Due Diligence - Can you dress it up to take it out?


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Due Diligence - Can you dress it up to take it out?

  1. 1. Dress Your Business Up To Be Taken Out By Greg Waite
  2. 2. Your Business as seen by You
  3. 3. As seen by a Banker
  4. 4. As seen by a Buyer
  5. 5. As seen by an Investor
  6. 6. As seen by a Tax Assessor
  7. 7. What’s Your Future <ul><li>Only 1 to 2% of companies will go public </li></ul><ul><li>98% will get taken out </li></ul><ul><ul><li>To the scrap yard </li></ul></ul><ul><ul><li>Or by acquisition </li></ul></ul>
  8. 8. Diligence <ul><li>Yours versus Theirs </li></ul><ul><li>Yours </li></ul><ul><ul><li>Everyday – Operating/Tactical/Strategic </li></ul></ul><ul><ul><li>Pre-sale Diligence </li></ul></ul><ul><ul><ul><li>They can’t value what they can’t see </li></ul></ul></ul><ul><li>Theirs </li></ul><ul><ul><li>Post-sale Diligence </li></ul></ul><ul><ul><ul><li>Looking for bullets, bombs and black holes </li></ul></ul></ul>
  9. 9. Group Challenge <ul><li>What are your primary assets? </li></ul>
  10. 10. Primary Assets for Tech <ul><li>Intangible Assets </li></ul><ul><ul><li>IAM </li></ul></ul><ul><ul><ul><li>Human Capital </li></ul></ul></ul><ul><ul><ul><li>Intellectual Assets </li></ul></ul></ul>
  11. 11. Focus On Intellectual Asset Management <ul><li>Run a Great Business </li></ul><ul><li>Look at everything you do in terms of </li></ul><ul><ul><li>Operations </li></ul></ul><ul><ul><li>Tactics </li></ul></ul><ul><ul><li>Strategies </li></ul></ul><ul><li>Monetize your assets </li></ul>
  12. 12. Operating Benefits of IAM <ul><li>Easily </li></ul><ul><ul><li>Finding things, facilitating transactions, getting the right answers quickly </li></ul></ul><ul><ul><ul><li>facilitate meetings, decisions etc. </li></ul></ul></ul><ul><ul><ul><li>finding and executing employment or contractor agreements </li></ul></ul></ul><ul><ul><ul><li>knowing when a license is up for renewal </li></ul></ul></ul><ul><ul><ul><li>knowing who did a specific piece of work 3 years ago </li></ul></ul></ul><ul><ul><ul><li>showing proof documentation for SRED </li></ul></ul></ul>
  13. 13. Tactical Benefits of IAM <ul><li>Exploiting some assets for barter, cross licensing or some kind of monetization (brand visibility) </li></ul><ul><ul><li>Examples </li></ul></ul><ul><ul><ul><li>selling a component of code to provide cash flow and visibility </li></ul></ul></ul><ul><ul><ul><li>networking in your community and bartering/cross licensing non-core assets with members </li></ul></ul></ul><ul><ul><ul><li>providing a value component for free (perhaps open source) to garner brand awareness </li></ul></ul></ul><ul><ul><ul><li>having specialized legal agreements that expedite turnkey deals (maybe strategic) </li></ul></ul></ul>
  14. 14. Strategic Benefits of IAM <ul><li>A longer term business purpose </li></ul><ul><ul><li>aligning intellectual assets and human capital towards products and services that fulfill the needs/wants of specific markets/segments and purposes (pain and or gain). </li></ul></ul><ul><ul><ul><li>Positioning as # 1 or 2 in Space (Barrier Strategy) </li></ul></ul></ul><ul><ul><ul><ul><li>Branding Strategy </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Business Model </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Patent Block </li></ul></ul></ul></ul>
  15. 15. Intellectual Asset Management <ul><li>What Is it </li></ul><ul><li>Why is it Important </li></ul><ul><li>When is it Important </li></ul><ul><li>What are the Benefits </li></ul><ul><li>Who Can Facilitate it </li></ul><ul><li>What Would it Involve </li></ul>
  16. 16. What Is It <ul><li>Documenting and monitoring your intellectual assets </li></ul><ul><ul><li>(measure, mentor, manage) </li></ul></ul><ul><ul><ul><li>What are they, what do they do </li></ul></ul></ul><ul><ul><ul><li>Who created them </li></ul></ul></ul><ul><ul><ul><li>Who owns them </li></ul></ul></ul><ul><ul><ul><li>How are they protected </li></ul></ul></ul><ul><ul><ul><li>What agreements are related to them </li></ul></ul></ul><ul><ul><ul><li>How do they relate to products, services, R&D programs </li></ul></ul></ul>
