Recently, I saw a note from a university congratulating its technology researchers who got patents. But will these patents ever be commercially used or was the money spent a waste? Can some of these patents be commercially used with some improvements to the current ecosystem?
About 97% of patents gather dust. Here are 3 reasons why:
· VC is of no use at this stage. VCs want Aha, i.e., evidence of potential, and an unproven patent is usually not enough. In an analysis of 85 billion-dollar entrepreneurs, only 1% got VC after proving the technology. 23% got VC after proving their business strategy and potential using business skills. 76% built real unicorns using business skills and without VC. This means that someone needs to prove both the business strategy and financial potential of the patents without VC – if they want to commercialize it.
· Business- school entrepreneurial-education is not focused on this stage. Brian Chesky had to prove his venture’s potential before getting angel capital. He got $20,000 from an incubator and advice to focus on making a few customers happy. Heeding this advice, Airbnb focused on New York City, because of its huge influx of global visitors. Many of these New York visitors became hosts when they returned home. With this start, Airbnb grew to 10,000 users and 2,500 listings. After proving his strategy and leadership, Airbnb got angel capital and VC.
Unfortunately, business schools are more focused on “first-mover” ideas (that are beaten by the “smart-mover” strategies of unicorn-entrepreneurs), technology innovations (that are mostly not commercialized), business pitches (that are superficial), and venture capital (that helps about 20 out of 100,000 ventures – after Aha). By focusing on finance-smart strategies and unicorn skills of billion-dollar entrepreneurs, universities may actually be able to earn meaningful revenues from more patents, create more successful ventures, and boost the regional unicorn-ecosystem.
· Most corporations do not know how to build unicorns on emerging trends. Many corporations, from Control Data to Sears, have fallen to unicorn-entrepreneurs because of their inability to compete on emerging trends. Often, corporations acquire emerging ventures that seem like unicorns, but more than 70% of corporate acquisitions are said to fail. And some corporations, like Xerox, have failed to profit from technologies that they themselves invented because the strategy was not known and the potential was not evident.
Universities could commercialize more patents successfully by following the 94% of billion-dollar entrepreneurs who avoided VC interference, rather than using the highly selective, failure-prone VC model that has home runs rarely, and where the VCs themselves cannot predict which venture will be a home run, as proven by one of the best VCs. Marc Andreessen, who invested in an early round of Instagram, did not follow up since he saw more potential elsewhere. Instagram proved him wrong – and right.
Here are 4 strategies universities, corporations, and those who want to commercialize unproven patents can use:
· Understand how billion-dollar entrepreneurs really create unicorns and learn to jump the VC-Gap from idea to Aha, rather than listening to the proponents for the VC-model.
· Teach the unicorn skills actually used by billion-dollar entrepreneurs to prove the potential of technologies and to commercialize ventures and shift the focus from capital-intensive strategies and VC to finance-smart strategies and capital-smart financing.
· Change the focus from pitches to skills. Bragging about potential is easy. Achieving it is tough. Reward the achievers, not the braggers.
· Most importantly, change the incentives. Reward tech developers based on the commercial success of their patents, and not just for developing technologies or for citations.
MY TAKE: Ideas and innovations build few unicorns. 99% of billion-dollar unicorns were built by entrepreneurs with the business skills to develop the right strategy and the passion to persist when no one else saw any potential. Universities can commercialize more technologies and earn more money from more of their technologies by training the technology developers to prove the commercial potential of their technologies with unicorn skills, not with VC.
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