost" method reminds me of equity valuation methods that use book value and Tobin's Q. The "income" approach is pretty much the discounted cash flow method that most equity analysts should recognize.
The illiquid nature of IP means a pure-play investment in a bunch of intangible assets would bear more resemblance to a private equity investment than a public stock. Liquid proxies for an illiquid patent portfolio do exist. These include ETFs based on the Ocean Tomo 300 Patent Index. The simplest way to measure the alpha of a pure-play IP portfolio is to compare it to that index's return over whatever holding period is relevant.
There are "unknown knowns" that pose risk management challenges to IP portfolio management. Patent quality matters. There must be some way to perform statistical analysis of an IP portfolio's quality beyond just number of filings by country or sector. WIPO's PATENTSCOPE database and the USPTO probably have enough data to make this analysis worthwhile. Managing an IP portfolio's risk should consider litigation trends within the taxonomy of patent classifications. The risk breakdown would assign different risk weights to electronics, hydraulics, or whatever to avoid overconcentration of ownership in some class subject to heavy litigation (like software). My Google searches for "patent portfolio theory" and "patent portfolio race" reveal a notable amount of theory addressing these issues. Finally, I wonder whether IP portfolio considerations should differentiate by type of IP: patent, trademark, copyright, etc. A diverse portfolio containing many IP types may achieve an optimal risk-return tradeoff, or it may be an encumbrance to the search for pure-play returns.
Investing in IP or IP-heavy companies reminds me of the "innovation premium" theory. I proposed my own metrics for an innovation premium in an Alfidi Capital blog article last year. Those metrics can be weighted differently to account for qualitative differences; i.e. "number of patents filed" can carry a smaller weight if patent quality declines. I feel like publishing a longer research report on generating alpha from an IP portfolio but I will only do so if it adds something not already covered in WIPO's literature. Good knowledge of IP valuation would make a huge difference in technology transfer from research laboratories to the marketplace. I would consider commercializing tech from a government or university lab if I understood how its valuation fit into a larger portfolio.
Full disclosure: No positions in any investment products mentioned at this time.
Wednesday, March 19, 2014
Chinese And US Patent Lawfare
Today I attended CALOBA's presentation on how Chinese companies handle US patent litigation. I have not found the researchers' slides or data in public media at the time I wrote this article. The research concluded that Chinese companies get sued a lot and are prime targets for US patent trolls. The report's authors used Lex Machina to mine databases on patent lawsuits, so Big Data is finally transforming the legal field. The trends that CALOBA's invited panelists discussed made me think of how Chinese companies are vulnerable to deliberate lawfare tactics. I can summarize the Chinese vulnerabilities they identified, in the best non-lawyer way I can muster.
Vulnerability #1: Speak no evil. Chinese companies underestimate the amount of documentation they must provide during discovery in US-based litigation. They are unaccustomed to such extensive transparency. Their reluctance to disclose emails, meeting transcripts, and other records puts them at risk of losing cases in US courts.
Vulnerability #2: Lost in translation. Chinese companies rely too much on English language translation services. The panelists presented some anecdotal observations that engineering diagrams would have withstood cross-examination in a US patent hearing if they had been accompanied by original descriptions in English.
Vulnerability #3: What goes on in country doesn't stay in country. Chinese executives who are unwilling to travel to the US for a trial hurt their case. American juries want to hear the Chinese executives' side of the story. The panel recalled a funny story about a Chinese company that ignored a default judgment only to travel to the US for business afterwards and see their trade show exhibit seized. They must have assumed the court system would have a short memory. The long arm of US law has a very long memory.
Vulnerability #4: Not enough lawyer firepower. I'm not sure whether Chinese companies take their legal system as seriously as Americans take their own system or give their attorneys as much prestige. The panel implied that typical Chinese corporate in-house counsel either doesn't have enough rank within the company to be heard or has additional duties in low-level management. I should have asked the experts on hand to clarify the social standing of Chinese in-house counsel but it was hard to be heard over the silly questions some dingbats in the audience were asking.
The WIPO published China's own description of its utility model patent (UMP) system in September 2012. I read stuff like this all the time. The US Chamber of Commerce published a detailed description of China's UMP regime in November 2012. I like the US description better. I can't fully trust anything from the Chinese government until they complete their planned legal system reform. The US report clearly identifies that China's focus on pushing raw numbers of patent filings has driven a decline in patent quality. This decline has invited the attention of patent trolls whose legal tactics outwit Chinese companies in US courts. The US has begun fighting its own patent trolls while China remains vulnerable to its own trolls.
I'll offer some broad considerations for US public policymakers, business lobbyists, and entrepreneurs in light of the above conditions. US regulations and laws discouraging patent trolls may limit the ability of US firms to litigate Chinese IP theft. It is too early to tell whether Chinese legal reform will accommodate the kinds of multi-pronged IP strategies US companies are accustomed to using in the US. Patent claim strategies must account for prior art to avoid duplication. Startups have tighter budget constraints and shouldn't pursue expansive patent strategies; they can't afford to patent much besides their core tech. All of that wisdom is totally a stream of consciousness blast, but that's how Alfidi Capital does business. Take it or leave it.
