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Welcome to the Winter 2008 issue of the Blueprint Corporate Insider.
Blueprint Ventures has a specialized investment practice in Corporate IP Spinouts, where we spin out non-core technology (pre- revenue or early-revenue) from high-tech companies to create new venture-backed start-ups. The Blueprint team has led 14 Corporate IP Spinouts from leading technology companies including Intel, NEC, Fujitsu, and Brocade. Overall, we remain well-positioned to help entrepreneurs, technologists and executives bring great technologies to market and build successful companies.
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HOLIDAY CARD 2007: The Adventures of Gary Snoman Continue
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Blueprint Ventures' 2007 holiday card features the latest adventures of Gary Snoman, the entrepreneur turned VC who takes the global venture industry by storm. For those of you who missed this third installment of Gary's antics, we've included the 2007 video for your viewing pleasure.
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NEW FINANCING: Platform Solutions Inc., a Corporate IP Spinout from Fujitsu
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We are pleased to announce the closing of a $37 million Series C financing for Platform Solutions, Inc. (PSI), a Blueprint Ventures portfolio company and Corporate IP Spinout from Fujitsu. The Series C financing included new investor Microsoft with participation by existing investors Blueprint Ventures, Goldman Sachs, Intel Capital, InterWest Partners, and Investcorp. Blueprint led the company's initial Series A spinout financing in 2003. PSI is now positioned to be the only direct competitor to IBM's $18 billion mainframe business.
Based in Sunnyvale, CA, PSI develops Open Mainframe Computers (TM) compatible with the broadest set of datacenter environments and operating systems. PSI's systems are based on proven systems architecture spun-off from Amdahl Corporation and industry standard Dual-Core Intel® Itanium® 2 processor technology, and provide customers true choice and flexibility in mainframe computing. This Series C round provides PSI with the financial resources needed to compete effectively in the multi-billion dollar mainframe market.
PSI is a prime example of how a corporation's decision to exit a market can lead to a subsequent Corporate IP Spinout. When Fujitsu's mainframe technology began to lag IBM's, Fujitsu chose to shut down its mainframe division and exit this market altogether. PSI was formed from valuable IP developed at Amdahl and Fujitsu over a 20-year period that was no longer strategic to the corporate parent. Fujitsu benefited from the spinout by receiving an equity stake in PSI and by avoiding layoffs for the employees that joined the new start-up. We hired an experienced CEO Michael Maulick (20-year IBM executive and 2-time start-up CEO) familiar with the technology and market to lead PSI going forward.
Read the full press release
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BOOK REVIEW: Open Business Models - How to Thrive in the New Innovation Landscape
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 We reviewed a recent book by Henry Chesbrough discussing novel approaches to corporate innovation. In his book "Open Business Models - How to Thrive in the New Innovation Landscape," Chesbrough outlines how corporations can get economic value out of technology innovation and intellectual property (IP). Whether through IP assertion, patent licensing, or Corporate IP Spinouts, selecting the right business model is critical to unlocking the gold mines of latent corporate IP value.
We examined several emerging business models for corporations to practice open innovation:
- Spinouts : Astute VCs with the ability and desire to work with corporations to structure Corporate IP Spinouts will be well positioned to generate value for themselves and the corporations. The trick is to find a business opportunity where the parent corporation did not.
- Licensing : Corporations are increasingly integrating IP management into their innovation life cycle. Procter & Gamble, for example, forces any patented invention to be available for external licensing or spinout within a few years of shipping into the market or patent issue.
- Marketplace : IP specialists like Intellectual Ventures and Ocean Tomo are purchasing patents for resale and/or assertion. While this model is still somewhat unproven, these firms represent well capitalized IP-based business model experiments that may ultimately succeed.
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of the review
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FEATURE: Corporate IP Spinouts - Running with the Numbers
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In a recent Venture Capital Journal article entitled "Early-Stage Corporate IP Spinouts: Running with the Numbers," we examined recent performance data illustrating the attractive risk-adjusted returns of Corporate IP Spinouts. While Corporate IP Spinouts clearly benefit corporations seeking to divest non-strategic projects, historical data shows that these transactions are also very attractive to venture investors as well. Corporate IP Spinouts were not only more capital efficient but also more likely to achieve a positive realization than traditional early-stage start-ups.
We ran the numbers on VentureSource data from 1990-2005 to quantify the key drivers for investing in Corporate IP Spinouts. Here were our findings:
- More capital efficient : Corporate IP Spinouts required less VC funding than traditional start-ups most notably in the semiconductor ($23.8M vs. $28.8M) and communications ($41.1M vs. $44.1M) sectors. Corporate IP Spinouts are able to achieve an exit on less capital by leveraging prior corporate investment.
- Lower mortality rate : Corporate IP Spinouts were more likely to reach a positive M&A or IPO exit (68%) than traditional start-ups (62%). This finding reflects the reduced technology risk associated with Corporate IP Spinouts, which are more mature and fully developed than traditional start-ups at the time of initial funding.
- Solid home run potential : 31% of Corporate IP Spinouts generated a 10x or greater return for its investors. This figure demonstrates the significant upside potential of Corporate IP Spinouts. Disciplined investors who scrutinize each opportunity carefully can find winners like past spinouts Ciena, VeriSign, and Documentum.
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About Blueprint
Ventures
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Blueprint Ventures is a San Francisco Bay Area investment firm focused
on technology start-ups including components, systems, and
software/services. The firm works with exceptional entrepreneurs to
deliver disruptive technologies to market in a capital-efficient
manner. Blueprint is the industry innovator in leading Corporate IP
Spinouts by partnering with high-tech companies to commercialize their
non-core, pre-revenue intellectual property. Blueprint's investment
professionals provide significant entrepreneurial, operating, and
investment experience to their portfolio companies.
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Contact Information
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Bart Schachter, 415.901.4004, bart@blueprintventures.com
George Hoyem, 415.901.4005, george@blueprintventures.com
Jim Huston, 415.901.4000, jim@blueprintventures.com
Richard Yen, 415.901.4025, richard@blueprintventures.com
David Frankel, 415.901.4009, david@blueprintventures.com
Learn More
About the Team
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