  17. 17. What Are IA’s <ul><li>Myth – it’s not just about Patents </li></ul><ul><ul><li>In fact, for most companies Patents will represent none or only a small portion of value </li></ul></ul><ul><li>An Intellectual Asset is anything that you have created that provides some measure of value or uniqueness to your business (or others) </li></ul>
  18. 18. Group Challenge <ul><li>Brainstorm on Intellectual Assets </li></ul>
  19. 19. Examples of IA and IP <ul><li>Ideas </li></ul><ul><li>Invention </li></ul><ul><li>Unique Business Knowhow </li></ul><ul><li>Customer Relationships and Information </li></ul><ul><li>Logos </li></ul><ul><li>Brands </li></ul><ul><li>Domain Names </li></ul><ul><li>Software </li></ul><ul><li>Web Site(s) </li></ul><ul><li>Landing Pages </li></ul><ul><li>Brochures </li></ul><ul><li>Concepts </li></ul><ul><li>What you’ve learned (captureinternal expertise) </li></ul><ul><li>Advisors, Employees/Consultants </li></ul><ul><ul><li>Special Skills, Unique Competency, Relationships </li></ul></ul><ul><li>Competitive assessments </li></ul><ul><li>Repurposing products for other segments </li></ul><ul><li>Awards, Testimonials, Case Studies (PR) </li></ul><ul><li>Testing Frameworks Apparatus, Materials </li></ul><ul><li>Strategies </li></ul><ul><ul><li>Monetization Strategies </li></ul></ul><ul><li>White Papers </li></ul><ul><li>Publications (where are you published) </li></ul><ul><ul><li>wikipedia </li></ul></ul><ul><li>Policies </li></ul><ul><li>Procedures/Processes </li></ul><ul><li>Specialty Agreements </li></ul><ul><li>Business Plans </li></ul><ul><li>Pre-planned Product Improvements </li></ul><ul><li>Competitive Analysis </li></ul><ul><li>Analytics (web, discovery, research) </li></ul><ul><li>Licensing in opportunities </li></ul><ul><li>Customer conduits (monetizing communities and relationships) </li></ul><ul><li>Key Word Analysis </li></ul><ul><li>Adoption Curve Analysis </li></ul><ul><li>Innovation Curve Analysis </li></ul><ul><li>Business on a Page </li></ul>
  20. 20. IP verus IA <ul><li>Formal IP is different from IA </li></ul><ul><li>Formal IP rights </li></ul><ul><ul><li>Patents </li></ul></ul><ul><ul><li>Trademarks </li></ul></ul><ul><ul><li>Copyright </li></ul></ul><ul><ul><li>Industrial Design </li></ul></ul><ul><ul><li>Trade Secret </li></ul></ul><ul><ul><li>Domains (lite IPR rights) </li></ul></ul>
  21. 21. Group Challenge <ul><li>Poll Audience on IP Knowledge </li></ul><ul><li>David to Quickly Cover Some Basics Such As </li></ul><ul><ul><li>Patent vs. Trade Secret </li></ul></ul><ul><ul><li>Software and Business Method Patents </li></ul></ul><ul><ul><li>How to Keep a Secret Secret </li></ul></ul><ul><ul><li>First to file vs. first to invent </li></ul></ul><ul><ul><li>Domain vs. Trademark </li></ul></ul><ul><ul><li>Registered versus not Registered (Copyright and TM’s) </li></ul></ul><ul><ul><li>Important Jurisdiction Considerations </li></ul></ul>
  22. 22. IA’s versus IP <ul><li>It’s only IP if it has IPR and/or you proactively protect it </li></ul><ul><li>IA’s don’t have to be protected to have value but it is best to protect them to “preserve value” & “certify ownership” </li></ul>
  23. 23. Why Is IAM so Important? Valuation ! <ul><li>60% to 99% of a company is based on intangibles, intellectual assets and human capital </li></ul><ul><li>the primary value is “off the balance sheet” – not tracked by your accounting system </li></ul><ul><ul><li>Even in Steel and Oil and Gas companies the winners are all about innovation and inventiveness </li></ul></ul><ul><ul><ul><li>Repurposed Steel, Tar Sands Extraction </li></ul></ul></ul><ul><ul><li>TIP - Spend at least 10% of your “accounting time” on intellectual assets. </li></ul></ul>
