Week 13: Netchemia Internship

This week I had a day off work to attend some lectures organized in part by Kauffman. This included 'Angel Investment Term Sheets' at 'Invest Midwest'. What made this talk so interesting was that the talk was being presented to Angel Investors by an Angel Investor to try and educate them on how to go about writing a term sheet.

The bottom line was this: What is good for the Entrepreneur is often the best terms for the Angel investor also. Wow! Not only was this good new for all entrepreneurs out there but also they backed this up with solid data.

To ensure the best return as an Angel Investor the lecturer talked about tee-ing up the Start-up company for the next round of investment: trying to make the terms and conditions as easy as possible to stomach for the next round investors. Often if the angel investor doesnt consider the next round and tries to give him/herself terms which are too ownerous on the entrepreneur then one of 3 things happens:

• the entrepreneur can't find an investor who can tolerate the terms of the previous round and so doesn't invest
• the next round investor says that they will invest ONLY if the terms which they dont find favorable are changed
• the entrepreneur must find an investor who has money but not much sense

The second talk was at the Kansas City branch of 'Polsinelli Shalton Welte Suelthaus' an IP attorney. The talk was by Rob Sweeney founder of TextCaster. Rob talked about his experiences in business and what he learned when founding a company. At the time he spoke to Ewing Marion Kauffman and asked him for advice. Kauffman replied:

"Find the best person you can in your field, hire them and pay them well"

What great advice. Rob's company textcaster has patented the concept of "Permission Based Text Messaging" (see Patent US7197324). At first I was amazed this was possible. The 2 key points about patents are that they are:

• original
• not obvious

And too me this seems to be neither of the above. Even more surprisingly to me was that the patent has been extended to Europe, as originally i assumed this would be a business process patent. Looks like nearly anything can be patented these days!

For Rob the patent is great news as it provides his business with at least theoretical protection against competitors copying him. But I would bet that there are many companies who have infringed either unknowingly or before Rob filled his patent. And what small company can afford a patent lawsuit? So the patent at least at a glance seems useless.