18 FUTURESCOT
LEGAL
28 April 2016
The bank that
likes to say:
‘Can we get
more money
for tech firms?’
Lots of money is flowing
into the tech sector. But
is it enough? The head of
the Scottish Investment
Bank is about to find out
BY KEVIN O’SULLIVAN
The Scottish Investment Bank has
revealed plans for a market consultation exploring how the public sector
investor can help tech firms seeking
access to seed capital.
The SIB, which is the investing arm
of Scottish Enterprise, will go out
to the sector in Q3/Q4 this year to
discover how it can better assist tech
firms needing finance to expand.
Currently, the SIB takes a sector neutral approach when it invests in companies in Scotland, although it has given
some specific support to life sciences
and renewables.
“We have a digital technologies
team who from a sector point of view
are constantly trying to work out what
that sector needs,” says Kerry Sharp,
head of the Scottish Investment Bank.
“From an investment point we’re not
taking a different approach to our
generic co-investment funding because
we’re not sure it’s needed just now
but it is one of the areas we are about
to consult with the market on what’s
happening.”
She adds: “There’s still lots of money
flowing in [into tech] but is it enough?
And if not do we as the public sector
need to be doing something else to
finance it? I know there are a lot of
individuals out there who think something more should be happening and
that’s what we do, we keep our ears to
the ground. If we find that people feel
there might be something, then that’s
when we go into a wider consultation;
if it’s anecdotal it’s difficult for us to do
too much about it.”
The consultation is likely to be driven by Scottish Enterprise, initially with
key market players, and Sharp echoes
the investment community’s call to try
and encourage more outward investment into Scotland.
“We just want to make sure there’s
not a glass ceiling there or that there
are still more companies not getting
the funding because it’s scarce. So
we’re trying to work out whether there
are other responses that we need to
do like trying to encourage other VCs
to move into Scotland, or whether we
need to encourage funds to set up here
that we can invest into.”
In terms of risk capital the SIB runs
two investment funds – the Scottish
Co-Investment Fund and the Scottish
Venture Fund, although it is more
active in the former where it partners
with many of the most established
investors from the angel community.
The model is built around joint publicprivate sector investment.
“We have a digital
technologies team who
from a sector point of
view are constantly
trying to work out what
that sector needs”
Kerry Sharp, Head of the Scottish
Investment Bank
Sharp says the SIB deals with more
than 100 investors and recent analysis
has shown in the last three years that
40% of investment has come from outwith Scotland. Sharp wants to increase
that to 50 or 60%, giving Scotland’s
economy the benefit of scale as well as
international experience and knowledge; although she is cautious about
not wanting companies to be “grabbed
out of Scotland, and moved elsewhere”.
“Although acquisition can be good
for a company, and it allows them
access to additional capital and allows
them to grow, we want them to do that
in Scotland.”
SIB HAS INVESTED IN:
l CLEAR RETURNS – software for
retailers - £175,000
l CLOUDSOFT CORPORATION
LTD – cloud application management
- £1.5m
l SUMERIAN EUROPE LTD – IT
capacity planning - £3.2m
l ADMINISTRATE LTD – Training
company software - £900,000
l BIG DATA FOR HUMANS –
Customer analysis software - matched
funding with Techstars incubator
l IMETAFILM – Digital film - secured
£217,000 funding package from Kelvin
Capital and SIB
l BLOXX – real time Internet and email
filtering – exited after shareholder sale
to US-based Akamai Technologies Inc in
October 2015.
Intellectual Property strategy for technology companies
IP should be top of mind
for start-ups who want
to protect their returns
BY ROBERT BUCHAN
All businesses, and particularly new
tech start-ups, have many competing
demands and budgets to prioritise.
When a new player has a bright idea to
offer a new product or service which
will disrupt existing technologies or
undercut larger competitors, their
main focus is always on developing
the technology and getting their idea
swiftly to market. While legal advice
and input will probably be low on the
list of a startup’s priorities, Intellectual
Property (IP) rights should be right at
the top of it, together with a clear strategy to protect and maximise returns
from IP from the start.
In short, IP rights are a mix of valuable legal rights which can allow any
business to cr eate a monopoly for its
products or services, exclude competitors from the market or at least
charge premium prices as a reward for
innovation.
IP RIGHTS can include trademarks
for a brand, app or logo, a patent for a
new product or manufacturing process
or design rights for the shape of a product. They can also protect confidential
information and know-how about how
the technology works or copyright in
software code.
As tech development is at the heart
of all start-ups, IP will be created and
used from the outset. Indeed, IP will
usually be by far the most valuable
asset for a tech company. When time
and money are precious resources, all
too often IP protection is either overlooked altogether as not relevant or
put off as something to deal with later
when more funds are available or the
product has been further developed or
road tested. But putting IP on the back
burner can mean any legal protection
is lost forever or its value undermined.
IT IS VITAL to the success of any
business to have IP on the agenda to
ensure that all IP created is captured,
protected and able to be fully commercially exploited. A clear strategy
and/or portfolio of registered IP, such
as patents or trademarks, not only
provides the strongest basis to protect
against copycat competitors, but will
also be much more attractive to any
potential investors or collaborators
and, ultimately, any potential buyers. A
key part of any due diligence, whether
valuing the strength of the technology or the company itself, will test the
strength and breadth of the IP owned
or licensed. If there is no registered
IP or IP strategy, questions will arise
about whether there is any real commercial basis or value to invest in, work
with or acquire a start-up.
It is also vital to check what competitor IP already exists to avoid infringement as well as to provide a clearer
focus for your own research and
development. Carrying out a freedom
to operate/clearance search at the
outset will be cheaper in the long run
and avoid any disputes or being forced
to stop use of your IP.
Not having IP protection and enforcement at the top of the agenda is a
false economy. Expert IP input should
be obtained as a priority.
Robert Buchan is a Partner in the IP,
technology & outsourcing team at Brodies LLP. For more information, please
contact Robert on 0131 656 0078 or at
[email protected].