The broad drafts of US patents and the inflexibility of Chinese patent appeals illustrate the asymmetric advantages the US possesses in any potential lawfare contest. The US's ability to conduct lawfare should be a source of national pride. This country graduates more lawyers every year than the rest of the world supposedly has in stock. God bless America for winning the lawfare arms race early.
Vulnerability #1: Speak no evil. Chinese companies underestimate the amount of documentation they must provide during discovery in US-based litigation. They are unaccustomed to such extensive transparency. Their reluctance to disclose emails, meeting transcripts, and other records puts them at risk of losing cases in US courts.
Vulnerability #2: Lost in translation. Chinese companies rely too much on English language translation services. The panelists presented some anecdotal observations that engineering diagrams would have withstood cross-examination in a US patent hearing if they had been accompanied by original descriptions in English.
Vulnerability #3: What goes on in country doesn't stay in country. Chinese executives who are unwilling to travel to the US for a trial hurt their case. American juries want to hear the Chinese executives' side of the story. The panel recalled a funny story about a Chinese company that ignored a default judgment only to travel to the US for business afterwards and see their trade show exhibit seized. They must have assumed the court system would have a short memory. The long arm of US law has a very long memory.
Vulnerability #4: Not enough lawyer firepower. I'm not sure whether Chinese companies take their legal system as seriously as Americans take their own system or give their attorneys as much prestige. The panel implied that typical Chinese corporate in-house counsel either doesn't have enough rank within the company to be heard or has additional duties in low-level management. I should have asked the experts on hand to clarify the social standing of Chinese in-house counsel but it was hard to be heard over the silly questions some dingbats in the audience were asking.
The WIPO published China's own description of its utility model patent (UMP) system in September 2012. I read stuff like this all the time. The US Chamber of Commerce published a detailed description of China's UMP regime in November 2012. I like the US description better. I can't fully trust anything from the Chinese government until they complete their planned legal system reform. The US report clearly identifies that China's focus on pushing raw numbers of patent filings has driven a decline in patent quality. This decline has invited the attention of patent trolls whose legal tactics outwit Chinese companies in US courts. The US has begun fighting its own patent trolls while China remains vulnerable to its own trolls.
I'll offer some broad considerations for US public policymakers, business lobbyists, and entrepreneurs in light of the above conditions. US regulations and laws discouraging patent trolls may limit the ability of US firms to litigate Chinese IP theft. It is too early to tell whether Chinese legal reform will accommodate the kinds of multi-pronged IP strategies US companies are accustomed to using in the US. Patent claim strategies must account for prior art to avoid duplication. Startups have tighter budget constraints and shouldn't pursue expansive patent strategies; they can't afford to patent much besides their core tech. All of that wisdom is totally a stream of consciousness blast, but that's how Alfidi Capital does business. Take it or leave it.
The broad drafts of US patents and the inflexibility of Chinese patent appeals illustrate the asymmetric advantages the US possesses in any potential lawfare contest. The US's ability to conduct lawfare should be a source of national pride. This country graduates more lawyers every year than the rest of the world supposedly has in stock. God bless America for winning the lawfare arms race early.
Wednesday, January 01, 2014
Serious Entrepreneurial Knowledge for Patents, Financing, and Risk
I'd like to discuss some concepts I learned from attending a seminar last November in SVC Wireless' Advanced Entrepreneur Development Program. I learned a lot about how legal experts solve problems in patent portfolios, startup financing, and sources of risk (both internal and external) to an enterprise. I'm interspersing my own knowledge and observations with the concepts I picked up from the speakers, so none of this constitutes legal advice. Aspiring entrepreneurs reading my stuff are welcome to seek out Fenwick and West's Silicon Valley office in Mountain View for a more professional discussion of risk management.
TechCrunch and CB Insights track the growing influence of angels and seed round investors. I think the VC community is still getting over its reluctance to endorse crowdfunding but that is changing as more VCs establish a presence on crowdfunding portals. Seed-DB shows the growth of accelerators and their ability to attract seed capital to participating startups. Their list will never be complete because new accelerators pop up all the time. If this database survives the accelerator bubble it can help us avoid survivorship bias among surviving accelerators once we analyze those that fail.
Term sheets decide valuation, dilution, liquidation preferences, voting rights, and board structures. The largest corporate law firms have automated term sheet generators. I like the ones from Orrick and WSGR. Those are free because startups have to make their own term sheets in the early rounds. VCs will have their own term sheets in later rounds. Startups that don't hire attorneys to track their cap tables will have to do it themselves, and it is extremely important that they get it right the first time to avoid securities fraud. The SEC doesn't like business owners who misrepresent the ownership of their companies. Mapping cap tables to key employees tells those team members how much time they need to spend at the enterprise before their sweat equity options will vest. Series Seed has a very interesting take on a term sheet that has what appear to be crowdsourced edits.
