Jurgen Vollrath, President at ET Counsel, explains how PatSnap’s landscapes help clients position their disruptive technologies in the marketplace
What does Exponential Technology Counsel do?
We work with companies of all sizes. If I were to take a startup as an example, a common problem that I see with founders is they start off not really knowing where they want to go with their business.
“They have a niche technology that they want to develop. They might have been working on it as researchers at a university, and then they do this rudimentary mental analysis, that goes something like this: “What is my total addressable market, and what kind of market share can I expect?”. Then they’ll say “we’ll be conservative, we’ll just assume we’ll get one or two percent of the market.” However, it’s all a guess on their part really. They have no data other than being able to identify how big the market is – they have no idea how big a share of the market they will actually attract.
“There’s clearly a big problem with this approach.”
What challenges do your clients face?
One challenge clients face is defining their exit strategy. They don’t have an exit strategy – in fact, they’ve never considered what their exit strategy might be until an angel investor comes along, at which point they pull one possibility out of the hat, without considering all the options and identifying what makes the most sense for their particular situation. And the second thing is they typically don’t validate who their customers are, or what their needs are.
“As I mentioned, they usually go out making an assumption about how much market they can get, but it’s really a function of how valuable – how unique – their product or their process is, and how well they protect that position – whether that’s through patents, trade secrets, or by creating strategic relationships.
“The last point is your company valuation. If you are going to be exiting – and I use the term “exit” in the broad sense of being able to liquidate your funds, even if you’re going for an IPO – you want to be able to put a dollar or a euro value on your business.
“What I’m saying is, in order to avoid the guesswork, companies need to make use of landscape maps. Through patent analytics, you can plug some of the holes, avoid a lot of the guesswork.
“Investment bankers, CFOs traditionally value companies using financial models based largely on earnings, year-on-year growth and adjusting this information to align with financial curves. They’ll, for example, downgrade profit margins a few years down the line on the premise that competition will start cutting into profits. But again, it’s based on guesswork. On the other hand, by knowing how well you can protect your uniqueness, the assumption that your market share will be eroded over time is not necessarily correct.
“You can actually impact how much it gets affected – simply by the way you structure your IP portfolio and what strategic relationships you create with other companies – and to do that you need an overview of where you’re going, which gets back to the whole landscaping issue.
“And basically that’s what we do. We work with companies through each of those steps to ensure not only that they’ll be successful, but to position them so as to increase their valuation by as much as 50%.”
How does PatSnap fit into your work?
We use PatSnap first to identify who all of the players are in the field.
“When you start off with your new technology, you don’t really know who else is involved.
“You might, through the grapevine, have heard of other companies that are active in this space – but that, by no means, means you have a clear indication of who all the other players are.
“Typically your knowledge is limited to companies that are actively marketing their technology. And for each company that’s actively marketing, there are probably 10 people who are doing research behind closed doors: at universities or research institutes. And then there are countless numbers of individuals who have patented their ideas but failed to ever commercialize them.
“And so, by actually doing a patent analysis and identifying all the players by virtue of their patents, you get a much better overview of the challenges you’ll be facing. And secondly you want to consider the companies that are active – and are commercializing – and ask yourself: “How can I use them? How can they benefit me?” – Either from a licensing perspective, or they might be a potential target for acquiring your company later on.
“All these players are of interest to you. It’s a matter of seeing what patents they’ve filed, what patents they are renewing, what companies they have acquired, and what portions of the acquired IP they have expanded on. In other words, have they done anything further with that IP? In the United States there’s an application called a Continuation in Part (CIP), and, as in Europe, you have Divisional Applications, which basically provide a vehicle to expand the protection of your existing technology. By monitoring these activities you identify where their interests lie. It gives you a crystal ball to define their next move.”
Are there personal drivers behind what you’re doing? Why is this so important to you?
” It goes back to the book “Abundance” by Peter Diamandis – that was sort of the precursor to my going down this road. There are certain technologies that will take the world by storm, that will totally disrupt the way we do things.
“And in the book, the author mentions the example of Kodak, and how they were totally annihilated simply because they didn’t see the broader picture.They invented the digital camera, but because they felt it would undermine their existing technology – their market share in paper and chemicals – they decided to ignore it. In fact, they went one worse – they licensed the technology to all their competitors.
“So the whole concept of exponential technologies, and how best to promote them, became a dominant theme, which resulted in my founding Exponential Technology Counsel. I found this whole thing fascinating, and I knew there were ways that we could work with researchers and make them more successful. I think the stats are something along the following lines: that 80 percent of startups fail in the first five years, and of the 20 percent that are left, another 80 percent fail in the following five years. I figured that if I worked with these researchers I could make the success rate significantly higher, and increase the value of their technologies and their startups.
“So the short answer to your question is – it’s kind of the excitement of helping a company that would probably otherwise fail, to ultimately be wildly successful.”