How do entrepreneurial ventures create value while protecting IP?

How do ventures create value while protecting their intellectual property? Amid some tension there are tricks to the trade, according to an expert panel at Cambridge Judge Business School.

Startup ventures in sectors such as technology face a dilemma: they want to elicit lots of feedback in hopes of perfecting the next great thing, while at the same time protecting their intellectual property (IP) against rivals big and small.

So how do entrepreneurial ventures create value while protecting IP? That was the topic of the Enterprise Tuesdayevent at Cambridge Judge Business School last month, part of a series organised by the School’s Entrepreneurship Centre. The sessions are held on Tuesdays in November, February and May each year.

The session was introduced by Dr Matthew Grimes, Reader in Organisational Theory & Information Systems and Co-Director of the Entrepreneurship Centre at Cambridge Judge, and chaired by Shaun Grady, Vice-President of Business Development Operations at pharmaceutical giant AstraZeneca. Panellists were Heather Richards, CEO of Cambridge-based knowledge automation company Transversal, and John Snyder, a Cambridge Judge Entrepreneurship Fellow and co-founder of Grapeshot, a contextual intelligence platform that was acquired last year by US software company Oracle.

Here is an edited summary of the discussion at Enterprise Tuesday on 12 February:

Squaring the circle

Matthew Grimes: “This topic is rife with a lot of tension. Clearly there’s a need to protect one’s intellectual property but also a need to open up and get external feedback.”

The need for patenting differs by sector

Shaun Grady: “Applying for a patent is costly, maintaining patents is costly. But is there a sense that you need to be patenting because it’s a proof point of your innovation and your growth as a company?”

John Snyder: “I think it’s mandatory in life sciences where you have a business model not based on revenue and a lot of customers, but based on hypothesis, which is very intellectual, so you need a very strong patent base. But in other businesses your real winning formula isn’t the patent, it’s how you conduct and how you grow your business and it’s the quality of your team and everything you put into play, not just the IP.”

In patent applications, a little bit of information can go a long way

John Snyder: “The problem with patents is you have to publish your method. So you can have a knife used to cut bread, but you need a patent to show that it can also spread butter – and you have to demonstrate that in the patent application. We didn’t want to tell the world how we were doing our algorithms, so I purposely went off and did one patent that was left of field, just to tick the investment box.”

Heather Richards: “Early on there was our core method, part of which was patented. We thought, for the same reason, why do you want to broadcast to the world the very things that make you special? But it’s possible to get out there not the full code – but enough to get the idea out there and communicate to potential investors that this is what we’re focusing on.”

Pay close attention to the language of your contracts

Heather Richards: “I’ve talked to some founders who didn’t realise until three or four years later that the way their employment contracts are written, the coding belonged to the coders and not the company. Also, make sure that NDAs (non-disclosure agreements) are in place for employment contracts. Then, as you start selling product, look at the contracts you have with firms you are selling to: some might want exclusivity, so you have to ask is that something you want to do – as it could keep you from doing a deal with a bigger company.”

Keep excellent IP records for potential acquirers down the road

John Snyder: “You need to lock down who owns the IP in all cases. They need to see a complete audit trail and where the IP sits. You have to be absolutely sure you have that wrapped up.”

Shaun Grady: “In therapeutics, we walk away from a few deals once we decide to go for them, and the absence of strong IP is typically the reason we walk away.”

The Cambridge ecosystem – how good is it for startups?

Shaun Grady: “Let’s talk about talent: what was it like getting access to the clever people who would help you fulfil your vision? Is Cambridge   the right place to be? Is Cambridge big enough to get the resource and intellectual capital to feed the innovation?”

John Snyder: “Cambridge is an awesome place to be. A good friend coined the phrase: ‘It’s a low-risk place to do high-risk things.’ It’s the culture of Cambridge: You can recruit people who don’t want a payday salary, they want a challenge and a problem and a mission.”

