Chapter 12. Securing your business idea

I keep six honest serving men: They taught me all I knew: Their names are What and Why and When and How and Where and Who.

Rudyard Kipling

This chapter covers

• Setting a strategic plan for your business
• Funding your business strategy
• Securing your business strategy

It’s often said that one year in the mobile business is the same as five years in any other sector of the economy. With such a dynamic environment, developer-entrepreneurs will need to define, adapt, and grow their business using all possible tools at their disposal. A great plan, the right funding, and proper protection of your intellectual property will set the odds of success firmly on your side.

If you’ve followed the steps in the book up to this point, then you’ll have created your own location app concept, built it, and distributed it. This chapter will take you through the next step, which is building and securing a business around your app development efforts. We’ll look at how to build a business plan based on the core values of your team or business. We’ll then consider how to fund your great business idea with the right source of financing, before wrapping up with ways in which you can secure your business going forward.

12.1. Strategic planning

Strategic planning can be defined as the setting of long-term goals and objectives backed by a specific action plan. It can also be defined as the guide to the what, who, how, where, and when of your business idea.

Whichever definition you choose, the bottom line is that strategic planning is fundamentally about helping you make decisions. Good strategic planning allows you to make good decisions, because it involves thinking today about decisions you may need to make tomorrow, for example:

• How will you sell your application or service?
• Who will you sell it to?
• How will you fight off the competition?

These questions require a great deal of thought and time. Once you have the answers, you’ll be able to compile them into a business plan. This will serve as a road map at the start of your entrepreneurial journey. But before you begin compiling your plan, you’ll need to choose the right strategy for your business.

12.1.1. Choosing the right business strategy

Life is about choices. Creating and running your business is no different. There are infinite possibilities but only a finite amount of resources available to develop them. Once you’ve established what kind of service you’re going to develop and launch, you’ll need to build a sustainable business around it that makes the most of your enterprise’s core strengths.

A good model for kicking off your thought process involves thinking of your core values. These are the unique skills and culture that lie at the heart of your venture. Looking at your core values can help you decide whether you should focus on the product, the process, or the customer. You can see this model in figure 12.1.

Figure 12.1. Strategic choices available to a start-up include product leadership, operational excellence, and customer intimacy, and derive from the core values of the company.^[1]

¹ Source: White paper by Mark A. Zawacki, “Startup Candy Vol. 1,” The Milestone Group, November 2009.

Product Leadership

Product leadership means making the most innovative, cutting-edge products in the market. Apple’s iPhone is an example of product leadership within a company whose core value is marketing know-how. In another example, Android app developer Ecorio was able to establish an early product lead with the launch of their carbon-offsetting LBS application, shown in figure 12.2. This allowed them to win one of the Android Developer Challenge prizes offered by Google in 2008. Like many start-ups, despite their initial success, Ecorio struggled to grow their business. We’ll look at some strategies for growth in section 12.1.3.

Figure 12.2. Ecorio launched its green Android LBS application in August 2008 and established an early product leadership after receiving the Android Developer Challenge prize. The application helps users reduce their CO₂ emissions.

Operational Excellence

This involves being the most cost-effective producer and providing great value for the money to your consumers. Korean mobile manufacturer Samsung has been able to drive greater efficiency through its manufacturing process compared to competitors like, say, Motorola, and so rapidly gained market share in the last three to five years. As a mobile application developer, one of the ways you can achieve a low cost base is by basing your software team in emerging economies with strong skill bases, like Poland, Ukraine, or Russia.

Customer Intimacy

This means putting the customers first at every contact point they have with the company. Full customer satisfaction is at the core of the service offered by companies adopting this strategy. Zappos, whose e-shop storefront is shown in figure 12.3, is an example of an online company that started out with a clear goal: to place the customer first. Customers can return goods within 365 days of purchase, compared to the 30 days offered by Amazon (it’s perhaps fitting that Amazon closed the acquisition of Zappos in November 2009, citing the unique Zappos customer-based culture as the key deciding factor).^[2]

² Sarah Lacy, “Amazon-Zappos: Not the Usual Silicon Valley M&A,” Business Week, July 30, 2009; available at http://www.businessweek.com/technology/content/jul2009/tc20090730_169311.htm.