I once saw a very lengthy due diligence checklist on the website of a major VC firm. That was back in 2007 but it stuck in my mind. Larger VCs that have the resources to commit eight-figure sums to a round will have a multi-page checklist. Smaller investors with less at stake can get away with simpler tools. I use Google searches and superior court website name queries to see if any entrepreneurs I meet have questionable backgrounds. That's how I uncovered the history of a Stolen Valor fraud who ripped off the San Francisco veterans' community. That stupid jerk continues to prospect rich suckers around town. Some people never learn anything.
Big law firms perform a public service by tracking VC funding trends. These are usually located in the "entrepreneurial services" section of the firms' websites. Every quarter entrepreneurs can see how much money is chasing the hot sectors. I'm pretty sure funding for mobile software will dry up after what I saw at many tech conferences in 2013. The world doesn't need another calendar app. Pitchbook also has data on PE valuations so entrepreneurs can see whether VC-funded companies have matured.
Enterprise IP ownership matters. Employment agreements matter. Prior employees can bring lawsuits for IP infringement if the IP they created isn't clearly assigned to the company with an employment agreement. Contractors who are specifically tasked to do something can end up owning what they create even if an assignment agreement governs their final product. Clean IP assignment in the eyes of the law happens under an employment agreement. Employment lawyers exist to review those agreements. I am so glad to be a sole proprietor because I don't ever have to understand employees' needs or try to solve their problems.
Startups with little cash will have to figure out creative ways to employ people with non-cash compensation, which to me means sweat equity. Entrepreneurs can do their part in building credibility with key employees by showing them where they stand on the cap table and by forgoing any deferred salary themselves. More mature startups (i.e., those with enough revenue to pay salaries) should use publicly available compensation figures to lure the expertise they need. That's part of the reason why Salary.com and Glassdoor exist.
I disagree with a lot of the conventional wisdom on patent protection. A lot of what lawyers say about the importance of filing patents just seems like a sales pitch for hiring them. Prior art can invalidate a patent and the wide availability of so much information through online searches makes it very difficult to write a patent that truly secures something original. USPTO's patent manual section 2128 paints a very broad definition of accessible prior art. Non-disclosure agreements (NDAs) covering trade secrets are probably more effective in keeping the lid on something proprietary, because a filed patent is immediately searchable and thus visible to competitors.
Fenwick and West helpfully provide a free guide to developing a patent strategy, with a separate patent checklist. Once again, a lot of this strikes me as a full-employment program for attorneys. The market ultimately decides whether a proprietary technology succeeds once its creators start executing their business plan. I must admit I like the use of military-type terms like sword, shield, guard, numbers, and counterstrike that I hear mentioned in discussions of patent strategy. It seems that some enterprises will protect a core tech by filing a decoy patent for some vaporware product just to throw a competitor off their trail. I think the best patent strategy is a proactive search for existing patents. That avoids duplicating something that already exists and thus inviting a lawsuit.
Legal risks come in three flavored layers: occurrence (when some adverse event actually happens), detection (an attorney or regulator discovers the action), and challenge (the likelihood of an injured party launching litigation). I think minimizing occurrence through good management is the easiest mitigation strategy, but my job is easy because I only have to manage myself and not a bunch of troublesome people. Copyright infringement damages are quite hefty and DMCA makes discovery inevitable in our digital society. Enterprises with in-house IP counsel like to keep them busy taking on infringers.
Startups that pivot from software to IoT devices are going to get hit with regulatory risk. Our society has spent the last two decades incentivizing coding over making, and the smartest job creators need to learn the craft of manufacturing all over again. A lot of coders have no clue how to get federal and state regulatory approval for new physical devices. Adding network connectivity means adding the FCC to an approval list. I question the legal strategy of playing for regulators to give up with repeated requests for delayed action. Regulators may not be as smart as those of us in the private sector but technology means they won't even need to be alive. Governments will eventually automate regulatory functions into BRMS engines that will automatically troll their responsible sectors for violations and send repeat notices demanding compliance. Soft law can become hard law but I think that happens when sufficient industry lobbying demands it. That's why startups can stay ahead of industry moves by joining relevant trade associations to watch pending regulatory changes.
FEMA's emergency preparedness guide for business includes a business impact analysis that is adaptable to non-emergency situations. I think it behooves entrepreneurs to graph all of their legal and regulatory risks on a chart that compares severity of impact to probability of occurrence. They can then design mitigation strategies for each source of risk, estimate the cost of mitigation, and then prioritize the solutions by either strategic importance or cost. That's not taught in MBA programs but I learned how to do that in the military. Startups don't think about insurance but policies for errors and omissions, or for directors and officers, may come in handy.
