Monthly Archives: October 2012

A case study on Concrete Canvas

A case study on Concrete Canvas

Supporting company valuations and licensing agreements

The Sollomon valuation system helps proprietors and licensees to understand and agree the value of intellectual property and intangibles for licensing purposes and equity distribution.

Concrete Canvas Ltd manufactures a ground-breaking material which allows concrete to be used in a completely new and far more efficient way. The patented technology was originally developed for the company’s award-winning Concrete Canvas Shelters, a “building in a bag” that requires only water and air for construction.

Concrete Canvas products are sold to large construction firms, utility and infrastructure providers such as Network Rail, the Highways Agency and the National Grid, local authorities and military organisations all over the world, with exports accounting for 80% of sales. Orders are, as CEO Peter Brewin is happy to report, “off the scale!” and the company’s current focus is on expanding its production capacity.

Concrete Canvas first used the Sollomon valuation tool following an introduction by the Welsh Government in 2010. It conducted a new valuation in 2011, as supporting evidence for an updated company valuation when the company was putting a new share incentive scheme in place.

Peter Brewin sees the valuation as being useful in many different scenarios. He has used it when agreeing a licensing deal with the company’s US partners, and adds, “I also found it helpful to be able to send a report round to investors in Concrete Canvas, so that they can see the value of the product they have helped us to create.”

Peter concludes, “Inngot are a friendly company who offer excellent customer service and provide an efficient yet robust way of valuing intangible assets.”

Visit www.inngot.com today to find out more..

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Categories: All, Inngot | Tags: , , , , , | 4 Comments

Eco-Innovators and Intellectual Property

A new report, authored by Inngot for the ‘EcoMind’ cross-border initiative co-funded by the EU, has just been published. It investigates the IP challenges and solutions of most relevance to sustainable innovation.

EcoMind is a programme to support sustainable business growth and the development and market introduction of new, environmentally friendly products and services. One of the issues identified during the programme’s activities was the importance of obtaining sound commercial advice on intellectual property matters, particularly when bringing new products to market.

In order to produce actionable, evidence-based conclusions and guidance, Inngot conducted an intensive research exercise aimed at establishing the IP strategies being adopted by eco-innovators and the challenges and opportunities these present. This involved a combination of one-to-one interviews, secondary research and primary survey data (conducted online amongst the EcoMind membership, with support from the Environmental Sustainability Knowledge Transfer Network).

The report, Intellectual Property and Eco-innovation for Small and Medium Businesses, identifies key challenges faced by the sector, addressing in particular patenting, copyright and the alternative approaches often used to protect IP by preserving secrecy. It also highlights five aspects for eco-innovators to consider when formulating their IP strategy.

EcoMind has a strong focus on practical support. Accordingly, the final two pages of the report provide a list of 10 key questions, derived from the topics highlighted by Inngot’s research, and a “flowchart” to assist entrepreneurs in deciding which IP protection strategy is likely to be most appropriate for them.

EcoMind is led by BSK CIC and co-funded by the European Union under the Interreg IVA 2 Seas Cross-Border Programme 2008-2011.

Visit www.inngot.com today to find out more..

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Putting a value on sweat equity

Martin Brassell, CEO of Inngot, considers how founders can realise value from their hard work in a pre-start context

There are many areas in which expectations differ between investors and entrepreneurs seeking investment. One of the areas that often proves hardest to resolve is the question of valuation, especially if a business is yet to generate first revenues.

‘Sweat equity’ is the delightful term coined to describe the value to be placed on the efforts expended to bring an opportunity to the point of realisation. At the point when a business is first presented to independent investors, rather than a more receptive first audience of ‘friends and family’, entrepreneurs will often strive to place a financial value on their labours. From their viewpoint, this is a perfectly reasonable thing to do: after all, no-one doubts that bringing an innovative idea to market involves a lot of perspiration as well as inspiration.

Any investor worth having knows that the road to success is generally a steep one, and likely to require a good deal more sweat to be expended. He or she also understands that it is counter-productive to leave a founder so short of equity that they lack the commitment and energy to make the climb. However, the risk climate dictates that this is a buyer’s market at present, in which any valuation is bound to be subjected to close scrutiny, and needs to be as objective and well-evidenced as possible.

How does sweat get expressed? Generally as a factor or multiple of the salary that the entrepreneur(s) would be earning if they were in some notionally equivalent employment (or still in a previous job). The more senior time and energy put into an opportunity, the more it should be worth, and this method quantifies it – right?

Sorry – wrong, on a number of counts. To begin with, this approach assumes that hard cash and theoretical cash are equivalent in value. In reality, there is always an exchange rate in action. Sometimes this works in the founders’ interests, if they manage to get an opportunity to a point where it clearly has vastly more value than the time they have expended on it would indicate. But on other occasions, the investor is being expected to put in new cash to realise an opportunity that the theoretical cash has failed to deliver on its own. They will understandably take the view that their ‘real’ money is more risky and should attract a premium.

Even if a pound-for-pound calculation were appropriate, an investor has no way of auditing the amount of time that has actually been invested, or knowing whether the salary sacrifice implied is real or not. Certainly, people do sometimes jump out of highly paid jobs to create new ventures: but on some level, the saying that “necessity is the mother of invention” is generally applicable to entrepreneurial motivation as well as to the innovations themselves. And there is a more fundamental problem, which is the underlying premise that cost is equivalent to value.

Plainly, it’s not. The fact that it costs one company twice as much as another to produce a given widget does not translate into 2x value that the market can see. To take a less obvious example, many endeavours involve going down a number of what prove to be blind alleys. This creates ‘negative know-how’ – understanding what doesn’t work. It has some value, but clearly not as much as actually discovering the ‘secret sauce’.

To present a more compelling case requires a focus on what a pre-startup has actually been able to deliver to date. This involves consideration of assets, and since few start-ups are well enough funded to invest much in tangible ones, it inevitably comes down to the value that an investor can see in the opportunity and the company’s capacity to realise it based on a) the quality of the team (if there is one) and b) the quality of the approach embodied in its intangible assets.

An investor needs to see how the sweat invested by founders has translated into assets that create income, ‘freedom to operate’ and/or ‘barriers to entry’. Not all these assets are equal, and the type most highly prized will generally firm orders, often in short supply. However, any such orders are likely to have been secured based on capabilities that are underpinned by intellectual property and similar rights.

The more comprehensive an inventory of assets a business can produce, the better its prospects of attracting favourable attention, and the more likely it is that an investor will see that there is something of value at the heart of it. The present day value of those assets can then be extrapolated from the scale of the opportunity they enable a company to realise, and the length of time it will take for an investor’s new money to enable that opportunity to start to be realised. This comes down to having a credible and well drafted business plan, in which the risks and their mitigants are given proper consideration.

So the secret of expressing the value of sweat is simple: don’t focus on how much time you’ve spent – instead, show what you have been able to do with it.

Visit www.inngot.com today to find out more..

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Categories: All, Utilising, Value | Tags: , , , , , , | 2 Comments

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