Heather Richards: “Cambridge is a great place to be, that’s one of the reasons we’ve stayed here. There are so many bright people who, if you put a problem in front of them, can do amazing things even if they’ve never tackled that problem before. What’s changed dramatically is the competition we have in hiring people in Cambridge. Ten years ago that didn’t exist. We’re now part of “AI Alley” – just footsteps away from Apple, Amazon and, Microsoft in a little corner of Station Road.”

New bank card with fingerprint scanner

Are you someone who’s forgotten the pin for your credit or debit card with the usual embarrassing and inconvenient consequences? Thankfully, those days may soon be behind you. Because a card with a built-in fingerprint scanner is on the way. Izzie Clarke asked Angel Investor Peter Cowley to explain who's behind this work. 

Peter - It's actually a company you probably haven't heard of because these products like this are all done by companies you hear with the consumer. It's a company called Gemalto, a Dutch company, a couple of billion turnover. Quite a big company and they're just introducing this initially as tech and trialling it.

Izzie - Where are we hoping we might be able to see this?

Peter - Well, they've trialled it in several places round the world but it's been announced that RBS and NatWest are trialling it just with 200 people just for three months.

Izzie - Okay. So not too many then! How does this actually work?

Peter - It's basically a card as I’ve got one in my hand and it's got a chip on it. You can't use it contactless because you need the power to run the fingerprint detector. So you're putting the card into the reader so then the power comes through from the reader itself and instead of putting your pin in, you've got your finger or thumb over the reader at the same time. So what they've done is to actually get into the card which is much less than 1 mm thick. The idea behind it is that you're using your fingerprint or your thumbprint instead of a pin. Now the advantage of that is that pins are obviously forgotten, as you say. My late father used keep his pin attached to his card - it's not a good idea. And also that the pin itself, you're probably not aware but the pin can be stored on the card but it also can be stored remotely so there's a possibility the pin can be intercepted. Whereas the fingerprint will be stored purely on the card in the same way as it is on your phone if you've got a fingerprint recognition on your phone.

Izzie - How secure is this though?

Peter - Well, this is a good question. In fact, I don't know if you're aware - Chris might be aware - that even identical twins do not have the same fingerprint. And it turns out it's because a level of nurture rather than nature i.e how long the umbilical cord is even, whether that fingerprint changes. So we are all unique, basically.

Chris - I was just going to ask you how the fingerprint scanner works because there are several ways to scan fingerprints, aren't there? There's just the mundane way of taking a picture which is pretty easy to fool, and then there's the way that most phones work which is they're measuring the electrical capacitance. But then there's this newfangled way which is it stores an ultrasonic measurement of the fingertip which is much hard to dupe, so which of these is it?

Peter - I suspect, and there's no technical information on the net about this, but I would suspect that it’s the capacitance one, because you got to get into such a small space. This is 0.75 mm so that's got to have both the reader and all the electronics behind it and all the wiring etc. So security, yes, it's likely to be much more secure than a pin.

Izzie - And, you know, cost-effective? How much does it add to the cost, say, of operating a card?

Peter - Again, they don't know yet because these are really small trials. But if you take a standard card it's about 10 or 20 cents to manufacture in big volumes. If you take it with a chip in as well it's 1 to 2 dollars, so it's going to be more than that. But the cost of actually distributing the card and the pin and everything else by the bank to people like us is a multiple again, so the card cost is likely to be more. It comes down to whether it's worth it for somebody. Now is it for the people who forget their pins or perhaps have some sort of issue with remembering pins. Chris, do you remember your pin?

Chris - I struggle because of I’ve got so many cards. Like passwords, because we’ve got to the point now where we've made passwords so uber complicated with 15 different types of special character, plus a number, plus a capital letter, a lock of your mother's hair and a DNA sample all wound into your password. You can't remember any of them so what do you do, you write them down. But the point I was going to make about cards, is this fingerprint business a sort of solution to a problem that we really haven't got any more because are cards are really going to be around? Do you see a long term future for cards because everyone is paying with phones and things?

