From IP Strategy to Venture Capital
From IP Strategy to Venture Capital
The Importance of Early Innovation Research
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Today’s Ignore the Confusion piece is about our journey from IP Strategy consulting firm to Venture Capital firm. In many ways, we are performing similar tasks with startups, but now we get to participate in the upside.
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From IP Strategy to Venture Capital & The Importance of Early Innovation Research
Over the past 20 years, my firm helped create and implement intellectual property (IP) strategies for dozens of companies. This included robust innovation capture and management programs, technology landscape analysis, and white space assessments. Our team identified acquisition opportunities with defensible control positions for growing tech companies. We evaluated and recommended technical design-around strategies to avoid freedom to operate issues. Startups benefited from our deep research and analysis on how to identify IP gaps, position themselves for maximum leverage, and eventually exit through acquisition. And, we helped large corporations determine whether it made more sense to build or buy new technology.
Consulting on behalf of our clients was rewarding. Each project presented unique challenges, new technology to learn, and new experts to engage with. I am very fortunate to have worked with many brilliant technical, legal and business experts across a variety of technology areas. Our firm created immense value for our customers and we learned many lessons from their success and failures.
Upon reflection, the Golden Thread connecting all of our services is rooted in early innovation research. An early understanding of the technology area, players involved, and how those players act sets the stage for establishing differentiated R&D, business, and IP strategies. Whether it is a frontier tech start-up trying to identify product market fit, a mid-sized deep-tech company exploring acquirers, or a large company trying to identify new R&D and product development opportunities, early innovation research is key to success.
Our role in the success of these companies to access and leverage early innovation research is just a piece of the larger puzzle. While it's possible they would have excelled without our guidance, our firsthand experience helping numerous companies successfully navigate product launches, acquisitions, and IPOs has led us to take a more proactive approach. Rather than solely offering strategic guidance for a fee, we opted to directly invest capital along with our advisory services allowing us to actively participate in their success and reap the benefits.
Below are a few case studies (details redacted) from engagements that provide insight into how early innovation research is the key to success in a variety of circumstances.
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Large Company Searching for Growth Opportunities in New Markets: Build from scratch, acquire, or do something else?
One of the early projects we worked on was for a large analytical instrument conglomerate focused on molecular diagnostics. The company was interested in exploring the best way to enter two emerging technology areas, Light Emitting Diodes and DNA Microarrays.
Their stated goal was to explore entering these areas either by acquiring a company with an established R&D team and a strong IP position, or build a team based on gaps within the technology landscape. We spent several months working closely with experts from their R&D, corporate development, and IP teams to identify a handful of paths forward.
We dug deep into patent literature reviewing abstracts, and in some cases embodiments and examples, to understand what other companies were working on. We read a lot of scientific literature to understand the cutting edge. Then, we analyzed this data to assess who the players were, how much activity was occurring, where technology log jams were, and identify potential technology solutions.
With regards to Light Emitting Diodes, we discovered an area crowded with large conglomerates and a complex cross-licensing scheme, highly disincentivizing to new entrants. Our client chose to avoid this area.
Image of LED Patent Cross License Network.
As for DNA Microarrays, our research uncovered several acquisition targets along with research areas ripe for exploration. The client decided acquisition was the best path forward, and made a sizable investment in the area.
It would have been nearly impossible for our client to make informed decisions without investing resources to explore the early innovation and technology landscapes. Not only did they gain insights into whether and how to enter these areas, they set themselves up for long-term success.
By gathering extensive knowledge about their competitors and their actions, they acquired valuable data, analytics, and in-house expertise that played a crucial role in establishing their DNA Microarray business. Unlike situations where acquisitions are made solely based on personal connections, i.e. who the CEO’s lab partner was in graduate school, our client leveraged deep technology research to strategically acquire a company and maintain a significant advantage in an intensely competitive field.
Large Biopharma Company Looking for an Edge: Expansion into new therapeutic areas.
Researching early innovation and analyzing the competitive landscape goes beyond identifying key technical references and players. It is essential to gather and update this information on an ongoing basis. With thousands of new patents filed worldwide everyday along with countless scientific research papers published, it is critical for deep tech companies to stay on top of current research to help guide their R&D efforts.
Our client in the biopharmaceutical space identified a highly competitive therapeutic target, similar to a related area it dominated. The company was looking to keep pace with, and ideally surpass the competition in this emerging field. The head of IP, a high strategic thinker, recognized the importance of an early understanding of the state of the art, and ideally how to create novel approaches to drug targeting.
Working closely with the R&D, IP, medicinal chemistry, and the chemical analytics groups, we built a daily patent and chemical structure monitoring program for their teams in order to stay current on the newest developments. Each day, our team scanned and reviewed dozens of patents, drew representative chemical structures, and updated the client on the newest targets competitors were working on.
This program enabled the R&D, IP, and business teams to assess technology risk and determine viable chemical targets at the earliest point possible. Early monitoring of competitor innovations resulted in our client identifying gaps in the technology landscape, bringing novel molecules into the clinic, and ultimately creating one of the world’s most successful drug franchises.