I'll make one final announcement about Alfidi Capital. I don't have to register a trademark to own it. I am the first and only user of the terms and logos for "Alfidi Capital" and I don't have to register anything. I can and will sue anyone who tries to use or register my marks. You can all see that I learn a ton of stuff from the free seminars I attend. I love using free information from the public domain.
Nota bene: Nothing in this article constitutes legal advice. I'm not telling anyone what to do here. I'm kicking these ideas around purely for my own enjoyment. None of the organizations mentioned above paid me any money at all to publish anything in this article.
TechCrunch and CB Insights track the growing influence of angels and seed round investors. I think the VC community is still getting over its reluctance to endorse crowdfunding but that is changing as more VCs establish a presence on crowdfunding portals. Seed-DB shows the growth of accelerators and their ability to attract seed capital to participating startups. Their list will never be complete because new accelerators pop up all the time. If this database survives the accelerator bubble it can help us avoid survivorship bias among surviving accelerators once we analyze those that fail.
Term sheets decide valuation, dilution, liquidation preferences, voting rights, and board structures. The largest corporate law firms have automated term sheet generators. I like the ones from Orrick and WSGR. Those are free because startups have to make their own term sheets in the early rounds. VCs will have their own term sheets in later rounds. Startups that don't hire attorneys to track their cap tables will have to do it themselves, and it is extremely important that they get it right the first time to avoid securities fraud. The SEC doesn't like business owners who misrepresent the ownership of their companies. Mapping cap tables to key employees tells those team members how much time they need to spend at the enterprise before their sweat equity options will vest. Series Seed has a very interesting take on a term sheet that has what appear to be crowdsourced edits.
I once saw a very lengthy due diligence checklist on the website of a major VC firm. That was back in 2007 but it stuck in my mind. Larger VCs that have the resources to commit eight-figure sums to a round will have a multi-page checklist. Smaller investors with less at stake can get away with simpler tools. I use Google searches and superior court website name queries to see if any entrepreneurs I meet have questionable backgrounds. That's how I uncovered the history of a Stolen Valor fraud who ripped off the San Francisco veterans' community. That stupid jerk continues to prospect rich suckers around town. Some people never learn anything.
Big law firms perform a public service by tracking VC funding trends. These are usually located in the "entrepreneurial services" section of the firms' websites. Every quarter entrepreneurs can see how much money is chasing the hot sectors. I'm pretty sure funding for mobile software will dry up after what I saw at many tech conferences in 2013. The world doesn't need another calendar app. Pitchbook also has data on PE valuations so entrepreneurs can see whether VC-funded companies have matured.
Enterprise IP ownership matters. Employment agreements matter. Prior employees can bring lawsuits for IP infringement if the IP they created isn't clearly assigned to the company with an employment agreement. Contractors who are specifically tasked to do something can end up owning what they create even if an assignment agreement governs their final product. Clean IP assignment in the eyes of the law happens under an employment agreement. Employment lawyers exist to review those agreements. I am so glad to be a sole proprietor because I don't ever have to understand employees' needs or try to solve their problems.
Startups with little cash will have to figure out creative ways to employ people with non-cash compensation, which to me means sweat equity. Entrepreneurs can do their part in building credibility with key employees by showing them where they stand on the cap table and by forgoing any deferred salary themselves. More mature startups (i.e., those with enough revenue to pay salaries) should use publicly available compensation figures to lure the expertise they need. That's part of the reason why Salary.com and Glassdoor exist.
I disagree with a lot of the conventional wisdom on patent protection. A lot of what lawyers say about the importance of filing patents just seems like a sales pitch for hiring them. Prior art can invalidate a patent and the wide availability of so much information through online searches makes it very difficult to write a patent that truly secures something original. USPTO's patent manual section 2128 paints a very broad definition of accessible prior art. Non-disclosure agreements (NDAs) covering trade secrets are probably more effective in keeping the lid on something proprietary, because a filed patent is immediately searchable and thus visible to competitors.
Fenwick and West helpfully provide a free guide to developing a patent strategy, with a separate patent checklist. Once again, a lot of this strikes me as a full-employment program for attorneys. The market ultimately decides whether a proprietary technology succeeds once its creators start executing their business plan. I must admit I like the use of military-type terms like sword, shield, guard, numbers, and counterstrike that I hear mentioned in discussions of patent strategy. It seems that some enterprises will protect a core tech by filing a decoy patent for some vaporware product just to throw a competitor off their trail. I think the best patent strategy is a proactive search for existing patents. That avoids duplicating something that already exists and thus inviting a lawsuit.