Figure 12.3. Zappos is a well-known example of a company that started out with a clear “Customer is king” strategy, aiming to wow its online clients.

Having considered what your core business values are, you can now move on to formulating a winning business strategy to build on these within the context of a business plan.

12.1.2. Formulating your business strategy—the business plan

Most entrepreneurs will, at some point or another, be required to create a business plan. This is a document ranging from 10 to 100 pages describing the company’s product, employees, marketing plan, and financial plan. It describes what you’re trying to achieve with your (new) product, why it’s better than others, and how it’ll make money for those who invest in the business. The writing of a business plan is a great exercise in discipline, because it forces entrepreneurs to consider all key aspects that may affect their business idea.

It’s also a daunting exercise for many, because it requires a lot of thought and analysis (which can lead to analysis paralysis!) and can take a very long time to complete (months, in some cases). Whether you have to write a business plan or not, thinking about what you would write is highly recommended. It’ll probably lead you to obtain outside views on your own business brainchild, which can provide constructive criticism to help enhance your idea.

As part of the exercise of writing the plan, it’s possible that you’ll expose your business idea to outside people for the first time, so it’s worth bearing in mind a few points as you do this:

• Most people (if they are being honest and you are being entrepreneurial) will tell you that your idea will never work because of a whole host of reasons. You need to be sufficiently convinced of your own beliefs to cope with this!
• You’ll be told that something similar already exists. You need to be prepared to explain why your idea is different/better.
• You’ll be asked intimate questions about how you’ll make your idea work. The temptation here is to be over-defensive of your pet project. Don’t fall into this temptation. Be prepared to freely share all aspects about your project (except for the “magic formula,” if you have one).

It’s best to think of your business plan as a fluid, changing document, as opposed to a one-off manuscript or definitive guide to your great business idea. We live in competitive times. You need to deal with that. You may not have a competitor today, but you may tomorrow. You’ll need to adapt your plan to allow for this. This means the key is to write as short a business plan as you can (the people who matter will read only your executive summary anyway!). You should be able to describe your venture in sufficient detail in a 10–15 page document. You can always add to it later if you have to. In some cases, you may have to rewrite most of the plan completely and throw away the first one, so it pays to be concise!

Try to break up your plan into key sections that you can update quickly as things change. This is fundamental when covering the following areas:

• Competitor overview
• Market predictions
• Financial projections
• Business assumptions

You can find a typical business plan outline structure, with the breakdown of sections, in appendix B.

Finally, be aware that a business plan is both a mental and a communication exercise. You’re disciplining and structuring your thoughts so that you can explain your business idea clearly and concisely. You’ll use your plan to convince future customers and stakeholders. Remember that the plan is unlikely to reflect reality, but so long as you’ve considered different possible scenarios within it, it should offer some guidance even when circumstances change.

For example, suppose you stated in your plan that you were going to spend $50,000 on advertising in the first quarter, but you spent $150,000 instead. This doesn’t matter, so long as you did so for a good reason (you generated $500,000 in revenue as a result, for example) or had anticipated a business plan scenario where greater advertising spend might be required. Don’t be shackled by the constraints of an inflexible business plan.

12.1.3. Strategies for growth—external partnerships

If you consider the overall life cycle of a company, from creation to liquidation, there’s a well-documented “funnel effect.” Of perhaps 100 companies that are created, on average only 25%–30% make it through the first three years. One of the reasons is related to the company’s growth and particularly to getting the right balance of sustainable growth. This is growth that’s neither too fast nor too slow. Grow too quickly and you’ll stretch your resources too thin. Grow too slowly and your more nimble competitors will overtake you.

We mentioned previously that Ecorio, despite winning the Google Android Developer Challenge prize in 2008, was unable to grow their business since then and didn’t capitalize on their window of opportunity. One of the reasons was that the business was a side project of a group of college students, with the skills but not the resources to expand their idea. A great strategy for growth for start-ups with limited resources is to develop external partnerships (or special relationships, as they’re sometimes referred to).