  24. 24. Why Is IAM so Important? Corporate Memory <ul><li>Knowledge and IA walks in most companies </li></ul><ul><li>Imagine a Store where 20% of the inventory shrinks every year </li></ul><ul><ul><li>Minimally that is what happens to intellectual assets </li></ul></ul><ul><ul><li>Lost information on a portion of a prototype could end up being a wall </li></ul></ul><ul><li>Transition Costs </li></ul>
  25. 25. Why Is IAM so Important? Time Burner <ul><li>Re-invent Re-create </li></ul><ul><li>Where is it </li></ul><ul><li>Who did it </li></ul><ul><li>Why did they do it that way </li></ul><ul><li>What was learned </li></ul><ul><li>How does it relate to other assets </li></ul><ul><li>* Payroll is the highest cost </li></ul>
  26. 26. Why Is IAM so Important? Examples <ul><li>Planned Product Features and Prototypes </li></ul><ul><ul><li>When a CTO leaves can you find these </li></ul></ul><ul><li>Market Research </li></ul><ul><ul><li>When a Marketing Manager leaves can you find his or her research </li></ul></ul><ul><li>Competitive Analysis </li></ul><ul><ul><li>When a Product Manager or Mkt Manager leaves can you find competitive analysis </li></ul></ul><ul><li>Agreements </li></ul><ul><ul><li>Can you readily find contracts, licenses, confidentiality agreements </li></ul></ul><ul><li>Key Dates </li></ul><ul><ul><li>Can you find or are you notified on key dates, renewals, expiries etc. </li></ul></ul>
  27. 27. Group Challenge <ul><li>Monetize “Them There Assets&quot; </li></ul><ul><ul><li>Google </li></ul></ul><ul><ul><li>@Home </li></ul></ul><ul><li>Strategic Innovation </li></ul><ul><ul><li>Dell </li></ul></ul><ul><li>Repurposed Innovation </li></ul><ul><ul><li>Dofasco </li></ul></ul><ul><li>Competitive Innovation </li></ul><ul><ul><li>Suncor </li></ul></ul><ul><li>Unfocused Innovation </li></ul><ul><ul><li>Polaroid </li></ul></ul>
  28. 28. Why is IAM So Important? IP Has “Legal and Monetary” Teeth
  29. 29. Why Is IAM so Important? Time Burner & The BIG Ugly <ul><li>Big Events like Funding or Prospective Acquisition </li></ul><ul><ul><li>Shoe box versus a System </li></ul></ul><ul><ul><li>Dressed to Sell? </li></ul></ul><ul><ul><ul><li>Complete </li></ul></ul></ul><ul><ul><ul><li>Transparent </li></ul></ul></ul><ul><ul><li>Do You Have the Time to Dress Up </li></ul></ul>
  30. 30. Think Like an Investor <ul><li>Investments Analogy </li></ul><ul><ul><li>Compare </li></ul></ul><ul><ul><ul><li>Management </li></ul></ul></ul><ul><ul><ul><li>Innovativeness </li></ul></ul></ul><ul><ul><ul><li>Markets </li></ul></ul></ul><ul><li>Are you demonstrating “management” around the most important asset class in your business? </li></ul><ul><li>How can they know what you don’t show? </li></ul><ul><li>If you don’t value it how can they? </li></ul><ul><li>Can you communicate how assets translate into product service revenue streams? </li></ul>
  31. 31. TIP on Preparing for Their DD <ul><li>Check off your capacity to complete DD with ease </li></ul><ul><li>Show Gowlings </li></ul>
  32. 32. Some Examples - Your DD Investing in the Right Assets? <ul><li>Market/Customer Centric </li></ul><ul><li>Watch the Innovation Curve !!!! </li></ul><ul><ul><li>Are you investing in areas that customers or markets care about </li></ul></ul><ul><ul><li>Many companies invest time and effort in meaningless features </li></ul></ul><ul><ul><ul><li>People only use 5 to 10% of a software feature set yet software companies over innovate and add new features instead of increasing the usability of existing ones </li></ul></ul></ul><ul><ul><li>Many companies invent outside of their core </li></ul></ul>
  33. 33. Some Examples – Your DD Licensing-In <ul><li>Innovate for Competitive Edge </li></ul><ul><li>License-in for speed and non-core capabilities </li></ul><ul><li>Understand you strengths and limitations </li></ul>
  34. 34. Some Examples – Your DD Competitive Analysis <ul><li>Grow UP & Compete ! </li></ul><ul><ul><li>This is an asset not a liability </li></ul></ul><ul><ul><li>What you can’t see and what you don’t show will kill you. </li></ul></ul><ul><li>Understand the Innovation Curve of your market(s) </li></ul>
