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Upping valuation v2 9 30-2013

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Have you ever wondered what it is you need to do to increase the valuation of your company to get the best payout when you exit? This panel will discuss many ways of upping your valuation and how to start the process in the early days as well as improving it in the latter days of the life of the company.

For example, adding high profile industry experienced people to your team, buying or developing really interesting patents, creating channels, a brand, relationships that matter. Other ways include increasing your customer base and creating products that fit the gaps which larger competitors possess. When an acquiring company looks at you, what constitutes your value drivers?

Join a distinguished panel comprising entrepreneurs and acquirers as well as financial experts who can give you an idea of how to best increase your company’s valuation.

Published in: Business, Technology
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Upping valuation v2 9 30-2013

  1. 1. UNLOCKING THE VALUE OF YOUR IPUNLOCKING THE VALUE OF YOUR Creative Venturing: Upping your Valuation Moderator: Fas Mosleh, SVP, IP M&A Panelists: Praveen Gupta, VP, SK Telecom Tony Quintong, CEO, Securieon Clive Surfleet, Former IBM Executive Mark Heyl, Partner, M&A, Hopkins & Carley 1 Rights to trademarks referenced herein, other than Kanzatec trademarks, belong to their respective owners. We disclaim proprietary interest in the marks and names of others.
  2. 2. UNLOCKING THE VALUE OF YOUR IP • Introduction • Panelist views • Questions • Open session 2 Agenda Kanzatec is a leading Patent Research and Transaction Advisory firm serving private and public high tech companies to help drive greater business success through high-performance patent strategies. Our senior consultants combine operating company experience in business management, information systems, patent strategy and operations, with analysis and research capabilities spanning many high tech segments. The company collaborates with a wide range of high tech companies, from startups to the Fortune 500.
  3. 3. UNLOCKING THE VALUE OF YOUR IP Corporate Introduction • Founded in 2008 to focus on IT analysis and research – grew into IT product and system research, prototyping for F500 for IP projects – IT systems heritage • Emerging, SMB & Fortune 500 companies in high tech – imaging, web, software, enterprise datacenter, systems, semiconductors, mobile/wireless telecom • IP Brokerage Palo Alto, CA - Sales, Acquisitions, Valuation, Research/Analysis • Global team members and Subject Matter Expert network – Silicon Valley, NY, Kansas, San Diego, London, Netherlands, Korea, China – India, Europe, SMEs 3
  4. 4. UNLOCKING THE VALUE OF YOUR IP What Kanzatec Does – R&R 4 IP M&A and Patent Sales
  5. 5. UNLOCKING THE VALUE OF YOUR IP Example Industries We Serve 5 Energy Transport Networking Medical Imaging Mobile Data Center Semiconductor Cloud Social Web E-Commerce Software
  6. 6. UNLOCKING THE VALUE OF YOUR IP The Value in a Tech Company 6 Products & Technology Management Processes & Operations Customers and Channels Team & Brand Patents
  7. 7. UNLOCKING THE VALUE OF YOUR IP The Value in a Tech Company 7 Products & Technology Management Processes & Operations Customers and Channels Team & Brand Patents
  8. 8. UNLOCKING THE VALUE OF YOUR IP • Situation – Need another round of funding • Challenges – Business doing poorly – New funding hard to get at reasonable valuation • Action – Divest patents with a license grant back • Results – Obtained $2M to extend runway another 18 months 8 Upping Valuation– IP Funding
  9. 9. UNLOCKING THE VALUE OF YOUR IP • Situation – $1B+ revenues semi company • Challenges – Unnecessary IP found every year • Action – Create a regular revenue stream • Results – Sell $1M of patents every quarter garnering 75% margins – Healthy, dynamic IP strategy 9 Upping Valuation– IP Income
  10. 10. UNLOCKING THE VALUE OF YOUR IP Why Do Companies Patent? 10 Source: HIGH TECHNOLOGY ENTREPRENEURS AND THE PATENT SYSTEM: RESULTS OF THE 2008 BERKELEY PATENT SURVEY
  11. 11. UNLOCKING THE VALUE OF YOUR IP Praveen Gupta 11 Creative Venturing Upping Valuation Creative Exits Creative Funding
  12. 12. UNLOCKING THE VALUE OF YOUR IP Upping the Valuation:  When do I start?  What can I do early on? 12 Praveen Gupta Vice President – Corporate Business Development October 4, 2013
  13. 13. UNLOCKING THE VALUE OF YOUR IP 13 When do I start? – At Idea Conception Stage Source: Wikipedia - derived from work by Kompere Goals to get from Idea Conception to Exit:  Maximize Value (Wealth) at Exit  Minimize Time to Exit at the peak of growth curve  Target IPO, but Position for Getting acquired not sold Idea Conception