External partnerships can take multiple forms, such as these:

• Financing partnerships (like the funding arrangements we’ll examine shortly)
• Agency arrangements (getting a PR agency to publicize your company)
• Licensing (commercializing your product through third parties)
• Cross-marketing agreements (undertaking reciprocal marketing between two companies)
• Research agreements with public bodies (through research grants or by obtaining free use of university technology resources)

These types of agreements give an entrepreneur the ability to leverage their limited resources and behave like a much bigger company. They also help establish the startup’s credentials and give them a much wider public exposure than would otherwise be possible.

Before entering into these agreements, it’s worth considering whether the cooperation will be beneficial for both parties. A mutually beneficial agreement is likely to yield better results than a one-sided agreement. Prior to entering into a binding legal agreement, it’s common for a memorandum of understanding, or MOU, to be drafted and signed by both parties. This is where you’ll need to spell out the objectives of the agreement. In tandem with this, it’s common to sign a non-disclosure agreement (NDA) that aims to protect both parties from the threat of competition. You should note that the NDA is pointless unless you genuinely trust the party you’re doing business with, and you can’t rely on it to shield you from unethical business practices.

12.2. Funding your business strategy

Writing your business plan is a huge leap forward in securing your business idea. If you’ve completed your plan recently, congratulations! More often than not, to convert your plan into reality, you’ll need funding of some sort. We’re going to look at four main sources of funding next and how to find the right one to match your business plan. Before we look at each funding source, we’ll consider briefly how different funding types can be matched to the stage of growth the business is in.

12.2.1. Matching funding to stages of business growth

There are four main sources of funding available to a new venture:

• Bootstrap funding
• Friends, family, and fools (FFF, or “the three Fs”) funding
• Business angels (also known as informal investors or private investors) funding
• Venture capitalists (VCs) funding

It’s advisable to match the stage of growth your company is in with the appropriate investment. If you’re still at the ideas stage and setting up a core team for your company, there’s little point in seeking a $10 million investment. Similarly, if you’ve already received VC funding, you’ll tend not to seek business angels any longer. It’s useful to be aware of the terminology investors use to label which phase you’re in with your company’s growth. These are the five phases:

• Concept— You have a brilliant idea but little else.
• Seed— You’ve begun to define your business model and create your product.
• Start-up— You’ve assembled a team and started operations/sales.
• Growing— You’re expanding into new products and/or markets.
• Mature— Your own growth has peaked and you have to buy other businesses to grow.

Figure 12.4 shows how each phase of investment (concept, seed, start-up, growing, and mature) is matched by a different type and size of funding.

Figure 12.4. A company will need different amounts and types of funding according to which one of the five stages of development it’s in: concept, seed, start-up, growing, or mature.

Now that we’ve looked at how to match funding with the stage of growth the company’s in, we can consider each funding source in turn, starting with bootstrap funding.

12.2.2. Bootstrap funding

This means funding your business without any external parties’ involvement. Typically, this means that the funding comes from sales to existing customers, though it can also come from other sources of income of the entrepreneur (like a part-time job). Bootstrap funding amounts vary but range typically from $5,000 or $10,000 up to $20,000. The company’s working capital (the difference between what your customers pay you and what it costs you to deliver a service to them) is often temporarily funded by the entrepreneur’s bank overdraft or credit card. Companies such as Dell and Microsoft were originally bootstrapped, and it remains a common option today. Ross Perot famously started EDS with $1,000 and turned it into a multibillion-dollar enterprise.

The advantage of bootstrapping is that you can develop your business independently without interference from external parties. The disadvantage is that you’ll probably take longer to grow your business than if you had additional, external funding. You may also get distracted by being pulled by different customers in different directions.

If you decide to bootstrap your business, you’ll need to behave differently than a well-funded business. This will mean the following:^[3]

³ Adapted from Amar Bhide, “Bootstrap Finance: The Art of Start-ups,” Harvard Business Review 70, no. 6 (November 1, 1992): 109.

• Getting operational quickly
• Looking for quick break-even, cash-generating projects
• Offering a high-value product
• Not trying to hire an expensive “crack team” for your venture
• Not growing faster than you can afford to
• Focusing on cash and not market share
• Getting to know your bank manager right from the start

12.2.3. Friends, family, and fools funding

Where your business idea needs larger amounts of funding than that available in bootstrap mode, entrepreneurs can recur to the three Fs of friends, family, and fools. Three Fs funding covers investments between $10,000 and $100,000. This can be a good option to allow you to develop a working prototype and then pitch to larger investors for serious money to fund full-scale development of your business. Be prepared to lose your friends if your business doesn’t do as well as planned, and make time to keep everyone informed of developments.

