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Brain
Gain
By Michael Alan Hamlin
April 1, 2003
Paco Sandejas' Brain Gain Network
brought a couple of big guns to town last week to speak to a roomful
of IT entrepreneurs. You may recall that Sandejas is one of those
rare Filipinos who came back from the States to build careers, and
to try to help the Philippines get itself on track. A firm believer
in synergy, Sandejas started the Brain Gain Network, a network of
successful, overseas Filipinos who want to give something back,
and collectively can have some substantial impact.
Giving something back doesn't actually
mean that many in the network return to live in the Philippines
permanently as Sandejas has done, but they do come back to help
during short visits in various ways. Those ways range from the straightforward
transfer of knowledge and information to making business deals to
funding startups. Last week, Dennis Fernandez, a Silicon Valley
patent attorney, and Katrina Montinola, who has held a number of
top engineering jobs - including director of engineering at Oracle
- in both successful and not-so-successful Valley firms, spoke to
a room full of aspiring entrepreneurs.
Fernandez is not shy about admitting
that he is one of the Valley's most successful patent attorneys.
His presentation last week was intended to share two important pieces
of information. First, how to create what he calls a "fundable"
startup; and second, how to protect the hardware, software, and
services local startups develop here in the Philippines and sell
- hopefully - everywhere else.
The notion of creating a fundable
startup - especially in the IT sector - is not a great one to contemplate
these post-Internet bubble days. As Ms. Montinola observed, "There's
not a lot going on." But just because it's difficult doesn't
mean it can't happen, when the correct process - and not just the
idea - of developing an entrepreneurial business is pursued. And
because Fernandez has been involved with so many startups, he has
some pretty good ideas about that process.
The first - and most important step
in the process of creating a fundable startup - is putting together
the right team, he says. And how smart the team is - although that's
important - isn't the principal consideration for investors trying
to determine whether a startup is "fundable. The team is the
most important," Fernandez told his listeners, "because
investors need trust." That trust has to do with having the
confidence that the entrepreneurs will follow through on what they
say they will do in an honest, as well as competent, way.
The team is so fundamentally important,
Fernandez asserted, because it's the one step in the process of
creating a fundable startup that can't be fixed. So if investors
aren't comfortable that they're going to be dealt with honestly,
they walk away. No idea, no opportunity is so great that an investor
- in today's environment - will take a chance on a team that could
betray him by holding back information, fail to live up to production
commitments, or bail out when the going gets tough.
Former Microsoft executive and now
mentor capitalist Joey Gurango in a separate seminar last week agreed
that teams are at the core of creating a fundable company. Aside
from honesty, both Gurango and Fernandez say that a team must be
well differentiated in terms of its talents, roles, and responsibilities
as well. "Investors don't want a bunch of engineers running
the company," Fernandez said. "They want an MBA who's
watching the bottom line."
The second step in the process of
creating a fundable startup is the market. "Investors typically
are looking for a return of up to 50 times what they put into a
startup," Fernandez said, so they want to see a potential market
that can - if everything goes right - meet those expectations. "You
need big numbers and small percentages," Gurango added when
he spoke on entrepreneurship, "so that just two percent of
the market makes everyone rich."
The final step is the development
of a proprietary product, something that has real value, and can
be protected. "There are two parts to this," Fernandez
said. "First, the technology must be differentiable, and it
must work." And it must be clearly distinct in a fairly profound
way in terms of new insight. Second, "it must be protected.
If you don't protect your property, then you automatically consign
it to the public domain where anyone can use it," he said.
Protecting property is not easy or
cheap, however, especially if a startup is seeking to protect hardware
designs. A patent, according to Fernandez, can take years to get
approved and cost anywhere from $5,000 to as much as $20,000. There
are temporary alternatives, however. One is what Fernandez calls
a provisional application - a sort of do-it-yourself application
- as opposed to having someone like Fernandez do a full blown patent
application for the startup.
The advantage of a provisional application
is that the company can file it as soon as it believes it has a
differentiated technology that works. However, while the provisional
application locks in the date - protecting the startup from copycats
- it isn't reviewed by the Patent Office. That requires a formal
filing. The danger, therefore, is that the provisional application
- because it wasn't prepared by a professional - may be faulty in
some aspect, such as the description of what the property is and
what it does. If that's the case, a competitor's application could
be approved instead.
While that's a pretty sobering thought,
at least Fernandez got his audience to thinking about it by being
here, and sharing. And they are better off for it.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001), and he is currently
at work on High Visibility: The Making and Marketing of Asian Professionals
into Celebrities. Write him at mahamlin@teamasia.com.).
Copyright © 2003 Michael Alan
Hamlin. All Rights Reserved.
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