Legal risks come in three flavored layers: occurrence (when some adverse event actually happens), detection (an attorney or regulator discovers the action), and challenge (the likelihood of an injured party launching litigation). I think minimizing occurrence through good management is the easiest mitigation strategy, but my job is easy because I only have to manage myself and not a bunch of troublesome people. Copyright infringement damages are quite hefty and DMCA makes discovery inevitable in our digital society. Enterprises with in-house IP counsel like to keep them busy taking on infringers.
Startups that pivot from software to IoT devices are going to get hit with regulatory risk. Our society has spent the last two decades incentivizing coding over making, and the smartest job creators need to learn the craft of manufacturing all over again. A lot of coders have no clue how to get federal and state regulatory approval for new physical devices. Adding network connectivity means adding the FCC to an approval list. I question the legal strategy of playing for regulators to give up with repeated requests for delayed action. Regulators may not be as smart as those of us in the private sector but technology means they won't even need to be alive. Governments will eventually automate regulatory functions into BRMS engines that will automatically troll their responsible sectors for violations and send repeat notices demanding compliance. Soft law can become hard law but I think that happens when sufficient industry lobbying demands it. That's why startups can stay ahead of industry moves by joining relevant trade associations to watch pending regulatory changes.
FEMA's emergency preparedness guide for business includes a business impact analysis that is adaptable to non-emergency situations. I think it behooves entrepreneurs to graph all of their legal and regulatory risks on a chart that compares severity of impact to probability of occurrence. They can then design mitigation strategies for each source of risk, estimate the cost of mitigation, and then prioritize the solutions by either strategic importance or cost. That's not taught in MBA programs but I learned how to do that in the military. Startups don't think about insurance but policies for errors and omissions, or for directors and officers, may come in handy.
I'll make one final announcement about Alfidi Capital. I don't have to register a trademark to own it. I am the first and only user of the terms and logos for "Alfidi Capital" and I don't have to register anything. I can and will sue anyone who tries to use or register my marks. You can all see that I learn a ton of stuff from the free seminars I attend. I love using free information from the public domain.
Nota bene: Nothing in this article constitutes legal advice. I'm not telling anyone what to do here. I'm kicking these ideas around purely for my own enjoyment. None of the organizations mentioned above paid me any money at all to publish anything in this article.
Sunday, November 10, 2013
Don't Mess With The Mouse's Intellectual Property
"Don't mess with the mouse" is a business meme referencing the longtime Disney icon Mickey Mouse. It originates from Disney's penchant for litigating any infringement of the company's huge IP portfolio. Disney's acquisition of the Marvel comic universe and Lucasfilm properties make its IP territory even larger.
Internet memes using unauthorized photos of copyrighted works are going to be a gold mine for litigants under the Digital Millennium Copyright Act. Real estate investors have told me how much they collect in summary judgments against debtors who skip out on rent payments and damage assessments. IP litigants will find similarly easy pickings among Pinterest and Instagram serial violators of copyrights. I'm pretty sure some disruptive entrepreneur could develop a bot-net that would automatically scour the Web for non-watermarked images of Disney properties. Once identified, the Mouse's ERP corporate counsel module automates the generation of cease-and-desist orders. Global content owners will own those violators in no time flat.
Popular memes will gradually come to an end as the threat of litigation permeates digital culture. Web publishers will have to automate watermark searches for user-generated content just to ensure they don't get sued. We will no longer see funny meme photos of Star Wars characters saying absurd things. Forget about uploading mashup clips of your favorite Hollywood hits to YouTube. Disney and other creative powerhouses will own our culture. The only other works available will be artisan photos and projects that can only succeed if they go viral on their own. Start filming your cat's tricks right now. That's your ticket to fame and fortune.
Full disclosure: No copyrighted images were used in this blog post.
Internet memes using unauthorized photos of copyrighted works are going to be a gold mine for litigants under the Digital Millennium Copyright Act. Real estate investors have told me how much they collect in summary judgments against debtors who skip out on rent payments and damage assessments. IP litigants will find similarly easy pickings among Pinterest and Instagram serial violators of copyrights. I'm pretty sure some disruptive entrepreneur could develop a bot-net that would automatically scour the Web for non-watermarked images of Disney properties. Once identified, the Mouse's ERP corporate counsel module automates the generation of cease-and-desist orders. Global content owners will own those violators in no time flat.
Popular memes will gradually come to an end as the threat of litigation permeates digital culture. Web publishers will have to automate watermark searches for user-generated content just to ensure they don't get sued. We will no longer see funny meme photos of Star Wars characters saying absurd things. Forget about uploading mashup clips of your favorite Hollywood hits to YouTube. Disney and other creative powerhouses will own our culture. The only other works available will be artisan photos and projects that can only succeed if they go viral on their own. Start filming your cat's tricks right now. That's your ticket to fame and fortune.
Full disclosure: No copyrighted images were used in this blog post.