If you move on to obtaining larger investors, be aware that the Pareto principle, or the 80-20 rule, normally applies: your smaller stakeholders may take up 80% of your time dedicated to dealing with investor issues despite putting in only 20% of the funding.

12.2.4. Business angel funding

Business angels (also known as informal investors or private investors) are private individuals who invest their own money in high-potential start-ups in exchange for a share in the company and who also contribute their specific sector of business expertise and their personal network of contacts. Business angels typically invest from $50,000 to $300,000. Business angels play a crucial role as providers of early-stage, informal venture capital and competences at the seed and/or development stages of the business lifecycle. Many business angels are successful entrepreneurs who have typically sold their own business and have the interest and the capital to fund similar ventures.

Although in theory you can access business angels through formal networks and associations (for example, the European Business Angel Network, or EBAN, brings together more than 250 business angel networks and the business angels within), the reality is that without a facilitator you’re unlikely to obtain angel funding. A facilitator can be a close personal friend or business contact who’s willing and able to introduce you to a trusted business angel. That’s why one of the most common traits of successful entrepreneurs is the ability to network, so that they can access the right contact for the right situation.

12.2.5. Venture capitalist funding

Venture capitalists, or VCs, are financial firms that provide private equity capital obtained from a group of private, wealthy individuals and institutions. Famous VC names include Sequoia Capital (early investors in Google) and Kleiner Perkins Caufield & Byers. Most investments made are concentrated in California’s Silicon Valley. You can see this clearly in figure 12.5, which maps venture capital investment in the United States between 1970 and 2008. You can find a complete listing of over 400 member VC firms in the United States by contacting the National Venture Capital Association.

Figure 12.5. Map of venture capital investments made in the United States ($ billions, by state) between 1970 and 2008, showing a heavy concentration in California’s Silicon Valley that dwarfs that of second-place New England^[4]

⁴ Source: mng.bz/bn45.

Venture capital firms can either be the dream come true or the worst nightmare of any start-up founder. If things go well, your VC can propel your company into super-stardom by injecting large amounts of capital in your business. Indeed, typically VCs won’t invest anything below $1,000,000 and can go up to $20,000,000 or more. If things go badly, you can find you’ve spent an extraordinary amount of time and effort courting VCs without seeing a single dime from them.

VCs specialize in making high-risk investments. This makes them behave in a particular fashion when it comes to start-ups. You can see how VCs fit into the overall funding equation, together with entrepreneurs and investment bankers, in figure 12.6.

Figure 12.6. How the venture capital model works: Entrepreneurs need money to build their businesses. Institutional investors want high returns. Investment bankers need companies to sell to public markets. Venture capitalists make the market for the other three.

VCs can make money only by exiting their stakes in start-ups using investment bankers’ services. Critically, this means that the VC’s goals are not aligned with the goals of the company founders, which creates a built-in source of stress in the relationship. Founders prefer reasonable success with high probability, whereas VCs are looking for fantastic hit-it-out-of-the-ballpark success with low probability.^[5] A VC fund investing in ten start-ups will expect about seven of them to fail, two of them to trudge along, and one of them to be “The Next Netscape” (TNN). It’s okay if seven fail, because the terms of the deal will be structured so that TNN makes them enough money to make up for all the losers.

⁵ White paper by Mark A. Zawacki, “Startup Candy Vol. 1,” The Milestone Group, November 2009.

VCs hear too many business plans, and they reject 999 out of 1000. Their biggest problem is filtering the incoming heap to find what they consider to be that needle in the haystack that’s worth funding. They get pretty good at saying no, but they’re not so good at saying no to the bad plans and yes to the good plans.^[6]

⁶ Adapted from Michael Treacy and Fred Wiersema, The Discipline of Market Leaders (Addison-Wesley Publishing, 1995).

Reasons for seeking VC funding include the following:^[7]

⁷ Joel Spolsky, “Fixing Venture Capital,” June 03, 2003, http://www.joelonsoftware.com/articles/VC.html.

