Not long ago, Microsoft announced they were going to make their intellectual property more available through a new group called Microsoft Intellectual Property Ventures. The
Chase Market Velocity (CMV): Start to finish, how long was the process of working with Microsofts Intellectual Property (IP) team?
Bryan P. Mistele (BPM): We started engaging with Microsoft in November and closed our deal the middle of February. Subtract the two weeks at Christmas and that would mean it took us 3 months from start to finish. Overall, I was impressed with how fast Microsoft could move.
CMV: Was the fact that you were ex-Microsoft make a difference in making the deal happen? If you were an ex-Sun employee, how different do you think it would be?
BPM: Being an ex-Microsoftie made a big difference. I could speak the language, the technical due diligence went a lot easier, I knew many of the people involved and was perceived as a friendly party. If I was ex-Sun, it would have been harder not because Microsoft would have anything against an ex-Sun person, but because they probably wouldnt have the same network and as with any business deal, who you know is as important as what you know. This was especially true since we were the first company to do this. Now that they have a program established, a team helping facilitate these IP discussions, I imagine future companies (and independent companies) will find the process much easier.
CMV: Are there any other technologies that you are considering licensing from Microsoft?
BPM: The Microsoft Research team is continuing to do leading-edge research into the areas of traffic analysis and prediction. Some of this work we will be able to take advantage of for free under our agreement, some of it we may choose to license at some point in the future.
CMV: What kind of assurances do you have that the IP is defensible? If there's a dispute where a 3rd party claims infringement, how is that handled?
BPM: Microsoft maintained ownership of the patents themselves and the responsibility for prosecution. We have perpetual rights to these and derivative patents. If there is a dispute with a 3rd party over these patents, it will naturally be between Microsoft and that 3rd party.
CMV: Was any kind of market validation done on the technology beyond the internal "beta" of Microsoft employees using the technology?
BPM: Inrix did do quite a bit of diligence on the market opportunity meaning we contacted many potential customers across a variety of channels to validate interest, the opportunity, the perceived value of the predictive capabilities and our overall business strategy. These conversations led directly to the development of our business plan, pricing model and gave us a good deal of comfort about the assumptions we had made regarding the competitive landscape.
CMV: How did the VCs that funded/didn't fund look at the fact that you were licensing IP from MS?
BPM: 90+% of the VCs we talked to viewed the Microsoft connection as extremely positive it provided us a level of credibility around the technology and science that as a startup we wouldnt have achieved otherwise. More importantly, it provided us the opportunity to come to market very rapidly (within months of closing our Series A), which is very unique for a startup. We view this as one of the main advantages of having licensing IP from Microsoft. Some VCs (especially in the bay area), had concerns about Microsoft and didnt believe Microsoft was opening up to licensing IP.
CMV: Did you ever talk about Microsofts Corp VC fund investing in Inrix?
BPM: In our initial conversation, we decided not to pursue this. We felt it would be more advantageous for Inrix to be perceived as an independent company rather than a Microsoft-controlled entity because our potential customers included folks like Google, Yahoo, MapQuest, etc. which might have concerns working with a Microsoft-affiliated entity.
CMV: How will the researchers who developed the technology be available to you? Beyond paying royalties, is there any ongoing involvement by MS?
BPM: There is a good period of time where the Microsoft researchers will continue to be available to us to successfully transfer the technology, answer questions, brainstorm, debug issues, etc. Our overall goal in structuring our relationship was to create a scenario whereby both companies would be motivated to make Inrix a success. Therefore, even beyond the contractual obligations, we feel Microsoft will make every effort to help Inrix become a success because its in their best interest to do so.
CMV: Are there any requirements that you continue development on a MS platform?
CMV: What was the purpose of the Microsoft conference you just attended? From what you could tell, what kind of people attended?
BPM: The Microsoft VC Summit is a combination of Microsoft executives and VCs. It is an annual event where Microsoft reaches out to the VC community to help build better relationships, explain Microsofts roadmap and look for potential areas to work together. Inrix was asked to attend because this year IP Licensing was a big, new initiative for Microsoft and we were the first company to license technology from Microsoft. As such, we had a good opportunity to explain to the VC community how great it was to work with Microsoft and the benefits of doing so.