Freedom to pivot
- publish258
- May 15, 2023
- 3 min read
Updated: Apr 4
As a start-up, keep your freedom to pivot without destroying value and losing your priority by using provisional patents, says West Coast VC Eugene Shteyn
As a start-up, it’s certain you will pivot. You will always come across unknowns in scoping out a market. Like other venture capitalists, however, Eugene Shteyn’s first instinct is to cringe when he hears that’s start-up what is going to do.
‘The business of innovation is inherently uncertain. Often it like a swamp,’ he says. ‘Everything is unstable. You can’t be sure how it is going to turn out. So you’re trying to probe for where the firm ground is for your next step.’
‘If you rely on patenting a minimal viable product as a prelude to discovering your customers, the value you have already created is easily destroyed in a pivot and the priority in your idea is lost.’
So how can you stay flexible enough to move forward without spooking your investors? At a meeting of the High Growth Technology Business Forum, Shteyn explained why he opted for a policy of provisional patents when he was called into Ambature as director of invention development to check out materials for its superconductivity materials.
For him, the advantage was that the filing fees were low, but gave Ambature priority, while still letting them operate in stealth mode. In pursuing a licensing model, they could then work out where the value lay in different markets, such as sensors vs electric power equipment. At the end, they could then consolidate these insights into a final patent application.
‘It’s vital to secure priority in a cost-effective manner, if you’re going to be early, not late, to the party, says Shteyn, who is based in Cupertino, California and is now a partner in a venture capital fund for medAItech, Blackwood Healthcare Breaktrhoughs. ‘If you give yourself freedom to pivot, it can put you on a long-term development curve, which is super valuable.’
As a strategy, it’s widely deployed in the United States In Europe, it is largely overlooked, even if the option is effectively open. You can file snapshots of your ideas for free: they won’t be examined, but it gives you a priority date.
At Ambature, Shteyn created an IP factory which filed 170 provisional patents, turning a $500,000 budget into a $125 million portfolio. So how did he go about it?
It depends on giving yourself a ‘space to pivot’, he says. ‘Around your core insight, you adapt your claims to what the market expects. So stick to your core insight and don’t vary your technical spec, but keep re-drafting your claims.’
Be as clear as you can about how dominant your design or process could be, Shteyn says. In the case of Ambature, he judged that its superconductivity materials had the potential to find applications in all data capture and processing markets, particularly the closer we come to adopting quantum computing.
As director of invention development, Shteyn took the commercial lead, acting as a bridge between scientists and users. A patent agent drew up the technical details and a lawyer drafted key legal aspects of the specification and the claims.
‘As a founder, don’t delegate your business decisions to anyone,’ he says. ‘IP is your main source of value, so take responsibility for it.’
Be sure to define it widely as well, he says. ‘If you're a start-up, all you're doing is creating IP: in your products, in your documents, in your know-how, in your team. Think about them all as a portfolio rather than just one by one … it’s much broader than that.’
In the early stages, you won’t be worrying about freedom to operate for yourself. However, you have to keep in mind how your venture is going to end up, he says. ‘Often it will be through an exit. For your potential buyers, one of the main risks is whether they’ll be free to deploy your technology in multiple markets.’
• Eugene Shteyn is an inventor, venture capitalist and IP strategist. He is the author of Scalable Innovation. Details of his presentation about Ambature to the High Growth Technology Business Forum can be found at www.epo.org/business-forum.