  14. 14. UNLOCKING THE VALUE OF YOUR IP 14 What can I do early on? • Fundamental • Identify and Focus on Value Drivers • Be driven by Passion not Emotion • Selfless Leader - Think Team not individual • Flexible and Realistic • Don’t be blinded by your own thoughts • Open mind - No Tunnel Vision • Excellent Listener – Open to Criticism and act on it appropriately • Admit mistakes, learn from them, fix, and execute • Strategic • Build A-Team – Core expertise and relationships in your target area • Solve a real problem not a me-too solution • Get on the Radar of potential acquirers and investors • Tactical • Understand market, competition, & Customers – Outside-In • Seek Value add Partners and relationships • Build fundamental IP – Tweaks are not differentiators • Create work environment that encourages creativity
  15. 15. UNLOCKING THE VALUE OF YOUR IP 15 Examples: Good, Bad, & Tough-Luck • Good • GSM Switch Company • Decided to focus on 2nd and 3rd tier markets • Built a highly reliable full feature GSM switch at affordable prices • Avoided competition with big guys • Fast revenue growth as 3G market took-off • Sold to a US based company focused on Asia market to enable their expansion in emerging markets • Very good returns for investors • Bad • VoD server Company • Focused on serving VoD Applications over DSL • Great vision but too many bells & whistles • Great strategy but very low flexibility on tactical side • Targeted very small size customers without fully validating their financial credentials • By year 3, broke-even on booked revenue, but mostly turned out to be uncollectible • Company shut-down – tried to sell but no buyers • Tough-Luck • Enterprise Software Company • Built A-Team • Focus on CRM with defensible IP and Fortune 500 customer base • Positioned to price at $1+ Bn for IPO but market crashed that day • Sold 6 months later for low valuation due to ongoing Stock market issues
  16. 16. UNLOCKING THE VALUE OF YOUR IP Tony Quintong 16 Creative Venturing Upping Valuation Creative Exits Creative Funding
  17. 17. UNLOCKING THE VALUE OF YOUR IP Upping Valuations Without Emotions “Everything in life is for sale except for your family, friends and your soul” Izzy Orin
  18. 18. UNLOCKING THE VALUE OF YOUR IP Value is often in the eyes of the beholder
  19. 19. UNLOCKING THE VALUE OF YOUR IP Pre 2008-A false sense of value was masked by great waves of optimism and available credit. You just had to be at the right place and the right time to catch a wave of success.
  20. 20. UNLOCKING THE VALUE OF YOUR IP The Reality-Fault lines eventually cracked and a tsunami of economic waves of disaster caused wipeouts
  21. 21. UNLOCKING THE VALUE OF YOUR IP Insert Graph of Historic Market Performance
  22. 22. UNLOCKING THE VALUE OF YOUR IP Connecting the Dots for Higher Values-Milk Shakes and Life What is the real value you are delivering to the client? RFP-reading between the lines-Medical Sterilization Knowing the IP value of your employees Bentleys-M5s-S55-Posers-Furniture Lipstick on a Pig Fire-Ready-Aim Is not Sustainable-Used Tech Equipment Radura is not a river in Italy-NAFTA Cows, Spinach and the FDA The difference between Arrogance and Confidence is-Competence Ballast Water
  23. 23. UNLOCKING THE VALUE OF YOUR IP We deviate from the norm and quickly look at the systemic issues preventing real value
  24. 24. UNLOCKING THE VALUE OF YOUR IP Systemic Challenges to Value Revenue Sustainability and Scalability Masked Misalignment of Culture and Infrastructure from the top False Sense of Core Expertise-Ego What markets can you win? Who are the top three companies that would buy your firm? Silos and misalignment Investor Fatigue/Founder Fatigue
  25. 25. UNLOCKING THE VALUE OF YOUR IP Decision Points to Upping Your Valuation Why sell or buy today? What would your customers says? Blunt Employee Feedback Competitive Market Position and Differentiation Growth by Acquisition or by Execution? Valuations you can justify
  26. 26. UNLOCKING THE VALUE OF YOUR IP 26
  27. 27. UNLOCKING THE VALUE OF YOUR IP Clive Surfleet 27 Creative Venturing Upping Valuation Creative Exits Creative Funding
  28. 28. UNLOCKING THE VALUE OF YOUR IP BLADE NETWORK TECHNOLOGY (BNT) VALUATION STORY Clive Surfleet – Former BNT SVP, HP & IBM Executive October 4, 2013 28
  29. 29. UNLOCKING THE VALUE OF YOUR IP • Technology from Alteon & Nortel • Business Started at Nortel in 2003 – Networking switches for Blade Server market • By 2006, business was struggling due to lack of focus in Nortel • Spun out as a private company in 2006 • Acquired by IBM in 2010 29 BNT Background
