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@example.com.