  35. 35. Group Challenge - Competition <ul><li>What do you need to know? </li></ul><ul><li>Beyond their DD, Your DD </li></ul>
  36. 36. Your DD Competitive Analysis – Score Card
  37. 37. Your DD Competitive Analysis – Score Card
  38. 38. Your DD Competitive Analysis – Score Card
  39. 39. Competitive Analysis – Score Card
  40. 40. Competitive Analysis – Keeping Watch <ul><li>Find an Efficient Process </li></ul><ul><ul><li>We Use Copernic to Email Web Site Page Changes or Additions </li></ul></ul><ul><ul><li>Capture in Category within FuseTalk Discussion Forum </li></ul></ul>
  41. 41. Group Challenge : New Features <ul><li>Brainstorm - How do You Evaluate New Features? </li></ul>
  42. 42. New Features
  43. 43. New Features
  44. 44. Group Challenge : Market Segments <ul><li>Quick Triage on Market Segments </li></ul>
  45. 45. Your DD Market Segments
  46. 46. Group Challenge – Product Strategy Repurposing <ul><li>Brainstorm – What criteria could you use to evaluate the potential of repurposing or repositioning an asset/product/service </li></ul>
  47. 47. Your DD Product Strategy Repurposing
  48. 48. Group Challenge – Your Visibility <ul><li>Brainstorm – If Brand = Value plus Visibility, how do you demonstrate that you are or can be Visible? </li></ul>
  49. 49. Your DD Visibility <ul><li>Keyword Analysis </li></ul><ul><li>Hub and Spoke Marketing </li></ul><ul><li>Discussion Forums, Blogs, Wiki’s & Directories </li></ul><ul><li>Press Releases </li></ul><ul><li>Awards </li></ul><ul><li>Your Own Publications with RSS Feeds </li></ul>
  50. 50. Your DD Visibility <ul><li>Web Statistics </li></ul><ul><ul><li>Traffic </li></ul></ul><ul><ul><li>Rankings </li></ul></ul><ul><ul><li>Popularity </li></ul></ul><ul><ul><li>Stickiness </li></ul></ul><ul><ul><li>Return Visits etc. </li></ul></ul>
  51. 51. Your DD It All Starts With Discovery <ul><li>Build up the inventory </li></ul><ul><ul><li>what has been created, by whom, when, what does it do, is it protected </li></ul></ul><ul><li>Classify it </li></ul><ul><ul><li>Is it software, an idea, a trademark, a new feature, a strategy </li></ul></ul><ul><li>Organize it </li></ul><ul><ul><li>High versus value, competitive advantage, outside of competancy, why did we do this </li></ul></ul>
  52. 52. Consider a Standard Process <ul><li>All Assets Go Through a Systematic Review </li></ul><ul><ul><li>Pool and Parse </li></ul></ul><ul><ul><ul><li>Portolios, Micro(subset), As Is </li></ul></ul></ul><ul><ul><li>Evaluate </li></ul></ul><ul><ul><ul><li>Finance : SRED/OIDMTC </li></ul></ul></ul><ul><ul><ul><li>Legal : IP Assessment </li></ul></ul></ul><ul><ul><ul><li>Marketing : Commercialization, New Segments, Comp Edge, Opp for new Partners etc. </li></ul></ul></ul><ul><ul><ul><li>Promotion : Can you spin PR here? </li></ul></ul></ul><ul><ul><ul><li>Licensing : Cross License License Out Non Compete Opps </li></ul></ul></ul><ul><ul><ul><li>Relationships : Can you target new or existing customer to adopt technology </li></ul></ul></ul>
  53. 53. Your DD and Their DD Gems and Black Holes or Bombs <ul><li>Gems </li></ul><ul><ul><li>Typically will find a few assets that are </li></ul></ul><ul><ul><ul><li>not well known but are key differentiators, have competitive clout </li></ul></ul></ul><ul><li>Black Holes and Bombs </li></ul><ul><ul><li>Overinvested, low value, can license in, not strategic, not part of competancy or market </li></ul></ul>
  54. 54. Conclusion <ul><li>You can’t just dress-up you need to be “in shape” underneath it all </li></ul><ul><li>You must be in shape and dressed up at all times cause you never know when someone will ask you out </li></ul><ul><li>Due diligence is a process it’s really DO DILIGENCE </li></ul><ul><li>Always evaluate on how to Monetize Your Assets, if you can’t get rid of them. </li></ul><ul><li>Exploit everything on the Inside </li></ul><ul><li>Look at Your Company from the Outside </li></ul>