• The business itself could benefit from the publicity of getting an investment from someone who is thought of as being a savvy investor.
• The investor will add substantial value to the business in advice, connections, and introductions.
• The business can potentially have a big exit or become a large, publicly traded company.
• The start-up founders are not tied to “their way, or the highway” and are happy to give up some control to make the business more successful.

Reasons not to seek VC funding include these:^[8],[9]

⁸ Ibid.

⁹ Joel Spolsky, “Raising Money for StackOverflow,” February 14, 2010, http://www.joelonsoftware.com/items/2010/02/14.html.

• The start-up founders are risk averse and are willing to trade a much smaller payout for lower risk.
• The start-up founders are technical without substantial business experience and wish to maintain absolute control forever.
• The investor is mostly “dumb money,” that is, someone who doesn’t know anything about the field—the proverbial dentist who is happy to give you a half-million bucks but doesn’t know the first thing about CPMs and CPCs and CTOs.

ROI = (Payback - Investment) × 100 / Investment

ROI = $(80,000 - $30,000) × 100 / $30,000 = 167%

• You’re going into an established field with a lot of competition, and there’s no benefit to speed. You’re better off slowly building a niche business and growing from there, quietly taking one customer at a time away from the competitors.
• The product is immature and unproven, in which case expensive marketing efforts will be wasted, proving to the world how bad your product is.

Should you be successful in obtaining venture capital funding, your start-up will be submitted to a process of scrutiny, or due diligence. The extent of this will vary according to the type and size of investment, but it’s best to expect it to last several months. Part of the process will involve setting a pre-money and post-money valuation for your start-up. This will determine how much of your start-up’s shares (or equity) will need to be handed over to the VC firm in exchange for their investment. Valuing the startup is a subjective exercise and open to a great deal of negotiation between entrepreneur and investor. (You can find a great guide to negotiation in the book by Herb Cohen, You Can Negotiate Anything.)^[10]

¹⁰ Herb Cohen, You Can Negotiate Anything (Bantam Press, 1982).

The easiest way to calculate the pre-money value of your start-up is to benchmark it against the value of similar start-ups that recently received investment. The post-money value is the value of your start-up after an external investment has been made. The portion of the company owned by the investors after the deal will be the number of shares they purchased divided by the total shares outstanding:

Fraction owned by VC = shares issued to VC ÷
total post-money shares outstanding

For example, if your pre-money valuation was $6m, and a VC firm invested $12m, the post-money valuation is $18m. The VC firm will own ⅔ or 66.7% of the business after the investment ($12m / $18m = 66.7%). And if you have 2 million shares outstanding prior to the investment, you can calculate the price per share:

Share price = pre-money valuation ÷ pre-money shares
= $6m ÷ 2m
= $3.00

You can also calculate the number of shares issued:

Shares issued = investment ÷ share price = $12m ÷ $3.00 = 4m

The key trick to remember is that share price is easier to calculate with pre-money numbers, and the fraction of ownership is easier to calculate with post-money numbers; you switch back and forth by adding or subtracting the amount of the investment. It’s also important to note that the share price is the same before and after the deal.

Once you’ve passed the due diligence process, you’ll be issued a term sheet. This document outlines the terms by which an investor will make a financial investment in your company. Term sheets tend to consist of three sections: funding, corporate governance, and liquidation. Apart from the company valuation that decides the equity assigned to the VC in return for its investment, the VC will look to define a clear exit strategy for its investment. You can see an example of a typical term sheet in appendix C.

We’ve now completed our look at the four main sources of funding and how to match each of these to the current growth stage of a company. Next, we’ll consider how to secure the most valuable of assets resulting from the development of an application: its intellectual property.

12.3. Securing your business strategy

Although no one expects you as a developer-entrepreneur to be knowledgeable about the ins and outs of business law, it pays to have an awareness of some basic principles. Intellectual property, or IP, is the term used to describe “creations of the mind.” The two main company assets that you can protect by IP law are your brand/logo, or trademark (which extends to mobile/web domains), and the intellectual property associated with what you’ve invented (through patenting). By understanding what you can protect and how, you’ll be able to secure your development efforts and help build your business around them.

