ORIGINALLY POSTED MAY 22, 2005 BY KURT P. LEYENDECKER
I read about this company in the Denver Business journal this past week and thought what a great business idea. What do they do? Simply, they buy your used CDs and resell them to used CD retailers. But that isn’t necessarily the innovative part. They maintain a database of CD titles and the price they are willing to pay for each title and that database is linked to an online reverse shopping cart. I also imagine the price they will pay for a CD is automatically updated based on realtime demand an their stock of the a particular title.
A person wanting to sell his CDs just sits down in front of his computer; types in the titles he wants to sell; is given a price for each; decides whether to keep or sell each title; and when he is done prints out a shipping label to place on the box in which he packs the CDs. They pick up the shipping charges. Once Uzed receives the CDs and verifies their condition, the proper amount is deposited in the seller’s Paypal account or he is sent a check. Uzed then sells the CDs to used CD shops.
It seems to me that is a company that has demand on both ends of its transactions. One it provides a convenient manner for people to sell their used CDs and it provides a used CD shop a convenient manner in replenishing stock.
OK, so why am I writing about this company? Well, the company is looking for additional financing from either Angels or venture capital firms. And I suspect they will get it. But the thing that immediantly popped into my mind was whether or not they have pending or issued patent protection for their method of doing business. I don’t know whether they do or not. I am not affiliated with this company in any way. It strikes me, however, that the opportunity to invest in this venture would be so much sweeter if they had patent protection. Patent protection would prevent the big boys in music retailing from simply copying their concept and methodology and forcing Uzed out of business. Even a company backed by well healed venture capital firm is not going to be able to compete with the likes of Amazon if Amazon decides to launch a similar service. Who do you think would win the battle Amazon with their hundreds of millions of dollars or the small fry Uzed even with a multimillion dollar war chest.
Now if Uzed has or is pursuing patent protection, the landscape changes drastically. In such a situation, Amazon or any other music retailer would not be free to use Uzed’s methodology. In fact, if a music retailer wanted to enter Uzed’s space, they would have to either buy Uzed or license the technology and methodologies. In either case, the investors would likely see a handsome return.
And there you have it, the point of this post: patents can (1) greatly increase the chance at obtaining venture funding, and (ii) increase the value of the associated enterprise. Also, if you have a stack of CDs you longer use, check out Uzed.com and sell them for a few bucks.
Coming soon: Part III of my Control Protect and Leverage series. I have started writing it so expect it any day now.
