SMEInnov8Gate®

The Art of IP Valuation – A question of time and context

Seminario internacionalsobre valorización de tecnologías

21st June 2011

Brian More

Director IP Services

Coventry University Enterprise Ltd

Sustainable environments for a global, knowledge based economy

International seminaron valorization of technologies

Agenda

1. Background

2. SMEInnov8Gate®

o Objectives

o Toolso Tools

3. Future roll out of the tools

Background

Established 1989; Technology Park since 1998; IRC since 1995; Knowledge based business support services:Pre-incubation, incubation (BIC), innovation, metrology...knowledge base international business; exploitation of IP

transnationally (EEN), Internationally (China, India, Brazil...)Institute of Applied Entrepreneurship.Institute of Applied Entrepreneurship.

2004 - Intellectual Asset Management - IP Major Problem3 different software tools for new product assessment

o COAP – 10 point university schemeo RIB-IT 5 point NASA toolo Synnova® 1,000 of questions from Defence Diversification

Agency

SMEInnov8Gate®

o Open innovationo Large company formal commercial product developmento New product introduction (NPI) methods e.g. gating

The Development, validation, testing and dissemination of a professional and sustainable SME TTT Stage Gate methodology to produce profitable

innovation collaborations with large companies and RTDs

o New product introduction (NPI) methods e.g. gating processes

o Translate tools for SME useo Test in four sectors

Unioncamere Piemonte - ALPS IRCAutomotive & Transport

Coventry University Enterprises Limited – Midlands IRCICT & Health

SMEInnov8Gate®

Latvijas Tehnoloăiskais Centrs- IRC LatviaAgro Food

METU Technopolis – IRC AnatoliaSecurity & Defence

SMEInnov8Gate® - Resource Allocation

Model of generic StageGate® process used by

large companies

Specification

Concept Development

Gate 1

Gate 2

Customer Needs

IP Assessment

ROI

Customer Needs

IP Assessment

ROI

FACI

Validated SMEInnov8Gate® Stage Gate

Methodology

Prototype

Detail

Launch

Gate 3

Gate 4

ROI

Customer Needs

IP Assessment

ROI

Customer Needs

IP Assessment

ROI

ILITATOR

SME NPD ProcessInnov8Gate Tools SME-Innov8Gates

Gate Team

Useful tools 1. The Commercial Opportunities Appraisal Process

A. Uniqueness of the technology, IP Protection

B. Readiness of the technology for market entry

C. Value of the Accessible Market (VAM)

D. Anticipated profit margins (if considering a license, score on the anticipated royalty rate)

E. Intensity of Competition in the Market

F. Competitive Edge of your product or serviceF. Competitive Edge of your product or service

G. Ease of access to the Market

H. Customer conservatism

I. Commitment of the team

J. Commercial experience of the team

EachEach point is scored 1point is scored 1--10 10

Resulting 0-100

Useful tools 1. C.O.A.P. NPD Weighting Factors

A. Uniqueness of the technology, IP Protection 0.12

B. Readiness of the technology for market entry 0.08

C. Value of the Accessible Market (VAM) 0.20

D. Anticipated profit margins 0.12

E. Intensity of Competition in the Market 0.09

F. Competitive Edge of your product or service 0.14

G. Ease of access to the Market 0.06

H. Customer conservatism 0.05

I. Commitment of the team 0.07

J. Commercial experience of the team 0.07

Σ weighting factors = 1.00 Σ weighting factors = 1.00

Resulting ΣΣ 0-10

SMEInnov8gate® Tools

IP ToolIP Tool

Profits ToolProfits Tool

Technology issues (state of readiness,

IP protection, USP) Customer issues

(Acceptance, requirements and focus)

Market issues (accessible market volume,

route to market)

Standard financial metrics to track

project progress and anticipated profit Profits ToolProfits Tool

Customer ToolCustomer Tool

project progress and anticipated profit

margins, Return on Investment, Internal

Rate of Return, Breakeven

Listening carefully

Understanding fully

Delivering exactly

Useful ToolsUseful Tools 2.2. IP Health CheckIP Health Check

Identification of all IP assets that are subject matter in a transaction

Confirmation of IP status, in force or pending, registered or unregistered

Examine scope of IP rights to ensure that they cover what the company wants to commercialise

Verify the validity of the IP assets to determine whether they can be upheld under attackunder attack

Check for the existence of any litigation involving the rights

Identification of licences under the rights, or restrictions, impacting on IP value

Identification of any third party right which may prevent commercialisation

Useful Tools 2.Useful Tools 2. Profit ToolsProfit Tools

Standard financial metrics to track project financial progress and anticipated profit margins

o Return on Investment

o Internal Rate of Return

o Breakeveno Breakeven

o Net Present Value

o IP Value

Valuing IP – similar process to valuing any asset

• Open market value

Determine basis/context of

valuationSelect and apply

appropriate valuation methodologies• Copyright

• Database

• Trade mark /

Identify asset(s) / understand rights

• Calculate the incremental

• Value in use

• Fair value

• Liquidation value

• Book value

• Trade mark / passing off

• Patent

• Know-how / trade-secrets

• Design right

Calculate the incremental

value added by the IP

Slide credit: LECG Ltd, London

Income Approach – Factors

Influencing the Discount Rate

NPV = PV / (1 + r)n

Risk PremiumLost Interest

Where n is the year of the cash flowr is the discount factor expressed as a decimal

Discount

Rate

Inflation

Income Approach - Risks

• Technology Risk• Market risk• Specific industry risks

Appropriate discount rates are calculated using– CAPM (capital asset pricing model)– CAPM (capital asset pricing model)– WACC (weighted average cost of capital)

We can estimate the discount factor at each gate of theprocess to indicate the increasing IP value prior toproduct launch

Useful Tools 4. Voice of the Customer (VoC)

The "voice of the customer" is a process used to capture the

requirements/feedback from the customer (internal or external) to provide

the customers with the best in class service/product quality. This process is all

about being proactive and constantly innovative to capture the changing

requirements of the customers with time.

The "voice of the customer" is the term used to describe the stated and un-

stated needs or requirements of the customer. The voice of the customer can stated needs or requirements of the customer. The voice of the customer can

be captured in a variety of ways: Direct discussion or interviews, surveys,

focus groups, customer specifications, observation, warranty data, field

reports, complaint logs, etc.

This data is used to identify the quality attributes needed for a supplied

component or material to incorporate in the process or product. Definition from the iSix Sigma website

Future roll out of integrated toolkit

Currently all the software is available as separate Excel

Spread Sheets.

Use of Microsoft Gold partners using Microsoft Technologies:

oSharePointoSilverlightoWPFoWPF

Will integrate the suite of programs into a Professional

Quality Product for FNL (Floating Network Licences) to all

EEN centres

Will integrate the suite of programs into a Professional

Quality Product for multi platform, multi level use:

oCrystal Mark documentation

oEasy to understand and clear instructions to followoPC, Laptop, 4G Phones, Apple Devices, Blackberry

Commercial Industry

Future roll out of integrated toolkit

Commercial Industry

Appraisal

Voice of the

Customer

Financial Analysis -

Investor and Project

Data

Technology and

Resources Gap

Analysis

SMEInnov8gate Home Page

SMEInnov8gate methodology Web Page

SMEInnov8gate Training Web Page

SMEInnov8gate CIA Assessment Report

Sustainable environments for a global, knowledge based economy

Dr Brian MoreCoventry University Enterprises Ltd

Email: b.r.more@coventry.ac.uk