12.3.1. Trademark registration and brand protection

Trademark registration is subject to national legislation, so the exact procedure to follow depends on which country or countries you’re looking to register the trademark for. In the United States, the United States Patent and Trademark Office (USPTO) governs federal trademark registration. It’s possible to file for international trademark protection under what is known as the Madrid Protocol. In the European Union, you can (and it is more common to) register for a community trademark, giving protection across the whole of the EU.

When filing for a mark, it’s important to bear in mind that other entities may object to your claim (for example, if you attempt to register something similar to an existing brand). Your attorney will normally carry out a quick preliminary check to see if a competing mark already exists. After you file your claim, third parties are given a period (normally three months) during which they can present their objections to your claim.

The normal process is to choose which trading classes you want to register your mark for. These internationally recognized goods and services trading classes (called the Nice Classification), as defined by the World Intellectual Property Organization (WIPO), break down into 45 sections. The classes that directly apply to software developers are these:

• Class 38— Telecommunications
• Class 42— Scientific and technological services and research and design relating thereto; industrial analysis and research services; design and development of computer hardware and software

If you also need to, for example, sell merchandise with your company’s logo on it, you’ll have to register for other classes as well.

In general, there are four main types of trademark:

• The word mark— A word, for example, with links to the company or the product, or a made-up word or a word that stimulates association with the product or service. This normally means your brand name.
• The figure mark— The visual design of the mark, for example, a logo (a word in a special shape that creates a figure) or a picture, a symbol, a label, or letters or numbers that have been given a particular form.
• The combination mark— Word and figure marks combined.
• The outfit mark— Specially designed packaging or a distinctive detail in or on the item itself.

A trademark must be distinctive for the goods and services you provide. It can be recognized as a sign that differentiates your goods or services as different from someone else’s.

Trademarks can’t be registered if they

• Describe your goods or services or any characteristics of them, for example, marks that show the quality, quantity, purpose, value, or geographical origin of your goods or services
• Have become customary in your line of trade
• Aren’t distinctive
• Are three-dimensional shapes, if the shape is typical of the goods you’re interested in (or part of them), has a function, or adds value to the goods
• Are specially protected emblems, like royal emblems
• Are offensive
• Are against the law, for example, promoting illegal drugs
• Are deceptive. There should be nothing in the mark that would lead the public to think that your goods and services have a quality that they do not

In general, a registered trademark must be renewed every 10 years to keep it in force.

A useful point to bear mind in the United States is that any time you claim rights in a mark, you may use the TM (trademark) or SM (service mark) designation to alert the public to your claim, regardless of whether you have filed an application with the USPTO. You may use the federal registration symbol ® only after the USPTO actually registers a mark and not while an application is pending.

The advantages of registering your trademark are as follows:^[11]

¹¹ Intellectual Property Office, UK Patent Office, http://www.ipo.gov.uk/types/patent/p-about/p-whatis.htm.

• It may put people off using your trademark without your permission.
• It allows you to take legal action against anyone who uses your trademark without your permission.
• It allows the authorities to bring criminal charges against counterfeiters if they use your trademark.
• It is your property, which means you can sell it or let other people have a license that allows them to use it.

12.3.2. Patenting your development

Patent law, like trademark law, varies from country to country. Some countries in Asia are notorious for being particularly slack when enforcing patent ownership rights, leading to brisk business in knock-off products. The United States allows inventors to patent software code, whereas European patent law doesn’t allow this. Figure 12.7 shows a schematic from Apple’s patent filing application in March 2010 for the iGroups software that allows “clumping” of people in a certain location at a certain time. The patent application typically goes into extensive detail on the mechanics of the technology and includes a number of detailed, labeled drawings describing it.

Figure 12.7. One of the schematics from Apple’s patent for the iGroups software in March 2010. iGroups uses the iPhone’s positioning technology to broadcast and receive position tokens, which are timestamped and so create “clumps” of people who share a location at a given time.

The advantage of the approach to patenting in the United States is that mobile developers have an opportunity to patent their software invention. The disadvantage is that an enormous number of patents are filed, so there’s a greater need to be truly original as well as to carry out extensive research to ensure a similar patent isn’t already filed with the USPTO.