Peter - Exactly. In fact, as you know, on the this program before I have an Apple watch and and because Apple have done a deal, in the same way that Google will have done a deal, I can spend several hundred pounds on my wrist. I use cash probably once every five or six weeks. I use my card only when it's, say, in one of the big supermarkets round here I will get stuck at £30 limit otherwise I don't. I think it's more going to be used by people who do have a problem with remembering pins so I think that will actually work. But how big is that subset of the population? And if it's related to age, they obviously get old and use less so if you take the sort of millennial going through, it may not be needed. So I think, it's probably and may be very unfair on the manufacturer, properly a piece of tech they’re trying to see if there's a market.

Izzie - And you said that it's going to be a small trial, so when is this coming and where?

Peter - It's coming in the next 2 or 3 weeks I think in the UK, but that it has been trialled around the world so they're obviously trialling it out. The tech probably works, it’s whether the market i.e. us want to adopt it.

Prince of entrepreneurs aims to become king of the castle

Cambridge technology company Grapeshot created 27 millionaires among staff and investors from inception in 2002 to last year’s sale to American corporation Oracle, founder John Snyder has revealed.

While Oracle has slammed the lid tight on the price it paid for Grapeshot, US sources say to start at more than $300m and head towards half a billion dollars before stopping to reflect.

As second-leading shareholder Snyder walked away with a tidy packet financially but the sale didn’t include retaining the founder’s talents, which gave him several months to reflect on what he had built and what the future held.

In stark contrast to the mountain of greenbacks Oracle laid on the table Snyder well recalls the time when he bootstrapped the business, which applies advanced keyword technology to the programmatic advertising market and the broader field of information retrieval.

In the early years he was regularly laying out £20k a month to meet wages and other commitments, bankrolling as well as building the fledgling venture.

Imagine his feelings when he and co-founder Martin Porter were invited to London to meet US internet entrepreneur and VC Reid Hoffman – inspiration behind LinkedIn – only to leave the office having spurned the offer of major investment that would have fast-tracked the growth of the young company.

Snyder told me: “Martin was co-founder and the massive brains behind Grapeshot. Reid really liked our company and our culture and was prepared to back his judgement with big money. This was very early Grapeshot – five or six people.

“Martin was very scared of the fireworks that might ensue from driving Grapeshot into the stars –  a strategy that he felt was full of risks. I thought it could have been a great way to grow the company but we declined the investment offer and decided to grow our capital base much more slowly.

“In 2009 I said to Martin that I couldn’t keep bankrolling the business to the tune of £20k a month; even the payroll was down to me. I needed to hire more people quickly to take advantage of expansion opportunities. Then IQ Capital came onto the scene and we were able to grow at our own pace.”

Grapeshot set up a small office in New York, then Chicago and over the ensuing years the global roll-out became inexorable.

Oracle’s swoop last spring could not have been in greater contrast to Grapeshot’s humble beginnings – in Snyder’s attic. He did take an office in King’s Parade but that was so small, there was hardly room to accommodate a well-fed cat, let along swing one!

It was there that Reid Hoffman was initially introduced to the founders and immediately fell in love with Cambridge, Grapeshot and their respective cultures.

Fast forward to 2018 when Oracle came calling with a deal that literally changed Snyder’s lifestyle if not his life. He felt they were a great fit as the American company was entrepreneurial and immediately appreciated the energy and passion Grapeshot’s people had inculcated into the enterprise.

But in the final shakedown he was left with his windfall alongside his P45 and concedes that after so many years with Grapeshot he found the estrangement hard to come to terms with: “It doesn’t matter how much money you get, you are still left with a feeling of bereavement,” he says. “People congratulate you but you think; ‘hang about, I’ve lost my job. That feeling is now well behind me but one thing I will never forget is the amazing culture we engendered at Grapeshot.

