Patents promote startup acquisition success
You know the symptoms when they startup – racing pulse, the distraction at work, thinking only about one thing…
And then – at last! – you get together. But instead of bliss, it all falls apart. While it’s Saturday night and I’m still at work, that’s not what I’m talking about!
No, I’m referring to that depressing all-too-frequent story of failure. That is, of a failed startup-BigCo integration.
REALLY – IT ISN’T YOU….
Like all romances, this sad story begins with high hopes. BigCo realizes that it needs fresh innovative ideas and new blood. It makes your startup the object of its buttoned-down corporate affection.
The deal goes through. Suddenly you and your startup team are the stars of the moment. You’re lauded for your intelligence and daring, and (hopefully) paid well for joining the BigCo family.
But as Steve Blank points out, these acquisitions often just don’t work. His insight as to why they fail focuses on the reasons that the BigCo acquires the startup vs. the startup’s lifecycle stage. He specifically notes that these reasons should mesh with the stage in the startup’s life to avoid failure.
Under two circumstances, Steve Blank recommends rapid assimilation to the BigCo (using a rather disturbing Borg analogy). In the first circumstance, the startup has found a sustainable business model and the BigCo expects the startup to continue commercial execution on its innovation. Steve Blank has a number of recommendations for how to best integrate it into the larger corporate environment.
But sometimes, as Steve Blank points out, the BigCo doesn’t expect the startup team to continue executing on the innovation that it developed. One example that he gives is when a startup is acquired for its intellectual property. He briefly states that in this case, the startup team should be rapidly assimilated as its current business processes aren’t used to the BigCo.
NOT ALL INNOVATORS ARE INVENTORS
I’d like to add some specific recommendations to this general advice. Innovators who have developed the intellectual property – particular patents – can make their general ideas into the concrete property. Constructing patents is non-trivial and requires three skills:
- Distilling a vague idea to a specific design
- Describing how that design is different from what has been done before
- Blocking competitors from commercially lucrative related ideas
The BigCo could benefit from these skills in many ways. For example, instead of assigning the startup team to a vague “innovation group” which has no clear direction or goal, the BigCo could assign the team to solve a specific problem within a particular department. With these skills, the team would provide focused solutions to these problems. The new solutions could then be protected with patents that successfully block BigCo’s competitors from entering the space.
Or, for companies that have an effective innovation culture (like Disney, Amazon or any of the Alphabet soup), the startup team could execute well on bringing the department’s general ideas to a commercially successful solution. Patents would again protect that solution, to stake out BigCo’s market space and of course, block competitors.
When innovators can successfully translate their ideas into patents and other intellectual property, they should be employed – and of course, rewarded – for their unusual skills. BigCos that recognize the value of such innovators will ultimately get the maximum benefit from their startup acquisitions.
PATENTS PROMOTE THE PROSPEROUS STARTUP
But I’d add some specific tips for startup teams with patents:
- Define the value of the patents for the BigCo (i.e. – most of the deal value or just a nice to have?)
- Ask yourself whether the acquisition is the way to go. Could license your patents to be enough?
- Would a competitor give you a better deal to keep BigCo from having your patents?
Whatever you decide to do, patents will give your startup more options. And if your startup is bought by a BigCo, patents will help make it a success!
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