For over 20 years, Heiner Pollert has been building technology companies and applying for patents with Patentpool. In this interview, he explains when he invests and what advantages patent law can offer.
Heiner Pollert studied law, but first worked in the film industry. In 1997, when Internet companies were just springing up, many founders quickly became very rich and then lost all their money again, Pollert set up Patentpool. With his company, he supports founders who develop a technology for which a patent can be applied for. In return, however, they have to transfer decision-making power to him.
Mr. Pollert, what exactly do you want to be with Patentpool: Early-stage investor or company builder?
We are most likely a hybrid: we give money and, as shareholders, help build the company from the beginning. Ideally, we participate in early-stage basic technologies: we then work out a business plan with the so-called "innovation donor", jointly establish a corporation and apply for comprehensive industrial property rights around the technology, especially patents. The fact that the idea must be patentable is the decisive criterion for us.
Why is patentability the decisive criterion for you?
Because otherwise the risk of investing is too great for us. You can still have such a good idea. If you don't protect it, there will always be someone who copies it - and who may have more money at his disposal or a better distribution channel. Patent law is a powerful protection against this. A registered patent gives us great peace of mind.
What exactly does Patentpool's support look like?
If an idea, a technology or a project really attracts us and we can well imagine putting our capital and heart and soul into it, we first examine the project very carefully - with regard to all economic, legal, tax, financial, technical and patent aspects. If this examination reveals a risk profile with good prospects, we propose to the innovator(s) that they set up the company together with us. From this point on, in most cases, we take over the commercial work so that our new partner can fully concentrate on the technical realization, i.e. driving the idea forward.
How much money do you usually invest?
There is no rule about this: every project is unique. Some ventures get by for a long time on a small burn rate, others need half a million euros a month in the prime of their development. Anything within this range is possible.
Not every founder reinvents the wheel. How do you find your investments?
We see about 3,000 ideas or projects a year. We've been around since 1998, it's not at all difficult for us to find new investment targets. We wouldn't be afraid of five more patent pools as competitors either. Because there are not many addresses that founders can come to at such an early stage. We work together with universities, and as Chairman of the German Institute for Invention (DIE e.V.), I am also in regular contact with CTOs from medium-sized companies.
So you wouldn't invest in the sixth fintech or the fifth dating app.
Only if there were such a unique investment in this field that could be protected by patent. But I think that is rather unlikely. We pay very close attention to the market situation: at best, we are the only player in the environment - or have such a good market position that gives us and our investors a good chance of success.
Many startups fail early on, what do you think is the reason for that?
Many founders waste too much time on trivialities. When they get a lot of money early on, they look around for offices, get a 5 series BMW, buy a phone system, hire a secretary and so on. All of this eats up an insane amount of time and the money is misspent. Founders should be fully focused on developing their prototype. That's why we say: For 20 startups, an accounting department is enough, and usually a commercial manager and a telephone system.
When you found startups together, you like to hold 51 percent of the shares as a patent pool. Why?
That's just the structure of German corporate law. Whoever wants to provide the managing director to lead the fate of the company, also needs the majority in the company. However, this 51 percent rule only applies to some of our projects. In these cases, we were and are involved so early that we believe it is absolutely legitimate to strive for this distribution - especially since we provide the entire capital for the company's development. Thus, it is also the claim of our investors to have this percent more.
But you could also just take 49 percent of the shares. Why do you patronize founders so early on?
That's what we do all the time. In the other cases, if we put our own money into building a company, we have to make sure that the CEO doesn't say, "I don't like driving a BMW 5 Series, I'd rather drive a Bentley. We don't want to risk that kind of decision. And I think everyone understands that. So far, we haven't received a storm of indignation from founders. Because we stick to what's in the business plan. Incidentally, changes to the company's purpose would also require a three-quarters majority. So that's not an issue. We don't surprise the founder, but we can force him to stick to what has been agreed. Someone has to call the shots - and in case of doubt, that would rather be us.
How high do you estimate your success rate?
Firstly, success should be calculated in terms of return, and secondly in terms of a ratio of how many projects we have led to success. Returns are paid out on successful projects - that is, on an exit: that should be worthwhile for anyone who saw the potential in a good technology early on and had the courage to invest. Silicon Valley shows a 1-to-10 ratio, which is corroborating for tech startups worldwide. We can write a 1-to-4 ratio with different sized returns.
About the person:Heiner Pollert studied in Munich and wrote a PhD thesis in the field of intellectual property/copyright law. After a short career in the film business, he founded the Patentpool Group in 1998 with the goal of finding, promoting and marketing patentable technologies. Since 2009, he has also been chairman of the German Institute for Invention.
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