My good buddy and patent attorney Leighton Chong wrote a good article on “An Alternative Business Model for Hawaii Tech Company Success” that I think any entrepreneur should take a serious look at. Leighton’s point is that instead of building out a traditional Silicon Valley (SV) tech company, Hawaii can be just as successful by licensing intellectual property (IP) instead.
The SV model requires many millions in venture capital, which is very difficult to come by in Hawaii. The IP model only needs about $500k in angel funds, which is not too hard in Hawaii if you have a good plan. Instead of building out a huge company with lots of overhead, staff, executives, and headaches, develop what he calls the “Three P’s” :
(i) Protecting their intellectual property rights; (ii) Proving that the technology works (building a functioning prototype, or contracting tests and studies to validate it); and (iii) Productizing their inventions (researching unique niches of demand in the markets and designing optimal products that people will buy).
And once you’ve done that, find a company that is wiling to buy your Intellectual Property via a licensing agreement. A successful IP company provides almost as good a return as a successful SV company except it can do it with far less capital. Throw in our state’s Act 215 tax incentive to develop and R&D company, and it becomes quite attractive.
I’ve been personally following this path myself for the past few years with my email privacy company, Titan Key Software. We just received a patent in March of 2005. I’ll keep you all posted on any major good news that comes our way.
Meanwhile, give Leighton’s article a good read and post some of your comments here. I’m going to see if I can talk Leighton into doing a podcast interview.