If you’re looking to obtain patent protection for your software in Europe, patent lawyers may advise you to file for a combined software plus hardware patent. The hardware in question doesn’t necessarily need to be a new invention, but you’ll need to demonstrate that putting the two together leads to a genuinely new capability. In practice, this means that the actions that the user can take, or the use cases, need to be fully documented and proven as unique.

What’s a Patent?

A patent protects new inventions and covers how things work, what they do, how they do it, what they’re made of, and how they’re made. It gives the owner the right to prevent others from making, using, importing, or selling the invention without permission.

In order for you to apply for a new patent your invention must

• Be new
• Have an inventive step that’s not obvious to someone with knowledge and experience in the subject
• Be capable of being made or used in some kind of industry

The patent also allows you to do the following:

• Sell the invention and all the intellectual property (IP) rights.
• License the invention to someone else but retain all the IP rights. You saw this as a possible monetization strategy in chapter 8.
• Discuss the invention with others in order to set up a business based on the invention. Having this protection is useful if you need to provide confidential documentation during the due diligence process imposed by certain investors.

As with trademark registration, it’s normal practice to conduct a search to find out if there are prior claims with overlapping technology patents. Two types of searches can be conducted:

• Patentability search— A patentability search identifies any patents or other publications relevant to the novelty and inventiveness of your product or process.
• Freedom to operate patent search— A freedom to operate patent search finds out if your idea will infringe on another patent that’s in force.

What Protection Does a Patent Give You?

The purpose of a patent is to protect the intellectual property of the inventor. Patents prohibit anyone other than the patent holder from making or selling the patented item (or using the business method) without the permission of the patent holder.

Protecting your ownership of an invention is the main reason why you should consider getting a patent. When you want to hold the ownership rights for an invention, it’s essential that you file for a patent as soon as possible.

The patenting of technologies is becoming a key source of competitive advantage for technology firms. Some of the tactics used by larger corporations in an attempt to maintain their competitive advantage are controversial. Apart from the standard, defensive patent strategy, where a company files patents primarily to ensure that innovations can be practically used, offensive patenting is on the increase. An offensive patent strategy is designed to build barriers to block competitors from gaining entry to proprietary technologies. Nokia and Qualcomm have been locked in royalty disputes for many years, and, more recently, Nokia has turned its attention to Apple, claiming that Apple “infringed and continues to infringe” on its patents with the sales of its iPhone 3G, iPhone 3GS, iPod Touch, iPod nano, iPod Classic, iMac, Mac Pro, Mac Mini, MacBook, MacBook Pro, and MacBook Air.

You should now have a good overview of the main concepts of how to secure your intellectual property through trademark and patent protection. You also saw how patenting technologies can be a key competitive advantage—and something that large corporations (like Nokia, in the previous example) are prepared to battle intensely for.

12.4. Summary

Although the creation of a business plan can appear like an abstract art to some, it underpins the ability of entrepreneurs to sell their idea to their stakeholders, chief among which are potential investors. If the start-up needs to grow rapidly, it’s likely that it will need to tap into some source of funding sooner or later. In some cases, this will feel like playing a lottery, with the odds stacked against success. By identifying the ideal investor and the best opportunities to be able to present your idea, you can redress the odds in your favor. Having developed your concept and business, it pays to insure it from competitors by securing the intellectual property rights to your brand and software development. Although this process can test the patience of even the most accommodating entrepreneur, it’s a worthwhile long-term investment in order to secure your successful business.

A final word...

Well done on getting through this book on location-aware applications—we hope you enjoyed the journey! As mentioned in the introduction, we’ve taken the unique approach for a technical manual of blending both the technology and business flavor into one book. We’ve done this so that you, the reader, can be in a better position to develop killer location-aware apps. We also did it because we recognize that more and more developers have a keen, entrepreneurial streak they wish to capitalize on. We’ve built into the book some key, practical business knowledge necessary to convert your enterprise into a successful one (and, who knows, maybe among you is the future Mark Zuckerberg of mobile!). This book should have given you a solid overview of how you can use location to make mobile apps effective, fun, and popular. Now you’re ready to go out there and write your own chapter in the story of location-aware applications!