Sunday, October 27, 2013
Checking Out VEDC Access to Capital San Francisco 2013
The VEDC Access to Capital Business Expo in San Francisco has become one of my perennial favorite conferences. I had to attend and check out innovations in raising capital for small businesses. The Hyatt Regency San Francisco never disappoints with hospitality. VEDC renamed the conference this year as "Here's the Money!" instead of just asking where the money hides in years past.
Check out the awesome signage above. You just can't go wrong with signs like that showing you the way to money. I would posts signs like that around my home office but they would just get in the way of my daily moneymaking. VEDC comes all the way up to San Francisco every year to show us the money, which is a long trek away from their usual SoCal partnerships with organizations like Golden State Certified Development Corporation. They've been reaching out for partnerships with Mission Economic Development Agency here in town and the Nevada Microenterprise Initiative. Where's the money? It's here, there, and everywhere. I noticed that the conference also coincided with an unaffiliated event, EO Alchemy 2013, at the same venue. The entrepreneurs doing their alchemy may have had no idea that Access to Capital was just around the corner.
The introduction from VEDC announced their new venture, Aquaria Funds, specifically to operate outside Los Angeles. I think it's great that VEDC created a vehicle that entrepreneurs can use to obtain capital in addition to other local microfinance partners. They also offer more conventional SBA loans.
I started my morning checking out the session on startup financing. Interstate Business Capital mentioned cash advances on purchase orders and other merchant advances but I'm pretty sure those are only options for revenue-stage companies. No one can offer advances for purchases that haven't been made if the business is still trying to launch itself. There just aren't accounts receivable to accelerate or accounts payable to defer at most early-stage startups. Kiva Zip is enlisting its microlenders as evangelists for the non-profit projects they launch. That's great for Bay Area do-gooders. The Green2Gold guy, Bruce Blechman, mentioned CCVF's Clean Business Investment Summit and their founder's radio show on new venture money. Bruce is a genius and his rapid-fire rundown of non-bank lending, licensing, collaborative co-ops, advance order funding, and sweat equity is like a five-minute MBA education.
I slipped in to the concurrent seminar on financing for existing businesses but it was mostly a panel of larger banks discussing their established loan programs. Banks look at an industry's default rate in addition to a business' specifics, which will disappoint a lot of the aspiring restauranteurs and beauty parlor owners attending this conference. It's good to know that SBA-backed financing covers a ten-year cycle for equipment instead of banks' normal five-year cycle considerations. That was all I needed to know before going back to the last part of the early-stage financing panel. I was pleasantly surprised to hear that Chinese entrepreneurs were successfully pushing their government to crack down on IP infringement. I'd like to see more confirming evidence of stronger Chinese IP protection before I revise my low opinion of the rule of law in China. In the meantime, there is such a thing as insurance against IP infringement. It works just like other policies with premiums and deductibles. Yeah, just don't tell the ACA exchange folks about it, or they'll force us all to buy it with another mandate. Startups who want to protect their IP as early as possible should file a provisional patent application with the USPTO.
Strolling the expo floor meant listening to bank loan sales pitches. My eyes doth glaze over when I hear big banks say they have a community bank culture. Sorry, but I'm not a believer. Only two things determine a large corporation's culture. Number one is the CEO's personality and expressed strategic goals, because other executives will model that behavior and push their business units to meet those goals so they can get promoted to the C-suite. Number two is the HR department's policies on hiring, firing, promotions, and performance bonuses. Those are the hard incentives that motivate human behavior. Any big bank that aspires to live a community bank culture would have to devolve so much autonomy to its local branches as to make its corporate structure nonviable.
I sat in the next session introducing local resource partners. The usual cast of characters from the SBA, SCORE, SBDC, Operation HOPE, and others were on hand. The Renaissance Entrepreneurship Center, San Francisco Community Business Resources, Pacific Community Ventures, and OBDC's Bay Area Small Business Finance were also in attendance at the expo. I would have preferred to see the San Francisco Center for Economic Development (SFCED) in attendance but alas, it was not to be this year. Entrepreneurs from underrepresented demographics need to check out California's Veterans Business Outreach Center. I'll give you this panel's best quote, free of charge: "The one time a banker won't give you an umbrella is when it's raining." That means banks won't give you a loan if your business is losing money or the microeconomic climate for your sector has a poor outlook.
The most valuable insights I got out of that local partners panel was from the SCORE guy who previously worked with Harvard Angels and Sand Hill Angels on early stage investing. He said records of the term sheets and signed subscription agreements that support a startup's capitalization table are a must. Banks and angel investors will want to review those documents during their due diligence phase. Corporate structure is the key to determining capitalization structure because it must allow for selling equity shares. The choice of an S-corp or C-corp IMHO depends on how rapidly the business expects to scale up.
One participant at "Here's the Money!" mentioned Wells Fargo's financial support of microfinance platforms, which I presume to be Grameen America. I've blogged before about how SIFI institutions will eventually purchase microfinance and crowdfunding platforms to broaden their product offerings. The consolidation won't start until the SEC finalizes the regulatory structure enabling the JOBS Act. You heard it here first.
