Russ Krajec is the CEO of BlueIron, a patent finance company, and author ofInvesting In Patents, which explains the BlueIron investment model. Russ is an angel investor, registered patent attorney, the former COO of a venture-backed startup company, and an inventor with 30+ US patents/applications.
Year after year the patent laws become more complex. It seems with every decision from the Supreme Court and the Federal Circuit more detail is mandated for a patent application to be complete and for patent claims to have a fighting chance. These case law changes, as well as legislative and regulatory changes, are putting the patent system out of reach for startup companies.
The patent applications that must be filed require an enormous investment in time, money, and expertise – mostly by patent professionals who curate the inventions, write the patents, and nurture them through the examination process. To get high caliber, well researched, and well-written patents costs money – a lot of money unfortunately.
Quality is the main buzzword at the Patent Office, and increasingly so within the industry. Gone are the days that one could just get a patent and expect that it would be valuable enough to license or sell. Quality patents that cover quality technologies is the new business reality in the patent sector. But with the skyrocketing costs associated with obtaining the desired quality many startups resort to cost-saving strategies that most often only work to irreparably harm the changes of obtaining a worthwhile patent.
Filing a hastily drafted, woefully inadequate provisional patent application is a mistake, and one that can lead to a patent foundation being built on a hopelessly compromised base. The patent community was recently reminded of this fact when the Patent Trial and Appeal Board (PTAB) refused to recognize the priority of a provisional patent application filed to cover Juxtapid, a cholesterol medication. The PTAB found the provisional application defective because it did not teach the invention adequately and provided insufficient dosage information. This just proves that bad provisional applications are a very real problem even for pharmaceutical companies that should know better.
What are startups to do? There is never enough money to do everything a startup needs to do in order to succeed, so even the best, most well funded startups need to triage. As a patent attorney with over 15 years of experience, I know all too well this very real financial dilemma. Compounding this problem is the truth that most innovative startup companies are entering a marketplace where larger, well-financed corporations with giant patent portfolios dominate. Patents can be the great equalizer, but such a strategy requires high quality patents.
BlueIron’s non-dilutive financing for startups pays all of the patent costs, including filing fees and attorney’s fees, using a conventional commercial “lease-back” arrangement. This model has been gaining traction since its first release in the fall of 2014. After financing professional poker player Phil Gordon’s patent for his new software startup, Chatbox, BlueIron has made investments in startup companies in software, hardware, biotechnology, medical devices, financial services, and agriculture.
By financing the patents, we remove the cost barriers to getting strong, high-quality patents. This opens up the options to do a full due diligence workup, which most startups simply cannot afford. It also means the patents can be expedited and obtained more quickly. It also frees up critical capital for the startup to invest in business activities rather than paying for patents.
For expediting applications, when possible, we prefer the PCT-Patent Prosecution Highway, which often results in an issued patent within 12 months. With PCT-PPH, the costs of the patent are compressed into a 12 month window, rather than spreading them out over 3-5 years. If a patent application gets into the PPH the allowance rates are much higher, and in many cases over 95%. Given that an issued patent is far more valuable to a startup company than a mere pending patent application – especially one raising angel or venture capital – this strategy pays quick dividends, which benefits everyone involved.
The BlueIron model works because everyone has “skin in the game,” so to speak. We have every incentive to get high quality patents and to do so as reasonably quickly as possible. By having a patent portfolio that protects the startups technology additional investment becomes easier to attract, which makes much of the difficult work a startup will do much easier. By helping the innovative startup succeed we succeed. If the innovating startup company is not successful, the investment will only generate patents for products or services that never made it to the market, or which were not accepted once on the market. Patent assets covering technologies the market shunned have little, if any, value. On the other hand, if the startup company is successful the patents have real value – far more value than the cost of financing.
Through the BlueIron model I’ve attempted to create a new framework where both parties have the same goal: protect and grow a successful business. Our sole focus is to build investment-grade patents that have commercial value. By treating patents as “collateral,” our model rises or falls based on how strong the patents are – and how successful the innovative startup becomes.
If you are a startup company that is looking for someone to finance your patent activities please contact me. Candidly, we only invest in patents for operating companies, not for individual inventors for whom the invention is just a hobby. While we invest at a very early stage, the startup must have a financial commitment to bring a product or service to market for us to get involved.
If you are an angel investor or venture capital firm, we are actively seeking formal or information partnerships and relationships.
The Florida Venture Forum and the Angel Resource Institute are collaborating to bring you Pitching to Investors Workshop, taught by the Angel Resource Institute’s lead instructor, Troy Knauss on May 16, 2016 from 1:30 p.m.- 5:30 p.m. at the Hilton Carillon, St. Petersburg, Florida.
The standalone registration fee is $45.00 per person. In combination with the following full day event: 2016 Florida Early Stage Capital Conference the registration fee is $25.00 per person. Learning materials to be provided digitally, so be sure to bring a laptop or iPad to class.
Thoughts from Shark Tank auditions in Miami, FL
People were in line at 3pm the day before. Wristbands were given out starting at 9 am on Thursday. They handed out 500 and there were still more people, so they gave out 80 more, then even more. In all, there were over 700 people whoВ pitched. Last year, over 40,000 tried out and only 180 made to see the Sharks.
While I was not pitching, it was interesting to talk to the people whoВ were and there were several similarities. All were hoping for that Big Break, all wanted to hear that the person Loved their idea, and of course, everyone thought the pitch time went too fast.
While many had samples and prototypes, there was everything including food, websites, baby items and even a new holder for your ipad. That inventor did a rap to get his idea across. I heard that the interviewers loved it.
Dreams are big and fragile. The time, effort and money that went into the products showed that people are creative, looking for a better way, and hopeful that their idea will be the next big success.
