On the Creation, Protection, and Delivery of Shareholder Value—Lessons from the Color Kinetics Experience

Entrepreneurship and innovation are powerful forces that, when combined, can lead to the creation of great value. Last week, a Boston startup community saw one of its finest recent examples of entrepreneurial innovation: Color Kinetics (CK), deliver nearly $800 million in cash to its shareholders upon the completion of its purchase by Royal Philips Electronics.
With about $80 million in revenue run-rate and a current year EBIT (earnings before interest and taxes) expected in the $4-6 million range, Color Kinetics garnered a valuation that far exceeded typical multiples.
Looking back, an early share in a large or growing marketplace, an outstanding team, satisfied and loyal customers, and competitive advantage are often present in such high-value transactions and share between them most of the credit.
In the case of Color Kinetics, one additional factor deserves significant credit and that is the intellectual property estate built by the company during its decade of existence.
Atypical of many high-technology companies, but quite typical in biotechnology, the strategy of patenting early and often contributed ultimately to the company’s ability to protect and deliver the substantial value it created.

Read more at xconomy.com