The keynote speaker after lunch was Kevin Harrington, a TV pitch innovator who brought you Ginsu Knives on shopping channels and infomercials before he joined the Shark Tank show. I'll share his tips on "Creating Brand Success" pretty much verbatim because they apply to lots of different business types.
Kevin liked the "Three Steps and a Stumble" approach to raising capital and growing a business. Step One is "curiosity overload." Deep market research reveals product trends, so collect industry publications and attend trade shows. You know what . . . that's exactly what I do. Step Two is "hijack your habits." Think outside the box. Make things happen. Don't do something the same way forever because business changes quickly. Hey, I do that too. Step Three is "build a brand for both the company and yourself." Man, this guy must be reading my blog because surely he recognizes the pure unrivaled genius that is both Alfidi Capital and Yours Truly, Anthony Alfidi.
Kevin also laid out five skills for entrepreneurs. Here they come.
- Skill One: Create the perfect pitch. Show healthy profits, exponential growth, acquisition opportunity, strong market, bootstrap capital from founders, uniqueness, powerful presentation using his "tease / please / seize" structure, the industry gap you fill (which I interpret as the pain points you solve), and your exit strategy.
- Skill Two: Publish. The business plan must have an executive summary, industry overview, competitive analysis, marketing plan, strong financials, and an exit strategy.
- Skill Three: Productize. Show your product's mass market, problem solving ability, uniqueness, magical transformation, celebrity endorsement, multi-functionality, credible testimonials, documentation and clinical studies, publicity, and value proposition compared to cost of goods.
- Skill Four: Profile. New media accelerates publicity. Smartphones now have multimedia production capabilities equivalent to a full broadcast studio. Shooting smartphone videos for YouTube will go a long way.
- Skill Five: Partnerships. Find parties with resources you need, and offer them resources they need.
Now for the "stumble" Kevin mentioned. If you must fail, do it fast and cheap. Make it up on the next venture. Kevin shared videos of a lot of his very successful infomercial products and few that were disappointments. No one remembers your disappointments if you recover and follow up with new successes.
These VEDC events are highly condensed equivalents of college seminars in finance and marketing. So where's the money? Well, here's the money, in my wallet. It's yours too once you line up investors and creditors who have confidence in your business prospects. Don't ask me for money. Go out and find it with the local partners VEDC lined up for you.
Check out the awesome signage above. You just can't go wrong with signs like that showing you the way to money. I would posts signs like that around my home office but they would just get in the way of my daily moneymaking. VEDC comes all the way up to San Francisco every year to show us the money, which is a long trek away from their usual SoCal partnerships with organizations like Golden State Certified Development Corporation. They've been reaching out for partnerships with Mission Economic Development Agency here in town and the Nevada Microenterprise Initiative. Where's the money? It's here, there, and everywhere. I noticed that the conference also coincided with an unaffiliated event, EO Alchemy 2013, at the same venue. The entrepreneurs doing their alchemy may have had no idea that Access to Capital was just around the corner.
The introduction from VEDC announced their new venture, Aquaria Funds, specifically to operate outside Los Angeles. I think it's great that VEDC created a vehicle that entrepreneurs can use to obtain capital in addition to other local microfinance partners. They also offer more conventional SBA loans.
I started my morning checking out the session on startup financing. Interstate Business Capital mentioned cash advances on purchase orders and other merchant advances but I'm pretty sure those are only options for revenue-stage companies. No one can offer advances for purchases that haven't been made if the business is still trying to launch itself. There just aren't accounts receivable to accelerate or accounts payable to defer at most early-stage startups. Kiva Zip is enlisting its microlenders as evangelists for the non-profit projects they launch. That's great for Bay Area do-gooders. The Green2Gold guy, Bruce Blechman, mentioned CCVF's Clean Business Investment Summit and their founder's radio show on new venture money. Bruce is a genius and his rapid-fire rundown of non-bank lending, licensing, collaborative co-ops, advance order funding, and sweat equity is like a five-minute MBA education.
I slipped in to the concurrent seminar on financing for existing businesses but it was mostly a panel of larger banks discussing their established loan programs. Banks look at an industry's default rate in addition to a business' specifics, which will disappoint a lot of the aspiring restauranteurs and beauty parlor owners attending this conference. It's good to know that SBA-backed financing covers a ten-year cycle for equipment instead of banks' normal five-year cycle considerations. That was all I needed to know before going back to the last part of the early-stage financing panel. I was pleasantly surprised to hear that Chinese entrepreneurs were successfully pushing their government to crack down on IP infringement. I'd like to see more confirming evidence of stronger Chinese IP protection before I revise my low opinion of the rule of law in China. In the meantime, there is such a thing as insurance against IP infringement. It works just like other policies with premiums and deductibles. Yeah, just don't tell the ACA exchange folks about it, or they'll force us all to buy it with another mandate. Startups who want to protect their IP as early as possible should file a provisional patent application with the USPTO.