There were also some very unrealistic people. Their sense of entitlement was surprising. They did not want to start small and sell a few of their items at a time. They вЂњknewвЂќ that their idea was a million dollar item that should be on the market. There was one person who has an item that might cost $1 to make and could sell for $9.99 (he thought $19.99). He did not want to вЂњwaste his timeвЂќ making a few hundred and try to sell them to show proof of concept. It is unfortunate because he might have a chance with this item if he did that. When I asked him if he knew how Damon John started out, he had no idea.
For all of the dreamers, inventors and entrepreneurs, keep inventing daily, but be prepared for the real world. Any investor, whether on Shark Tank, or not, needs to know that you are giving it 120%. They bet on the jockey not the horse so do your homework and always be prepared. You never know when the opportunity to pitch will arrive. Are you ready?
Carolyn Keane – Founder – Inventor
InventingDaily.com is updating the website. While it is a work in progress, as all websites are, we appreciate your patience while we transition. Thanks for all of your support for inventors. We have come to realize that we can help more people by working directly with inventors. The transition is almost complete. The focus will be on coaching, mentoring, classes and funding opportunities for inventors. We will still have a section for new products under our Product Partners where you will have the opportunity to buy direct from the inventor.
Jim and I have also put together a class for DIY Patent Search – How to Save Money on Patents. We will provide the link shortly. We have several more in the works. Tell us what you would like to know.
As we continue to grow, watch for our new section on “Ask a Question”. We will have several people available to answer many types of questions. If you have the question, many others do as well.
The life of an entrepreneur is like a volatile, yet fun rollercoaster of emotions. Some opportunities come along when least expected and you have to be prepared to seize them. The following is the story of me pitching Daymond John and some of what I learned from the experience.
1. A great support team is crucial to your success.
There you are, sitting at home in your office and working on social media for your company when you get a phone call from one of your best friends. He knows that you have walked away from corporate America and chosen to follow your dreams of launching a business and working for yourself. He says, I have an opportunity to attend an intimate party with Mark Cuban and Daymond John to watch Shark Tank and I can invite one person. The best part of having a true friendship is that they will back you in any situation. In this case, my friend could’ve taken any number of other friends or women that thought it’d d be cool to hangout with celebrities. Instead, he knew that I could care less about the prestige of the event or meeting a celebrity and was much more interested in pitching my invention. This was an intimate event with only roughly 50 people. It wasn’t t a pitch event, but rather a small gathering to watch Shark Tank with both Mark and Daymond while they were in town. That being said, I wasn’t going to be in the same room as two of the most well known investors in the country and not pitch them. How do I do it? What should I say? Over the course of the two and a half hour drive, I racked my brain on what to say, how to say it, and how I’d create an opportunity to pitch them.
2. Be fully prepared to give a 30 second pitch at any given moment because you may never know when that opportunity may arise.
Despite Mark being a very nice guy he left abruptly and I didn’t t have the opportunity to pitch him, only a second to take a blurry picture. I had my phone in my hand with pictures of my prototype readily available, but it just ended too quickly. Daymond, on the other hand, had some time before his next appearance and I was able to pitch him my idea. I asked to take a picture with him like everyone else in the room. Forget an elevator pitch. I had 10-15 seconds to hopefully perk his interest enough to warrant any kind of acknowledgement. When doing so, I told him I liked the show, I had a product and wanted to know his thoughts. I showed him my phone as soon as the flash went off because there were 3 other people in queue to take a picture. He said he liked it! Great! Wait that’s it? You like it? What does that mean? Do we have a deal?
It was the next guy’s turn to take his picture with Dayomnd. Perfect timing! I offered to take it for him. He happily turned over his phone for me to be the photographer. I took that as an opportunity to talk with Daymond for 30-45 more seconds while taking someone else’s picture. I talked more about my product and asked him what he would do next or if he knew anyone that may be interested in it. I think Daymond was taken aback by the fact that I was still pitching despite taking a picture for someone else, but I learned from Glengary Glen Ross to Always Be Pitching. He continued to say that he had a couple of companies that may be interested in my product and to email his associate
3. Celebrate each win, BIG or small like a rockstar.
Wait a minute. Did Daymond John, star of Shark Tank just say that I have a good idea?! I know it’s a great product, but he really gave it a look and liked it?! This is incredible!! I’ve made it! These were some of the thoughts going through my head when we were leaving. Then my boy and I hit the town for the night. To give you highlights that can be written publicly, we drank like we were in college again, partied with celebrities of all kinds and were VIP in clubs that we had no business being in. I’m not saying these things to brag, as we didn’t spend more than $100 between us the entire night, but to tell you that we partied like I just inked a deal with a Shark despite only getting an email address.
4. Never Give Up.
I couldn’t have asked for much more out of this event. Not only did I get to meet two very influential and smart businessmen that I look up to, I got the opportunity to and had the balls to pitch one of them. On top of that, I walked away with confirmation that I had a solid idea and I had an email to send to a direct contact. I’m sure you are wondering what happened with the product and if Daymond pursued it? He didn’t and passed me to his associate to sign up for his consulting services, coaching, etc. I understand, but thought there would be a better outcome. Since then, I have had 3 licensing deals with major companies come and go. I’m still in the process of getting the re-fillable bath loofah to market and won’t stop until they are on shelves worldwide.
Jim Reidy is an inventor and the Founder of Inventing Daily, a unique company that was created by inventors, for inventors. In addition to Inventing Daily, Jim helps to secure financing and licensing for other inventions that have been evaluated, tested, and proven market viability. For more information you can follow him on Twitter @inventingdaily or email himВ firstname.lastname@example.org.