“I didn’t architect that culture but when we were around 25 headcount we had an independent consultant come in and spend some time with us and he identified three stand-outs:  1 – Simplicity: The company was run in a straightforward manner with simple apps and so on; 2 – Transparency: We kept staff informed about our financial position and other key factors; and 3 – Our people: Our people were supremely talented, worked hard and there was mutual trust between staff and management.

“I would say these qualities would benefit any young company keen to scale; recreating the kind of intimacy found in a family. When things come together you get a tremendous surge of adrenaline. And the sky isn’t the limit – there is no limit to what you can achieve if you unleash the kind of culture we engendered within Grapeshot and continue with it as you grow. We carried our culture to New York, Chicago and elsewhere and it is a really great feeling when it all comes together for the company.”

Snyder believes that the climate for growing a world-class technology or life science business from Cambridge has never been better. He was star turn at a Cambridge event hosted by global VC Draper Esprit last week and CEO Simon Cook set out the backdrop to his firm’s view on the Cambridge tech scene.

Cook said after the event: “We've been investing in Cambridge-based entrepreneurs for the last 20 years – from companies like CSR to the next generation such as Fluidic Analytics, Evonetix and Ieso Digital Health.

“But what was most striking about the event was seeing a new level of ambition in the ecosystem; there's a new hunger to build businesses of significant scale. “It really takes a whole community to build an ecosystem that enables that- the entrepreneurs, the capital, those with the expertise, the people like John Snyder who have ‘been there, done it’, the engineering, sales and marketing know-how.

“It takes a lot, and it was wonderful to have so many people from each corner of the ecosystem joining together. It feels like Cambridge is at an inflexion point, and we're just excited to get stuck in and play our part.”

Snyder feels the same way. He said: “I agree with Simon – Cambridge has changed dramatically for the better. Cambridge is a world-class cluster and a very low risk environment in which to build a successful tech business.

“The city is on the world stage and there are lots of Cambridge companies making a significant impact globally. Sales of young companies to Google, Apple and Amazon are testimony to that. The physical infrastructure hasn’t kept pace but the talent pool locally has enabled our best cutting edge businesses to follow their visions. Just as people are important to a business, so headcount is important to produce tax and spend for the economy.” So what next for John Snyder? Having just returned from a spell of kite surfing in the Bahamas he has rekindled his love affair with Cambridge Angels, which he co-founded and hopes to invest in future Grapeshots.

He says the group has become a major force on the investment scene, injecting record sums into early-stage ventures, and had gone past the ‘turn up for dinner and hear a pitch’ early days to become a well-oiled, thoroughly pre-prepared and professional full-time organisation. The Snyders – John’s wife Canon Sarah Snyder works as a peace reconciliation adviser to the Archbishop of Canterbury, Justin Welby in a role once filled by Terry Waite – have bought a big house in Cambridge and are also looking to help renovate a castle in the north of England as a reconciliation centre.

Longer-term John wants to create a corporate training, meetings, family events and weddings venue at Rose Castle – again, a far cry from his old Cambridge attic. He says: “I am meeting a lot of Cambridge companies again and my passion is to kickstart the Rose Castle project and get it up and running as a thriving business – and maybe attract more than a few Cambridge companies there.”

Peter Cowley: A Letter to my CEO Self

Peter Cowley founded Camdata, an electronic engineering, product design and turnkey development company, in 1984. To date, Camdata has delivered over 17,000 products and revenue of more than £16 million. Now a tech entrepreneur, angel investor and speaker, Peter has personally invested in 67 startups, is chair of the Cambridge Angels and President of the European Business Angel Network (EBAN).

Dear 29-year-old Peter,

You have had some entrepreneurial experience at University and in Bavaria, but this is the big plunge, the high risk, with which you will not only “cut your teeth”, but many other bodily parts, as well as your pride. The Camdata journey you are about to embark upon continues even now, 34 years later, with your, as yet unborn, youngest son running Camdata as a lifestyle business. And you will go onto found another dozen startups, with varying levels of success.