Strolling the expo floor meant listening to bank loan sales pitches. My eyes doth glaze over when I hear big banks say they have a community bank culture. Sorry, but I'm not a believer. Only two things determine a large corporation's culture. Number one is the CEO's personality and expressed strategic goals, because other executives will model that behavior and push their business units to meet those goals so they can get promoted to the C-suite. Number two is the HR department's policies on hiring, firing, promotions, and performance bonuses. Those are the hard incentives that motivate human behavior. Any big bank that aspires to live a community bank culture would have to devolve so much autonomy to its local branches as to make its corporate structure nonviable.
I sat in the next session introducing local resource partners. The usual cast of characters from the SBA, SCORE, SBDC, Operation HOPE, and others were on hand. The Renaissance Entrepreneurship Center, San Francisco Community Business Resources, Pacific Community Ventures, and OBDC's Bay Area Small Business Finance were also in attendance at the expo. I would have preferred to see the San Francisco Center for Economic Development (SFCED) in attendance but alas, it was not to be this year. Entrepreneurs from underrepresented demographics need to check out California's Veterans Business Outreach Center. I'll give you this panel's best quote, free of charge: "The one time a banker won't give you an umbrella is when it's raining." That means banks won't give you a loan if your business is losing money or the microeconomic climate for your sector has a poor outlook.
The most valuable insights I got out of that local partners panel was from the SCORE guy who previously worked with Harvard Angels and Sand Hill Angels on early stage investing. He said records of the term sheets and signed subscription agreements that support a startup's capitalization table are a must. Banks and angel investors will want to review those documents during their due diligence phase. Corporate structure is the key to determining capitalization structure because it must allow for selling equity shares. The choice of an S-corp or C-corp IMHO depends on how rapidly the business expects to scale up.
One participant at "Here's the Money!" mentioned Wells Fargo's financial support of microfinance platforms, which I presume to be Grameen America. I've blogged before about how SIFI institutions will eventually purchase microfinance and crowdfunding platforms to broaden their product offerings. The consolidation won't start until the SEC finalizes the regulatory structure enabling the JOBS Act. You heard it here first.
The keynote speaker after lunch was Kevin Harrington, a TV pitch innovator who brought you Ginsu Knives on shopping channels and infomercials before he joined the Shark Tank show. I'll share his tips on "Creating Brand Success" pretty much verbatim because they apply to lots of different business types.
Kevin liked the "Three Steps and a Stumble" approach to raising capital and growing a business. Step One is "curiosity overload." Deep market research reveals product trends, so collect industry publications and attend trade shows. You know what . . . that's exactly what I do. Step Two is "hijack your habits." Think outside the box. Make things happen. Don't do something the same way forever because business changes quickly. Hey, I do that too. Step Three is "build a brand for both the company and yourself." Man, this guy must be reading my blog because surely he recognizes the pure unrivaled genius that is both Alfidi Capital and Yours Truly, Anthony Alfidi.
Kevin also laid out five skills for entrepreneurs. Here they come.
- Skill One: Create the perfect pitch. Show healthy profits, exponential growth, acquisition opportunity, strong market, bootstrap capital from founders, uniqueness, powerful presentation using his "tease / please / seize" structure, the industry gap you fill (which I interpret as the pain points you solve), and your exit strategy.
- Skill Two: Publish. The business plan must have an executive summary, industry overview, competitive analysis, marketing plan, strong financials, and an exit strategy.
- Skill Three: Productize. Show your product's mass market, problem solving ability, uniqueness, magical transformation, celebrity endorsement, multi-functionality, credible testimonials, documentation and clinical studies, publicity, and value proposition compared to cost of goods.
- Skill Four: Profile. New media accelerates publicity. Smartphones now have multimedia production capabilities equivalent to a full broadcast studio. Shooting smartphone videos for YouTube will go a long way.
- Skill Five: Partnerships. Find parties with resources you need, and offer them resources they need.
Now for the "stumble" Kevin mentioned. If you must fail, do it fast and cheap. Make it up on the next venture. Kevin shared videos of a lot of his very successful infomercial products and few that were disappointments. No one remembers your disappointments if you recover and follow up with new successes.
These VEDC events are highly condensed equivalents of college seminars in finance and marketing. So where's the money? Well, here's the money, in my wallet. It's yours too once you line up investors and creditors who have confidence in your business prospects. Don't ask me for money. Go out and find it with the local partners VEDC lined up for you.
Monday, January 07, 2013
The Limerick of Finance for 01/07/13
Technology transfer is great
Marketing innovation can't wait
New gadgets and such
Don't cost all that much
Go commercial before it's too late
Marketing innovation can't wait
New gadgets and such
Don't cost all that much
Go commercial before it's too late
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