Intellectual Property - how the venture capitalists view the same? - presentation made at IIT Madras at IP Seminar by Department of Management Studies

1. IP Funding – an Investor’s
perspective
N Shekar

2. 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.

4. Investor life cycle
F, F & F
Incubator
Accelerator
Angel 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

5. 2015 Start up Eco System Ranking

6. Possibilities for TN Startups

7. Chennai Start up Map

8. 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

9. 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.

10. 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

11. A VC’s criteria for investing in IP
• Technology Investment Fund criteria
We 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

12. How to build an IP foundation?
1. Identify your core technologies
2. Audit your technology, understand your rights
3. Gauge your chances of IP protection
4. Get employees to assign inventions to the company
5. Implement non-competition and confidentiality
agreements
6. Establish procedures to protect your IP rights
7. Use patent applications offensively and defensively
8. Focus on the scope of your claims
9. Keep informed of your competitors' rights
10. Seek low-cost revenue opportunities

13. 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.

14. 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.

15. 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.