Once again, deep, early innovation research led to a very successful outcome. By understanding the full up to date picture of what was occurring in this technology space our client leveraged this information and developed a differentiated strategy for drug targeting and stay ahead of the competition.
Early Innovation Research: A startup pivots to a new model
In a recent engagement, we worked with a startup to explore the robotic surgical device technology landscape. The founders, experts in robotics, identified a potential new area to apply their robots to. Their plan was to use robots for surgical procedures unserved by robots. They won a couple of non-dilutive grants from The U.S. Department of Energy and the National Science Foundation and decided to spin out a company based on their research. They licensed the patents from the lab and began working to improve and commercialize the technology.
After speaking to several technical experts and surgeons familiar with their area, the founders felt this new area had great potential. They began to approach large players in the robot surgery market to form a partnership.
However, the feedback from these robotic surgery companies was skeptical. It appeared that the big players might think less “creatively” than the founders. Maybe their idea wasn’t so “commercializable
” after all.
Meanwhile, the founders engaged our team to explore the patent and scientific literature landscapes related to robotic surgical devices, and the area they focused on. While we identified other early-stage research projects applying robots to their focus area, they were using different robots than our client. At the same time, we explored companies developing robots similar to those our client was developing, and identified several other markets where these types of robots were being applied. We discussed these areas with the founders, and one of them had an epiphany. By making a few minor changes to their technology, maybe they could apply it to a completely different market area.
As we researched this new area, along with their proposed tweaks to the technology, we uncovered a small number of published patent applications that appeared to be tangentially relevant. These patents had been filed by a professor at a European university. The professor was using very similar robots to what our client was considering, and applying those to a tangentially related market area.
Ultimately, after additional analysis of the scientific literature and patents, along with more technology and market analysis, the founders pivoted. They began to rework their technology, and apply their research to a totally different market. They filed new patents, and began reaching out to potential partners in this newly discovered market area. Almost immediately, they found researchers interested in collaborating, large companies interested in licensing the technology, and potential customers.
Overwhelmed by these “good problems to have”, we worked with our client to determine the best path forward. After much deliberation, the founders decided the following:
Use the technology they developed to provide a service to customers. Meanwhile, leverage the data created by customers to improve the technology for other fields of use. Then, use the combined, anonymized data to improve the product. This enabled entry into new markets to generate additional revenue, while improving the efficiency of their service for their current customers.
License the tangentially related technology developed at the European university. Although the technology being developed at the university wasn’t directly relevant to the startup’s technology, exclusively licensing the patents had several benefits:
Establish a relationship with a thought leader in their field. The professor was developing tangentially related technology which could be the basis for future improvements or alternatives to their own approach.
Gain credibility with future investors by increasing the size of the company’s IP portfolio, including patents and know-how. This move also increases the value of their company by accessing tangentially related technology that could produce revenue in the future.
Keep the patents and the professor’s know-how out of the hands of competitors. Thereby reducing the risk of others being able to stop or compete against them in the future.
The company is profitable and growing. They most recently raised significant capital to build out their team and continue to penetrate new markets. Our early innovation research laid the groundwork for their innovation and growth strategy. Without it, they likely would have gone in a less successful direction.
Ready Fire Aim
This last example reminds me of a recent talk by Neil Gershenfeld, director of MIT’s Center for Bits and Atoms, about the importance of early innovation research. He discusses the traditional method for bringing new innovations to market as, “Ready - Aim - Fire”. Gershenfield explains that the “Ready” part focuses on performing an incredible amount of research at the outset of any innovation project. This is what sets up the “Aim” and “Fire” actions for success. If you are not properly “Ready” he explains, the “Aim” and “Fire” actions are likely to fail.
Gershenfeld further explains how a “Ready - Fire - Aim” approach is more effective because typically the initial “Aim” is off target. By embracing “Ready - Fire - Aim” he argues, teams can spend a lot of time getting “Ready”, then quickly “Fire” a test version of a solution knowing that it is unlikely to hit the target. Or in the previous example, attempt to sell into a market where other solutions are better, faster, or cheaper.
The learnings from a quick “Fire” that misses the target sometimes enable the team to “Aim” better. So the critical time is spent getting “Ready”. Do the early stage research, figure out all the possible ways forward and then “Fire” away. Maybe the first target won’t hit, but a strong corpus of early research enables a quick pivot.
This could be in the context of finding a new market, identifying new research areas, and/or applying technology to solve problems in ways that are new, unexpected, or non-intuitive. These unexpected solutions are foundations of creating novel and defensible technologies. In addition, it forces innovators to remain flexible by keeping an open mind with respect to outcomes.
This is a good model for early-stage startups to identify product-market fit. It may take several iterations but in the end, early innovation research pays off.
Wrapping up
For the past 20 years, our core focus has been on early innovation research. As an IP research and strategy firm, we have assisted startups in leveraging their control positions to drive their R&D and business goals. Additionally, as early-stage frontier tech investors, we not only provide guidance but also invest in these startups. Understanding a startup's needs from the beginning is crucial in finding customers, mitigating technology risks, and charting a path to commercialization. Through early research, we identify unique strategies that lead to successful exits. By actively participating as both investors and mentors, we directly reap the benefits of our startups' success.
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Thank you to Rohit Gupta for help editing this post.