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Roadmap 04/11 (click here to expand/collapse)

Below is the Roadmap for select April 2011 website articles.    Please note  the website contains many more articles covering these same topics. For example, pre-game is integral to our program for attracting better R&D investment opportunities.

Provide Predictable Funding for Unpredictable R&D+
(Introduction to Franchise Capital Mgmt.)

Make funding more predictable (From Unpredictable R&D to Predictable Investor Returns)

  Attract and Retain Long-Term Investors

– Make a Market (You Have to See It to Believe It)

  Reinvest Interim Windfalls+

Make R&D success more frequent * (Execution is the Key to Success)

  Get Smarter at Tracking R&D Advancements+ and Transitions+ (Exits)
  Attract Better R&D-centric Investments
  Increase R&D Productivity (Execution is the Key to Success)

* Although it's still unpredictable

As funding agent+ we match investors and investments (owners of intellectual property+). Our role as funding agent (as middleman) is to keep investors happy, thereby ensuring steady funding for investments. We do this by packaging unpredictable R&D investments into an offering that is more attractive for investors (the perpetual fund). We do this by direct mediation into our unpredictable R&D investments (via franchise operations+), to ensure above-market productivity. Above-market R&D productivity is the only reliable means to ensure predictable funding.

The Power of Ownership

Summary: 

We leverage ownership to drive greater productivity in R&D. Here’s what’s different from other attempts to do the same.

Introduction

Franchise Capital Management+ leverages the power of ownership. Owners are much more likely to do whatever it takes to make investments a success. Owners are also loath to give away ownership in exchange for operating funds and thus are better at managing operating expenses without the need for expensive oversight and control mechanisms (e.g., budgets). Individuals with a strong sense of ownership are more likely to admit MNLB+ when their ownership (and windfalls+ earned to date) are at stake.

We leverage both financial ownership and emotional ownership (braggin’ rights). Emotional ownership can be just as powerful as financial ownership, so we pay equal attention to both (…more). Individuals without financial ownership are often more vociferous in their claims, since passions aren't muted by financial considerations.

Financial Ownership

Financial ownership is measured by the percentage of total shares owned by managers and researchers in the legal entity (the franchisee+) that houses the research. They start with a high percentage (e.g., 80%) and sell shares reducing that percentage, to obtain operating funds. We have no arbitrary limit on the amount of operating funds used by a franchisee. But franchisees cannot fall below 30% ownership: to keep them from walking away from the mortgage. (...more)

Illustration of how franchisee ownership gets restored based on good results

Exhibit 1

Franchise Ownership and Progress. Franchisees sell shares to obtain operating funds and lose ownership with each sale. Their ownership is replenished by the franchise as a reward for advancements (e.g., pre-game to mid-game) and windfalls.
Management of the franchisee sells shares in their own firm to obtain operating funds. These are i-shares+, or internal shares, redeemable only with the funding agent+. The franchisee only has so many i-shares to sell, indirectly placing a limit on the amount of available operating funds. However, i-shares are replenished, and ownership restored, upon advancement+ by the franchisee (Exhibit 1). Also, the funding agent recognizes, explicitly, that the schedule for the next advancement (and replenishment) is only a guess. Franchisee’s often get replenished, as an extraordinary event, even before the next advancement. The hurdles for replenishment of i-shares at any time are not set too high in recognition of the unpredictable nature of the pursuit.

The percentage of ownership replenished decreases over time in recognition of the greater value of individual i-shares issued during each replenishment (e.g., shown by the decreasing height of the peaks in Exhibit 1). The franchisee can now sell fewer shares (give away less ownership) to obtain the same funds as before. The funding agent is constantly trying to find the mix of ownership percentage and share pricing which provides the franchisee with enough funding to carry it forward to the next advancement or windfall, while preserving the motivations that come from ownership. The goal is for the franchisee to end this roller-coaster ride with at least 30% ownership, although if they exceed expectations during any element of the ride they could end up with more. Interim ownership percentages are important in that the ride could end at any time (e.g., MNLB) and winnings-to-date are distributed based on percentages at that time.

Emotional Ownership

Not too far from reality is the fact that industrial R&D needs to band together to save itself. Franchise Capital Management is the home for exciting industrial R&D. Alone, researchers will continue to face major layoffs as corporations increasingly recognize that the factory approach to R&D is no longer effective.


You wouldn’t believe the lengths to which people will go to protect the right to exploit their discoveries: to retain braggin’ rights for a discovery. At least this will be the case with researchers in our franchisees. If we don’t see researchers driven to violence in order to protect these rights, then we've failed in how we set up and nurtured their emotional attachments.1 In today’s industry you often see this passion redirected into skunkworks+.

We deal with two levels of ownership: ownership of the research itself, and ownership in the franchise that makes possible the research. We need a similar dedication to both. We deliberately nurture dedication to the franchise, as being more remote from the innate passions of the researcher. We make the researcher understand, through instruction and example, that attention to the many redounds to the protection of the one. The passions they feel for the research must be extended to the franchise (see "…Protections").

Ownership in the franchise starts with exclusive membership+. Make entry tough and members fight to stay. Pay your dues, not just with money, but through the strength of your character. You see many other notables excluded. You begin to understand why it is you were admitted; you see the rare trait or personality you possess in common with fellow members. This is not a club for everyone. You understand why it is important for existing members to seek out and to recruit these rare personalities.2

Ownership builds as you put skin in the game. You sit as a jury member or appear as a witness in a trial by jury+ for one of your fellow franchisees and you not only learn to appreciate the strength of their evidence, you begin to question anew the strength of your own evidence for your own upcoming trial. This is your peer on trial, and this will soon be you. The quality with which trial operations proceed becomes of intimate importance to you as an individual. You learn to care about franchise operations+.

Ownership matures as you identify yourself with the franchise. As your success becomes apparent you are asked to sit back and reflect on how membership contributes to success. You stand in front of membership recruits and share those reflections. Or, you stand in front of critics and defend membership. Stumping for the franchise in public forums, or using franchise forums for public braggin’, are vehicles we employ to make you think more deeply about what membership means, or should mean. And you are encouraged to seize one of the many avenues available to you to shape the franchise into an instrument that can help you do even more.

Ownership is tied to pride in what is owned. I happily identify myself with successful organizations. I’m so smart for aligning myself with this success. I’m proud to have fought as hard as I did to make this organization what it is today. I’ve become a believer.

We know we’ve succeeded when staff in a franchisee fire off their own franchisee to exploit their own intellectual property. They have substantial knowledge of what it means to be a member. They know the costs and the challenges as well as the advantages. This is our ultimate measure of success: individuals dedicating potentially a decade or two of their lives to a creation of our making. We have successfully passed the baton. They are ready to form and build membership into an instrument that will meet the needs of their generation.


Editor's Picks for April, 2011

Further Reading
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Reba Tull
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Joined: 03/30/2011
Your ownership is too expensive

I get ownership with the Venture Capital approach and they only take 20% of my windfalls+. You seem to be taking 50%. Sure you're promising 30% ownership at the end of the line, but 30% of what? You've given it all away during the interim!