  30. 30. UNLOCKING THE VALUE OF YOUR IP • Valuation Measures – Revenue, Growth, Margins, Expenses, etc. – Perception of Value by the Buyer • Valuation Issues – Weak Gross Margins – Product Breadth – Route to Market – Direct, Reseller, OEM – Customer Breadth – Perception of Low Value Add 30 BNT Valuation Issues
  31. 31. UNLOCKING THE VALUE OF YOUR IP • What we did – Very tight operational management – Technical Field Sales Engagement – Product Expansion – First to market with new technology – New Routes to Market – New Product Categories – Make yourself look bigger than you really are – Customer Intimacy 31 Steps Taken to Improve Valuation
  32. 32. UNLOCKING THE VALUE OF YOUR IP • Build exceptionally close relationships with a few large customers – Long Term Relationships – Daily, weekly, monthly interaction at all levels – Multi-function relationships – R&D, Support, Sales, etc. • Build a strategic alignment – If your customer wins, you win • Allow them to help guide your product and business plans. • Continually bring new ideas to your customer. 32 Customer Intimacy
  33. 33. UNLOCKING THE VALUE OF YOUR IP • Displaced Cisco in a large number of accounts • Grew to 70% market share in Blade server networking • Several customers became minority shareholders • Eventually sold the company to our largest customer 33 Results
  34. 34. UNLOCKING THE VALUE OF YOUR IP Mark Heyl 34 Creative Venturing Upping Valuation Creative Exits Creative Funding
  35. 35. UNLOCKING THE VALUE OF YOUR IPUNLOCKING THE VALUE OF YOUR Upping Valuation: Pre-Exit Considerations Presented by Mark A. Heyl Hopkins & Carley, A Law Corporation
  36. 36. UNLOCKING THE VALUE OF YOUR IP Priorities of a Founder Develop Product or Service Raise Capital Minimize Operating Expenses Minimize Taxes
  37. 37. UNLOCKING THE VALUE OF YOUR IP Priorities of a Founder Develop Product or Service Raise Capital Minimize Operating Expenses Minimize Taxes
  38. 38. UNLOCKING THE VALUE OF YOUR IP Priorities of a Founder Develop Product or Service Raise Capital Minimize Operating Expenses Minimize Taxes
  39. 39. UNLOCKING THE VALUE OF YOUR IP Priorities of a Founder Develop Product or Service Raise Capital Minimize Operating Expenses Minimize Taxes
  40. 40. UNLOCKING THE VALUE OF YOUR IP Priorities of a Founder Develop Product or Service Raise Capital Minimize Operating Expenses Minimize Taxes
  41. 41. UNLOCKING THE VALUE OF YOUR IP Paradigm Shift Preparing for the Exit • Financial Statements • Establishing a Consensus • Timing • Consult with Advisors
  42. 42. UNLOCKING THE VALUE OF YOUR IP Paradigm Shift Preparing for the Exit • Financial Statements – Profits Most Substantial Factor in Determination Price – Shift Focus from Reducing Taxes to Maximizing Profits – Remove Unnecessary / Inappropriate Expenses • Take Non-Contributing Family Members off Payroll • Take Personal Items off Balance Sheet (i.e., cars, boats, 2nd homes) • Establishing a Consensus • Timing • Consult with Advisors
  43. 43. UNLOCKING THE VALUE OF YOUR IP • Financial Statements – Profits Most Substantial Factor in Determination Price – Shift Focus from Reducing Taxes to Maximizing Profits – Remove Unnecessary / Inappropriate Expenses • Take Non-Contributing Family Members off Payroll • Take Personal Items off Balance Sheet (i.e., cars, boats, 2nd homes) Paradigm Shift Preparing for the Exit • Establishing a Consensus • Timing • Consult with Advisors – Dissenting Family Members – Identify Key Employee – Retention Bonuses – Stock Options
  44. 44. UNLOCKING THE VALUE OF YOUR IP • Financial Statements • Establishing a Consensus – Dissenting Family Members – Identify Key Employee – Retention Bonuses – Stock Options Paradigm Shift Preparing for the Exit • Timing – Health Considerations – Economic Considerations – Transition • Consult with Advisors
  45. 45. UNLOCKING THE VALUE OF YOUR IP • Financial Statements • Establishing a Consensus • Timing – Starting or Buying Another Business – Retirement – Funding the Plan Paradigm Shift Preparing for the Exit • Consult with Advisors – Corporate Transaction Attorney – Business/Industry/Valuation Consultants – Estate Planning Attorney – CPA – Financial Advisor – Business Broker / Intermediary
  46. 46. UNLOCKING THE VALUE OF YOUR IP Thank you. Mark Heyl mheyl@hopkinscarley.com Hopkins & Carley, A Law Corporation 70 S. First Street San Jose, CA 95113 200 Page Mill Road, Suite 200 Palo Alto, CA 94306 (408) 286-9800 hopkinscarley.com
  47. 47. UNLOCKING THE VALUE OF YOUR IP Thank You 47 Creative Venturing Creative Exits November 8 Creative Funding December 6
  48. 48. UNLOCKING THE VALUE OF YOUR IP What’s Your V? 48 VALUE V V V V

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