Within six years, Camdata will suffer a painful failure, followed by a cautious phoenix, the sale and buyback (within just six months), followed three years later by buying your acquirer and then a competitor.

The journey will give you decades of gradually greying hair which, when you undertake an unforeseen metamorphosis into an angel investor, will provide invaluable experience and anecdotes to help the many hundreds of entrepreneurs you will meet, and act as a catalyst for the Invested Investor publishing project.

Some of the things that I know now, that would have prevented mistakes and heartache, and probably led you to better, although less interesting, outcomes are:

• Grasp opportunities – whether being an entrepreneur is nature and/or nurture, you have always been comfortable with risk, albeit conducting more and more analysis as you age, before taking the plunge.

• Luck is also important – having £70K of personal credit card debt to help finance building three houses in late 2001 could have bankrupted you.

• Build a great team – you have hired juniors who have become great leaders, but you have also made mistakes by hiring fast and firing slowly.

• Don’t skimp on skills within finance – letting a bookkeeper allocate cost of sale transactions onto the balance sheet, leading to a large unexpected write-down was very painful.

• Follow macroeconomic trends – not foreseeing the 1990 recession and hence downsizing earlier may have saved the business.

• Understand Lifetime Value – ensure it is a multiple of the fully loaded Customer Acquisition Cost, especially when mainly making capex sales. By the way, despite analysis, you will get it wrong with ZedCam – CAC using Google AdWords equalled LTV for nearly 2 years, before you realised and shut down the business.

• Financial leverage using debt works in both directions – with a rising asset price, the reward is large; when falling, the pain is even larger.

• Revenue is vanity, profit is sanity, but cash is reality – memorise this adage.

• Choose your advisors and Non-Executive Directors with care – and renew them as the company grows

• Regretting and FOMO (Fear Of Missing Out) are futile – you will need to learn that these are destructive character traits

The saying that “what doesn’t kill you makes you stronger” is quite true, and building a business takes courage and, at times, blind faith and perseverance.

By the time you get to my age, you will find that that your many, many “war stories” are of more use than you could possibly have imagined in helping young entrepreneurs. So, go for it, take the risks, make the mistakes and you will find incredible satisfaction in helping build multiple companies, as an Invested investor.

Yours,

Peter (your future self)

David Cleevely wins Barclays’ High Growth and Entrepreneurs ‘Icon of the Year’ award

Dr David Cleevely - one of the original Founders and still a Director of the Cambridge Network - has won the ‘Icon of the Year’ award at the Barclays’ annual High Growth and Entrepreneur Awards.

The awards were announced at a recent event and highlight and recognise the unique, original and positive ways that entrepreneurs from the UK are changing their industries, the economy and society.

The ‘Icon of the Year’ category is awarded to prominent entrepreneurs leading the way for existing and future entrepreneurs.

David is the Chairman of Raspberry Pi, founding Chairman of the Cambridge Science Centre and the Founding Director of the Centre for Science and Policy, University of Cambridge. He has been a prime mover behind the Cambridge Network, co-founder of Cambridge Wireless, co-founder and Chairman of Cambridge Angels and he is a member of the IET Communications Policy Panel.

David Cleevely said: “This is a great outcome for Cambridge and recognises the huge role which Cambridge now plays in the UK. With over 15 $1Bn companies and more in the pipeline from the most active entrepreneurial cluster in Europe, I’m proud to have contributed to this outstanding success. ”

Jon Corbett, Head of SME, South East Midlands and Cambridgeshire at Barclays said: “The Barclays High-Growth and Entrepreneur Awards, now in its third year, has proved to be a valuable and influential business competition for entrepreneurs and high growth businesses across the country. Entrepreneurs are fundamental to the UK’s economic competitive advantage, disproportionately driving job growth, attracting investment, and creating the innovative products and services that shape our todays as well as tomorrows.”

A national judging panel made up of key industry leaders and influencers selected the overall winners and presented the awards on the night.

Photo of David Cleevely courtesy of Raspberry Pi.